"Total Won't Have Big Problems Supporting the Shutdown of Operations in Cabo Delgado"

The French oil company Total should not have major problems in supporting the stoppage of operations in Cabo Delgadoin Northern Mozambique due to the diversification of its projects, large portfolio of supply contracts, and stock exchange operations.

According to an analysis of financial information agency Bloomberg to the financial information of the French oil company, one of the largest in the world, Total bet on risk mitigation in Mozambique, but not only, using geographical diversification, sharing projects and placing 'force majeure' safeguards in contracts to protect against unexpected events.

"The shutdown of the €20 billion project for an indefinite period due to escalating violence in the region is a reminder that many large oil and gas projects are vulnerable to geopolitical events such as civil wars, insurgencies and even natural disasters," Bloomberg wrote in an article analyzing the consequences of the shutdown for Total's accounts.

"Total is able to compensate for the shutdown through projects in the United States and with stock market transactions," commented analyst Ahmed Ben Salem of consulting firm Oddo BHF.

Total has a 26.5% share in the liquefied natural gas project under development in the north of the country, whose first production and export was scheduled for 2024, but which was delayed by at least a year following the oil company's declaration of 'force majeure'.

At issue are the safety conditions in the region, which for Total prevent the continuation of the work near Palma, in the north of the Lusophone country.

Total sold 38 million tons of gas last year, partly gathered from its plants around the world, and has more shares in other facilities under construction in Russia, Nigeria and Mexico, and is also studying new gas export terminals in the United States, Siberia and Papua New Guinea.

"Total has room to maneuver because it is the second largest liquefied natural gas company, and the other projects, such as Arctic 2 LNG are promising," added Marc-Antoine Eyl-Mazzega, director of the Center for Energy and Climate at the French Institute of International Relations, also stressing that "there will be other opportunities that will appear, such as Qatar."

Qatar, moreover, will be Mozambique's big competitor, since this Middle Eastern country is investing significantly in gas exploration, planning to increase its production capacity by more than 50% by 2027 to 126 million tons, cementing its position as the world's largest producer due to the conviction that demand will shift from oil to a less polluting fuel such as gas.

For Mozambique, competition from Qatar is not the only problem that the suspension of work near Palma entails: the government will also have to take into account the impact on the contracts that Total has signed with buyers, particularly Asian buyers, who were hoping to start receiving gas in 2024.

"The delayed deadline may provide a window of opportunity for other gas suppliers to try to 'get in the game' and offer to replace the supplies Mozambique has guaranteed to customers," Bloomberg wrote, pointing out that the project had secured sales and purchase agreements with several companies, including Royal Dutch Shell Plc, Tokyo Gas, China's National Offshore Oil Corp and Electricity of France, among others.

"Buyers who have specifically asked for gas supplies to be available in late 2024 or early 2025 may be eyeing potential substitutes," Bloomberg concluded.

Armed groups have terrorized Cabo Delgado since 2017, with some attacks claimed by the 'jihadist' group Islamic State, in a wave of violence that has led to more than 2,500 deaths according to the ACLED conflict registration project and 714,000 displaced according to the Mozambican government.

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