Good afternoon. 2023 has only 14 days to run, and the target that French energy firm TotalEnergies set itself of restarting work on its liquefied natural gas (LNG) project known as Mozambique LNG by year-end now looks certain to be missed. Not only has the company been trying to prevent its contractors from raising prices, but also the project site is taking time to prepare.
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This week a reminder comes that this mammoth project, costing more than Mozambique’s entire GDP, may not be quite as transformational as politicians promise. A report from the International Institute for Sustainable Development points out that, if oil prices fall and the energy transition reduces demand for gas, the state may end up getting only modest revenues as a result. The bulk of state revenues are not due to arrive from the project until the 2030s and 2040s, when, in theory, countries should be trying to move away from fossil fuels if they are to curb rising temperatures.
These sorts of observations about the gas projects are not new. Two years ago, Zitamar News exclusively published independent analysis suggesting that, if oil prices stayed at the early 2021 level of around $66 a barrel in real terms, Mozambique LNG (whose gas sale price is linked to oil prices) would only earn the state $27.6bn over its lifetime, rather less than the near-$50bn forecast by the National Institute of Petroleum in 2018. Oil prices are now in the 70s, which in real terms means they have returned to the price in early 2021. They may rise significantly in the coming years, if some forecasts are correct; but the point is that they are volatile, and so therefore are the revenues that will come to the state.