Saipem does not expect Mozambique LNG work to resume this year

Italian contractor Saipem does not expect work on the TotalEnergies-led Mozambique LNG project to resume in 2022, according to its chief operating officer Alessandro Puliti.

France’s TotalEnergies declared force majeure on the $20 billion LNG project in April last year following new attacks, and withdrew all personnel from the site.

In February this year, TotalEnergies said it would not restart work on the project until the civil population comes back to the Cabo Delgado province where the Afungi site is located.

The project’s EPC contractor is CCS JV, a venture between Saipem, McDermott, and Chiyoda.

Saipem previously said that the firm had expected work to resume on the project this year.

However, the firm now does not see resumption of work prior to 2023. Saipem also said that the EPC contract would have to be amended due to surging costs.

“Our current costs are covered in a fully reimbursable scheme from the client and we do not expect any restart of operation within 2022,” Puliti told analysts on Wednesday during Saipem’s first-half results call.

“Completely different world”

CEO Francesco Caio said that compared to 2019 when the CCS JV won the Mozambique LNG contract, “we are in a completely different world today.”

This is due the Covid pandemic and “because of the inflation of the raw materials that we have been experiencing starting at the end of 2021, even before the beginning of the Ukrainian crisis,” he said.

He said that the costs and terms for the Mozambique contract would have to be changed, “because what was agreed back and the beginning of the project is clearly no longer sustainable.”

“So, their full restart of the project will be definitely on different basis, a renegotiated basis with the client,” Caio said.

Prior to this, TotalEnergies had expected to launch the Mozambique LNG project in 2024.

The project includes the development of offshore gas fields in Mozambique’s Area 1 and a 12.8 mtpa liquefaction plant at the Afungi complex.

Besides TotalEnergies, other partners in the project are Japan’s Mitsui, Mozambique’s ENH, Thailand’s PTT, and Indian firms ONGC, Bharat Petroleum, and Oil India.

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