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The UK is taking legal advice over whether it can withdraw $1.15bn of taxpayers’ money from TotalEnergies for a controversial $20bn liquefied natural gas project, according to two people with knowledge of the situation.
UK Export Finance (UKEF), a government agency, committed in June 2020 to provide direct loans and guarantees to banks and British companies involved in the development in Mozambique, one of Africa’s largest energy investments.
But less than a year after the deal was struck, the project was halted after a series of terrorist attacks in the Cabo Delgado province where Total was planning to build a huge plant to liquefy gas from Mozambique’s offshore fields for shipment overseas.
The French company is now trying to restart the project, despite continuing violence in the region and political instability stemming from disputed elections in Mozambique in October.
The UK’s Labour government, whose policies include moving Britain away from fossil fuels and towards green energy, is taking advice on whether the 2020 commitment is still binding.
“Number 10 have been trying to find a way for this not to happen, but they have been worried about being countersued if they don’t do it,” said one person close to the government.
Since the original decision, the UK has pledged to stop new export finance to oil and gas projects. A “net zero” alliance among export credit agencies, such as UKEF, was one of the key announcements of climate negotiations at COP26 in Glasgow in 2023. Friends of the Earth warned the UK last October that supporting the Mozambique project would now be “unlawful” and contravene its pledge.
A government official also said there were concerns about the risks of operating in Mozambique. “It’s a bloody nightmare. It’s very challenging on the ground there to figure out what’s going on. It’s also challenging to work out whether or not we can get out of it, we are really concerned about it,” they said. “It’s not the environmental concerns that are the problem, it’s the volatile situation.”
UKEF declined to comment on whether the UK would go ahead with the financing. Total declined to comment on the UK’s support for the project.
Other governments, including the US and the Netherlands, are reconsidering their commitment to the project. The Dutch credit agency is reassessing the “security and human rights situation” before deciding whether to reissue about €1bn in export credit insurance, the Netherlands’ finance ministry told the Financial Times.
Any withdrawal would lead to a funding gap that Mozambique LNG would have to fill. This could lead to a renegotiation of the existing funding mechanisms, which may further delay the project.
At an investor day in October, Total chief executive Patrick Pouyanné acknowledged that some countries backing the development had shifted their “stance towards financing of LNG or oil and gas projects” since 2020. But he added that countries had told the group “they are committed by contracts they sign”.
The news comes after the Financial Times reported that the company had delayed its expected restart date from 2024, putting at risk a production date of 2029.
Letters seen by the FT also show that lobbying by Pouyanné failed to persuade top Biden officials to approve almost $5bn in US loans before the Trump administration took office.
https://www.ft.com/content/cacd29fb-1535-4462-bd5f-3f2bcb546a8d
