US Loan Approval May Enhance Mozambique’s LNG Project Prospects, Says Fitch Ratings
EXIM’s approval of a USD 4.7 billion loan for TotalEnergies’ LNG project could enhance Mozambique’s prospects if confirmed. Fitch Ratings notes potential positive outcomes but warns of ongoing insecurity risks. The project’s resumption may stimulate economic growth, with important fiscal implications. Overall development remains contingent on external financing and political stability.
The United States Export-Import Bank (EXIM) has reportedly approved a USD 4.7 billion loan for TotalEnergies’ liquified natural gas (LNG) project in Mozambique, a development that could enhance the project’s prospects if confirmed. Fitch Ratings indicates that such funding would yield positive outcomes for Mozambique in the medium term, though significant risks remain due to ongoing insecurity in the region.
Mozambique’s Energy Minister, Estevão Pale, announced that the EXIM board voted to support the project, as noted in media reports, although official confirmation from the bank is pending. The potential approval aligns with Fitch Ratings’ earlier downgrade of Mozambique’s rating to ‘CCC’ in February 2025, suggesting that financing prospects may improve with the new US administration. Reports indicate that other export credit agencies are reevaluating their financial commitments in light of Mozambique’s political situation.
Fitch Ratings projects that work on the TotalEnergies LNG project will likely resume in 2025 once the force majeure declared in 2021 is lifted. Despite TotalEnergies’ January statement indicating the project would not commence prior to 2029 due to political instability, Fitch believes production and exports could begin by 2030 if construction resumes swiftly.
The project’s successful development is anticipated to stimulate economic growth and enhance Mozambique’s export earnings and fiscal revenues. Mozambique is expected to face principal repayments of approximately USD 250 million annually on its USD 900 million Eurobond starting in 2028, coinciding potentially with the commencement of LNG production.
The revival of construction on TotalEnergies’ project could clear the way for a final investment decision on the proposed USD 30 billion LNG initiative by ExxonMobil. This project, partially onshore, aims to significantly contribute to economic growth during its construction phase and is expected to achieve a production capacity of 18 million tonnes per annum (mtpa).
Meanwhile, Eni has ordered a second floating LNG facility, Coral North, for Area 4, expected to match Coral South’s capacity of 3.7 mtpa. Unlike TotalEnergies’ project, Coral North is slated for production beginning in 2027-2028, and its development is independent of any TotalEnergies projects.
Security threats and political instability in Mozambique remain key concerns for the resumption of the TotalEnergies project. The continued presence of a Rwandan security force, established since 2021, is uncertain and may be affected by political controversies. Recent restrictions imposed by the EU on certain Rwandan Defence Force members due to their alleged involvement in conflicts further complicate the security situation necessary for the project’s progress.
In conclusion, the development of Mozambique’s LNG sector is vital for its medium-term credit outlook. However, the government’s access to external financing, its fiscal consolidation efforts, and the management of domestic political tensions are critical to stabilizing its economic environment.
In summary, the potential approval of a significant loan for the TotalEnergies LNG project may revitalize Mozambique’s LNG prospects, enhancing economic growth and fiscal revenues. Timeframes for production remain uncertain due to security and political challenges. The development of the LNG sector is essential for strengthening Mozambique’s credit profile, contingent upon external financing and effective government measures to stabilize the economy.
Original Source: clubofmozambique.com
