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Dozens of South African oil, gas and construction companies affected in what is a massive setback for the entire region.
Some $60 billion in natural gas projects off the coast of northern Mozambique have been violently disrupted following an attack by Islamic State-backed terrorists on the town of Palma on March 24 this year, resulting in dozens being killed and more than 100 000 fleeing the area for safety.
The African Energy Chamber says more than 700 000 people have already fled their homes in northern Mozambique as a result of the ongoing insurgency, and the count is still rising.
According to the United Nations refugee agency, UNHCR, the number could top one million by the middle of the year if the international community does not take steps to end the conflict.
There is talk of a joint Southern African Development Community (SADC) military force being sent to the area to quell an insurgency that has been gaining momentum since 2017.
Energy Voice reports that the attacks began on March 24, the same day French energy company Total announced a new security deal with the Mozambican government which would allow the company to return to work on the natural gas project in the area, having previously suspended work in January after several attacks close to its onshore production facilities.
Total has again put its plans to return to work on hold.
Dozens of South African oil, gas and construction companies are on-site in Palma, which is home to one of the largest gas investment projects in the world – a project that will transform Mozambique into the world’s third-largest natural gas producer.
South African security contractor Dyck Advisory Group is providing support to the Mozambican army in the area.
Earlier this year, Sasol announced that it would proceed with plans to supply gas to a 450 megawatt (MW) power plant in Mozambique, along with a liquid natural gas plant, with surplus feedstock being exported to SA. The project is expected to cost $760 million and commence supplies in 2024.
But with the latest terror attacks, project delays and security concerns will add to costs. Total in a statement said its primary concern is the welfare of its workers.
Few companies are going to send staff back into areas that have suffered such intense casualties.
The areas have already attracted more than $50 billion worth of investment commitments from consortia led by major international oil companies such as Total, Italy’s Eni, and US-based ExxonMobil. Total and its partners have already invested heavily in an onshore base and liquefied natural gas (LNG) plant on the Afungi Peninsula.
In a statement, the African Energy Chamber noted with alarm that the separatist militia known as Haul Sunnah Wa-Jamo (ASWJ) had stepped up its campaign to seize territory in Cabo Delgado, the country’s northernmost province.
More than 100 ASWJ fighters attacked Palma from three sides after a cessation of seasonal rains. Mozambique’s Defence and Security Forces, known locally as SDS, moved in quickly and mounted a counterattack the next day, but they were not able to regain control immediately.
The government in Maputo has pledged to work with Total to establish a safe zone around the gas complex on the Afungi Peninsula, but the fact that the attacks on Palma occurred inside the perimeter of the designated zone suggests far more will have to be done to cordon off the area.
Last month, Mozambique invited US military advisors and special forces into the country to deliver counter-terrorism training. Maputo has also accepted an offer from Portugal, its former colonial ruler, to provide additional training for the Mozambican armed forces.
“The investment going into this area will be more than $100 billion over the next decade, and this is of huge importance to the South African economy,” says NJ Ayuk, executive chair of the African Energy Chamber.
“The gas coming from Mozambique will allow SA to wean itself off coal as a source of power, and will contribute to reducing the country’s carbon footprint.”
“This is a massive setback not just for Mozambique and SA, but for the whole region. These attacks were targeted against oil and gas facilities, and happened just days after Total announced it [would] resume work in the area.
“A lot of South Africans are already working in the area, and a lot more were due to be relocated there to work on the gas projects.”
The Mozambican army says it killed dozens of terrorists and claims to have recovered control of the Cabo Delgado district, of which Palma is the oil and gas hub.
“We can argue about climate change and whether oil and gas are bad,” says Ayuk. “But this investment in Mozambique will lift that country out of poverty, and there will be spillover benefits for SA, so we all have an interest in seeing order being restored to the region.”
Ayuk warns that unless Mozambique’s friends and neighbours assist it in restoring order, terrorism will be exported to other parts of the continent.
“Don’t imagine that these terrorist attacks will magically stop in Mozambique,” he says.
“Yes, right now they are trying to disrupt massive oil and gas development in and around Palma, but they will not stop there. They plan to establish a caliphate in this area.
“We need a coordinated response from the region to snuff out these terrorists before they gain a stronger foothold in this region, which has mercifully been relatively free of this kind of terror.”
The African Energy Chamber says the Mozambican gas complex, which is just a few kilometres from Palma, will support upstream development work at the offshore block known as Area 1.
If the project is prevented from being completed, Total will have a hard time proceeding with its $20 billion Mozambique LNG project — and Eni and ExxonMobil will have a hard time following suit with their own South Coral LNG and Rovuma LNG projects, says the Chamber.
This article first appeared in Moneyweb and is republished with permission.
