Force majeure in Mozambique upends LNG fundamental
The decision by energy major, Total, to declare force majeure on its LNG project in Mozambique will radically change the global LNG supply-demand balance later this decade, according to experts.
The declaration followed a deadly attack by the Islamic militant group, Ansar al-Sunna, on the coastal town of Palma in the country’s northern province, Cabo Delgado. The assault left scores dead and many others unaccounted for.
The region is where Total’s Afungi site was under development. Ironically, the energy company had opted to develop an onshore site, rather than a floating facility, to generate greater benefits for the impoverished East African nation. The company rapidly withdrew all personnel following the latest strike.
The impact of the indefinite delay resulting from the force majeure declaration is a devastating economic blow for Mozambique. But it also has far-reaching implications for the dynamics of the global LNG market over the second half of this decade, according to Oslo-based analyst, Rystad Energy. As much as 28m tonnes of LNG supply annually, which was expected to transform Mozambique’s economy, is now at risk.
The impact of the insurgency also casts doubt on 17 newbuilding contracts for LNG carriers at South Korean shipyards. Market sources say that the contracts, signed at Hyundai Samho Heavy Industries and Samsung Heavy Industries last December by K Line, Mitsui OSK Lines, NYK Line and Maran Gas Maritime, are conditional until the end of May.
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