The “Declaration of Force Majeure” in the Total oil project in Mozambique will remain in effect until the Government guarantees security in the province in a verifiable and sustainable manner, a spokeswoman for the French energy company declared.
“The ‘force majeure’ will remain in effect until the Government of Mozambique has restored security and stability in Cabo Delgado province in a verifiable and sustainable manner,” said Anastasia Zhivulina, when questioned by Lusa news agency about the expected duration of the suspension of work.
“It is still too early to provide an updated timetable for the project, but there will be a consequence,” she added, referring to the delay caused by the withdrawal of workers following the attacks on Palma on March 24.
The oil company had already said this morning to Lusa news agency that “in the current environment, Total cannot continue to operate in the province of Cabo Delgado in a safe and efficient manner, so all project personnel have been removed from the site and will not return until the conditions permit.”
The company “remains committed to Mozambique and to the development of the Area 1 project when conditions permit, and will continue to monitor the evolution of the situation with great attention, in close contact with the authorities,” said Anastasia, when asked whether the declaration of “force majeure” implies the suspension or cancellation of the project.
Anastasia Zhivulina said that “the ‘force majeure’ has been declared because Total is unable to fulfill its obligations as a result of the severe deterioration of the security situation in Cabo Delgado, an issue that is completely out of Total’s control.”
In a press conference organised in reaction to Total’s force majeure declaration, Carlos Zacarias, Chairman of Mozambique’s National Institute of Petroleum (INP) stated that “any cost that, directly or indirectly, is caused by the implementation of the project, will later have to be discussed with the Government ”.
Asked if the losses caused by the stoppage of the multimillion-dollar natural gas project will be attributed to the Mozambican government, due to the inability to protect the site, the president of the oil regulator explained that this issue will have to be discussed between the parties.
“We have a team that checks the costs that are recoverable and those that are not recoverable. Naturally, for this specific case, we know that the work was being done, but got interrupted ”, he declared.
The concept of recoverable costs refers to the charges assumed by the concessionaire companies, but are still subject to reimbursement by the State.
“We have to be realistic” (in regards to possible impact on the accounts), “a small change from what were the initial basis of the costs that had been programmed” will open a discussion on whether such values ”can be taken as recoverable”.
Carlos Zacarias admitted that the impact of the suspension of the construction works of Total’s project in Afungi may extend to the relationship with buyers of liquefied natural gas, whose contracts have already been concluded, with defined compliance periods.
“There are [contractual] forecasts that naturally have a date in mind and some penalties on both sides, in case one of the parties does not comply,” he emphasized.
“As soon as the security conditions are created and improved, I am sure that the activities will be resumed, in fact, we know that, recently, the final financial closure was made, there are funds to continue with the project”, concluded Carlos Zacarias.
Valued at over US$20B, the project is the largest private investment underway in Africa.