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Total’s Mozambique LNG to sign US$15B financing in June

A Total SA-led liquefied natural gas project in Mozambique will receive commitments for about US$15B of financing at a signing scheduled in June, marking rare progress for such a project as companies scrutinize costs.

The first and most significant phase of the financing commitment for the LNG project — which will be Africa’s biggest private investment yet — involved lenders including about 20 banks, according to people familiar with the matter. That will move ahead at a time when plans for other facilities in the region and globally have been delayed.

Acquiring funding for construction of the US$23B project, which will chill natural gas into a liquid for export, comes as oil and gas companies globally are focused on cutting expenditure as the coronavirus curbs energy demand and pressures prices.

Image Source: Bloomberg Quint

The group of about 20 banks involved in the lending includes Rand Merchant Bank, Standard Bank Group Ltd. and Societe Generale SA, which is acting as the financial adviser, according to one of the people familiar.

Dele Kuti, Standard Bank’s global head of oil and gas, said the company was “pleased to see the progress” on achieving final credit approvals for the Mozambique LNG project, without confirming details of the financing.

“We have also approved large participations in Mozambique LNG’s ECIC and commercial tranches. We look forward to signing the facilities in the next few weeks,” Kuti said.

Rand Merchant Bank declined to comment. Societe Generale did not immediately respond to a request for comment.

Plans for similar facilities have been put on hold or cancelled. Royal Dutch Shell Plc exited a multi-billion-dollar LNG export terminal planned for Louisiana in March as coronavirus started to slash gas demand. Exxon Mobil Corp. delayed a final investment decision on its Rovuma LNG project in Mozambique that was expected later this year.

The LNG market glut is expected to last through at least the middle of the decade, but some companies are betting global demand will recover after prices for the super-chilled fuel fell to a record low along with a drive for cleaner energy sources from India to China.

A spokeswoman for the Mozambique LNG project said it expected to resume work in June after a coronavirus outbreak at the site, but didn’t respond to questions on its financing. First production is scheduled for 2024.

The U.S. Export-Import Bank has approved the US$4.7B loan to back American suppliers for the project. Japan Bank for International Cooperation will provide US$3B, Mozambique state-owned newspaper Jornal Noticias reported.

The so-called Area 1 LNG project will generate about US$38B in revenue for Mozambique’s government over its lifetime, according to a Finance Ministry forecast. That will be supplemented by sales from the even bigger project led by Exxon and planned in the neighbouring Area 4 offshore block.

Source: Bloomberg Quint

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