Last November, the Coral South LNG consortium began exporting liquefied natural gas (LNG) from Coral, an offshore field in Mozambique’s Rovuma basin. The group produced and loaded its first cargo on the Coral Sul, the world’s first deepwater floating LNG (FLNG) ship, and delivered it to Europe, where buyers have been looking eagerly for new suppliers ever since the Russian invasion of Ukraine. It has exported several additional cargoes to Europe since then and has continued to operate without interruption.
This development isn’t just a triumph for Eni, the Italian major that’s leading Coral South LNG, or for its European customers. It’s also a triumph for Mozambique, which is now the sixth African country to become a large-scale producer of LNG — and the first to take this step since 2013. It indicates that the Mozambican government’s efforts to attract and retain investors have paid off, and it ought to signify that the country’s offshore reserves have successfully been opened for commercial development.
It’s worth noting, though, that Mozambique’s offshore gas sector isn’t exactly all the way open yet.
Let me explain what I mean.
Mozambique: Two Years of Lost Opportunities
Coral South LNG was always supposed to be the first consortium to export gas from Mozambique, but it never expected to spend much time as the only party to do so. It expected to be joined in short order by Mozambique LNG, a group led by TotalEnergies of France that plans to extract gas from another field in the Rovuma basin. This second consortium was scheduled to start production in 2024.
If the second group had met its deadline, Mozambique’s gas production — and its status as a commercial producer of gas and LNG — would have leveled up significantly in a relatively short period of time. Mozambique LNG was designed to be far larger in scale than Coral South LNG, with two trains turning out 12.88 million tons per annum (mtpa), compared to a single train with a capacity of 3.4 mtpa.
But things changed in 2017 because of an insurgency in Cabo Delgado, the northernmost province of Mozambique. That conflict eventually reached the Afungi Peninsula, where TotalEnergies was building its LNG plant. It led the company to declare force majeure in April 2021, saying it could not resume work on the plant until the security situation in the area was stabilized.
Now, more than two years later, TotalEnergies is reported to be on the verge of announcing an official restart to construction after reviewing the outcome of a multilateral peacekeeping mission and making plans to support residents of host communities. Even so, it has said it won’t be able to start exporting LNG until at least 2026-2027. (There are hints that 2027 is a more realistic guess.)
Therefore, because of the violence in Cabo Delgado, Mozambique has to wait at least three extra years before its gas sector is in a position to outgrow Coral South LNG’s capabilities.
Moreover, it will also have to bear the consequences of the delay. It will have to bring its financial projections into line with not being able to collect any of the revenues it might have earned as an exporter of additional LNG before 2027. It will also have to forego the opportunity to lock in market share now under long-term contracts and instead bear the risk that gas demand will diminish by the time the plant starts production.
