Total secures Africa's biggest debt financing with LNG deal for Mozambique

A Total petrol station in Maputo, Mozambique. Total’s Mozambique LNG project is set to begin production in 2024 © Bloomberg

Total has secured about $15bn in financing to develop liquefied natural gas in Mozambique, with banks signing up to the biggest private debt-raising in African history despite the pandemic and turmoil in oil markets.

Lenders on Thursday said they had backed the French oil major to finance the $20bn project to process onshore gas, the biggest foreign direct investment in Africa. Total confirmed the financing had been agreed but declined to provide further comment.

Total, the world’s second-biggest LNG producer, bought out Anadarko as the Mozambique project’s main operator last year after the US company was acquired by rival Occidental Petroleum. Other investors include Mitsui of Japan and Mozambique’s ENH.

The project faced challenges to get funding, including the collapse of oil prices as a benchmark for the LNG market and a growing insurgency in the northern Cabo Delgado province, where the natural gas development is centred. “The financing would be phenomenal in a normal market let alone one that has been ravaged by a pandemic and an oil price crash,” said Katan Hirachand, managing director for energy finance at Société Générale, who worked on the deal. Total’s Mozambique LNG project, which is set to begin production in 2024, is one of several big projects in an industry analysts say is becoming oversupplied. 

ExxonMobil has put off a final investment decision on another Mozambique LNG project until next year. The Total project, which will take gas from a field owned by Indian companies and Thailand’s PTT, has secured several buyers for its LNG. Roughly $5bn of the debt package is being provided by the Export-Import Bank of the United States. 

The Japan Bank for International Cooperation said on Thursday it was lending up to $3bn to the project, which will send about a third of its LNG production to Japanese utilities.“As such, JBIC's support for this project will contribute to securing stable supplies of LNG and to diversifying LNG supply sources for Japan,” the bank said. The African Development Bank will lend $400m and commercial banks will arrange other loans, Oil India, one of the field’s owners, said on Thursday.

For a country such as Mozambique the amount of financing is “off the scale”, Mr Hirachand said. “Mozambique will join the limited club of major LNG exporters.” The financing has been agreed despite a worsening conflict in the country’s Cabo Delgado province, where militants have tapped into local grievances about lack of access to development. In recent months government forces and South African mercenaries have battled insurgents for control of key towns. To date there have been no attacks on main gas facilities but contractors for Total were targeted last month.
More than 1,300 people have been killed since fighting began in late 2017, according to the Armed Conflict Location and Event Data project.

Credit source: financialtimes