Oil & Gas

The UK government is reviewing its commitment to provide $1.15 billion in financing for the $20-billion Mozambique LNG project, seeking legal advice on whether the pledge made in 2020 remains binding. According to the Financial Times, UK Export Finance (UKEF) had initially agreed to offer direct loans and credit guarantees to UK firms involved in the project to boost UK exports. However, with ongoing security risks and shifting government policies on fossil fuel investments, the future of this financial backing is now uncertain.

The Mozambique LNG project, led by TotalEnergies, has faced significant setbacks since its launch. In 2021, operations were halted after Islamist militant attacks near the project site, forcing TotalEnergies to declare force majeure. This suspension, combined with political instability in Mozambique, has repeatedly delayed the project’s timeline, pushing the expected start of LNG production from 2027 to 2029. With no restart in 2024 as previously planned, the risk of further delays remains high.

Under the previous Conservative government, the UK pledged in December 2020 to end public funding for overseas fossil fuel projects. Now, the Labour government is reconsidering whether the UKEF financing is legally enforceable or if it can be withdrawn. A source close to the government told FT that officials are cautious about pulling support due to potential legal repercussions, raising concerns about contractual obligations and the risk of litigation.

TotalEnergies has acknowledged the complex political and security landscape in Mozambique as a key factor in the ongoing delays. The company recently confirmed that its plans to restart the project in late 2024 have slipped due to continued violence and disputes following Mozambique’s presidential election. With no clear resolution in sight, the UK’s potential withdrawal of financing could further complicate the already fragile progress of one of Africa’s largest LNG investments.