US Loan Approval Enhances Mozambique LNG Project Prospects, Says Fitch Ratings

The Export-Import Bank of the U.S. has approved a USD 4.7 billion loan for TotalEnergies’ LNG project in Mozambique, potentially enhancing the project’s prospects. While this could provide substantial economic benefits, ongoing security risks and political instability present challenges to the project’s completion and overall development of Mozambique’s LNG sector.

The Export-Import Bank of the United States (EXIM) has reportedly approved a USD 4.7 billion loan for TotalEnergies’ liquefied natural gas (LNG) project in Mozambique. This development, if confirmed, could enhance the prospects for the project’s resumption, offering various benefits to Mozambique in the medium term, albeit amidst ongoing security challenges that pose risks to project completion, according to Fitch Ratings.

Mozambique’s Energy Minister, Estevão Pale, stated that the EXIM board voted for the approval. However, the official confirmation from the bank is still awaited. Should this approval be validated, it aligns with Fitch’s earlier assessment that financing prospects under the new U.S. administration could improve for Mozambique, particularly following its downgrade to ‘CCC’ in February 2025 just prior to this announcement.

Fitch anticipates that work on the TotalEnergies LNG project may recommence in 2025 as the force majeure declared in 2021 is expected to be lifted. Despite TotalEnergies’ indication that the project would not be operational by 2029 due to political unrest, there remains a possibility that production could commence as early as 2030.

The successful advancement of this project is crucial for Mozambique’s economic development, as it would enhance export earnings and fiscal revenues. The government faces significant financial obligations, with the first principal repayments of approximately USD 250 million due on its USD 900 million Eurobond starting in 2028, potentially coinciding with the resumption of LNG outputs.

Furthermore, the possible resumption of construction on TotalEnergies’ project could trigger a final investment decision for a proposed USD 30 billion LNG initiative by ExxonMobil. This project promises significant economic contributions, expected to exceed the TotalEnergies project’s capacity of 12.9 million tonnes per annum, with ExxonMobil aiming for 18 million tonnes per annum, starting post-2030.

Eni, another key player, has initiated a second floating facility, Coral North, for Area 4. This facility is projected to have a capacity of 3.7 million tonnes per annum, similar to Coral South, which is currently the only operational LNG project in Mozambique. However, its economic benefit is not anticipated until the production phase starting around 2027-2028.

Despite these developments, the project remains vulnerable to security threats and the political climate in Mozambique. The continued presence of the Rwandan military force since 2021 to ensure security is uncertain amidst potential geopolitical tensions, such as the EU’s recent sanctions on Rwandan forces linked to conflicts in the Democratic Republic of the Congo. Domestic political and social stability is also crucial for the project’s progress.

In conclusion, the potential USD 4.7 billion loan from EXIM represents a significant opportunity for the advancement of Mozambique’s LNG sector, which is vital for the country’s economic growth and fiscal health. While prospects appear promising for the TotalEnergies project and its economic benefits, ongoing security issues and political instability remain critical risks that must be carefully navigated for successful project resumption and execution.

Original Source: clubofmozambique.com