The British government has announced it will withdraw its $1.15 billion in financial support for the TotalEnergies-led Mozambique Liquefied Natural Gas (LNG) project. The funding, originally promised in 2020 through UK Export Finance (UKEF), has been rescinded following a comprehensive review. British business minister Peter Kyle stated that the government concluded that the risks surrounding the project have “increased since 2020,” and that the interests of UK taxpayers are best served by ending its participation at this time.

The $20 billion initiative, which aims to position Mozambique as a major LNG exporter, has been suspended since 2021 when an Islamist insurgency in the Cabo Delgado region forced TotalEnergies to invoke force majeure. While TotalEnergies lifted the force majeure in November, the company noted that construction could only resume once the Mozambican government approved a new project budget and schedule. This new budget includes a substantial $4.5 billion cost increase, primarily incurred due to the four-year halt and the necessary security escalations.

The UK’s decision to exit the project, which follows a similar move by the Netherlands’ export finance agency, creates a significant financial hurdle for the consortium. TotalEnergies CEO Patrick Pouyanne had previously indicated that shareholders were ready to exercise their contractual rights to ensure the originally promised funds were approved, noting that losing European support increases the project’s reliance on equity or commercial lenders. The UK government confirmed that UKEF would reimburse the project for any premiums already paid, reflecting the end of its risk exposure.

The withdrawal underscores a crucial shift in the global financial landscape where major institutions are increasingly wary of high-cost fossil fuel projects in fragile states. The UK’s original commitment came just before it pledged to end direct government backing for overseas fossil fuel projects, making the Mozambique LNG initiative contentious from the start. With security still volatile and costs escalating, the decision highlights a growing risk-averse environment for mega-projects in politically complex regions.

SOURCE : BUSINESS INSIDER AFRICA