(Bloomberg) -- Mozambique flagged off its first shipment of liquefied natural gas, exports that could help ease Europe’s energy crunch as Russia squeezes supplies.
For Mozambique -- one of the world’s poorest nations -- it marks the end of a decade-long wait to monetize one of Africa’s largest offshore gas fields. President Filipe Nyusi announced the cargo’s departure in a statement Sunday.
The British Sponsor arrived last month in waters off northern Mozambique, about two weeks after the Coral-Sul Floating LNG vessel, operated by Eni SpA, started producing the super-chilled fuel. The tanker is owned by BP Plc, which has the rights to buy all of Coral-Sul’s output.
“The first shipment of LNG from Coral South project, and from Mozambique, is a new and significant step forward in Eni’s strategy to leverage gas as a source that can contribute in a significant way to Europe’s energy security,” Eni Chief Executive Officer Claudio Descalzi said in a separate statement .
The production platform has a capacity of 3.4 million tons per year of LNG -- equal to about one-third of the UK’s imports last year. The first cargo is bound for Europe, Mozambique’s oil and gas regulator said last month.
The International Energy Agency warned in a report that Europe’s LNG markets are bracing “themselves for a winter of unprecedented uncertainty of supply,” because of sanctions in response to Russia’s invasion of Ukraine. A complete shutdown of pipeline flows to the European Union can’t be ruled out, it said.
That’s brought Mozambique’s resources into the spotlight, even as its biggest projects have faced years of delays.
Fears of European shortages this winter have eased in recent weeks thanks to brimming inventories, continued imports, and unseasonably warm weather, according to an emailed note from Eurasia Group on Friday. But attention now shifts to next year when the IEA predicts an even bigger shortfall for Europe.
The natural gas fields off Mozambique’s northern coast were previously expected to transform the country’s economy by attracting $120 billion of investment. Each of the more than $20 billion onshore production facilities that TotalEnergies SE and ExxonMobil Corp. planned are worth more than Mozambique’s gross domestic product, but both have stalled because an Islamic State-linked insurgency.
The war that started in 2017 peaked in March last year, when the rebels raided a town next to the LNG developments, prompting TotalEnergies to withdraw all staff. Since then, military help from Rwanda and a regional bloc have dislodged the insurgents from key towns and bases deep in the forest.
Mozambique’s Finance Minister Max Tonela is “very optimistic” that TotalEnergies will make a decision by March to resume work. The company, which aims to produce 13.1 million tons per year of LNG, said last week that it may review the project in the first half of next year, but that it would only restart when security was reestablished in Cabo Delgado province.
Still, the violence continues to affect foreign businesses in Cabo Delgado province.
Insurgents last month attacked a ruby mine that Gemrock Mozambique Lda operates more than 270 kilometers (170 miles) southwest of the natural gas projects, causing “panic and chaos” as they torched heavy equipment, the company said. That raid also prompted neighboring mines to evacuate staff, although Gemfields Group Ltd. has since resumed operations.
--With assistance from Sergio Chapa.
(Updates with comment from Eni CEO in fourth paragraph)
©2022 Bloomberg L.P.