In this issue
+ Gas companies demand a foreign-controlled fortress
+ José Pacheco named SISE head, to deal with Cabo Delgado
=============================
Cabo Delgado war continues so gas companies demand a foreign-controlled fortress at Afungi
Will $2bn/y buy Frelimo agreement?
A meeting in Maputo Thursday 10 July between TotalEnergies CEO Patrick Pouyanne and President Daniel Chapo did not lead to agreement on restarting the giant gas project in Cabo Delgado. Chapo keeps saying that TotalEnergies should simply lift the force majeure declaration and resume work.
Pouyanne says TotalEnergies will only start if it can convert the Afungi peninsula into a fortress, with no gates and no access by land. People and cargoes would have to arrive and leave only by air or sea; Afungi already has a large landing strip and dock. TotalEnergies is already working with Rwandan military on anti-drone protection and on naval protection, probably requiring control of the sea for 5 to 10 kilometres off shore. Lifting force majeure also requires that the agreement with Rwanda to provide 5000 soldiers and support personnel will be extended beyond the current 2029 finish.
Total already has 1500 people on site on the Afungi peninsula and has given some contractors notice that it is ready to proceed. Pouyanne told the Japan Energy summit in June that TotalEnergies could start work this year and be exporting in 2029. ExxonMobil has the adjoining part of the gas field and will also use the Afungi peninsula, and could export starting in 2030. By 2031 government revenues from the gas are estimated at £2bn per year. But the big money, perhaps $7bn per year, would start flowing to government only when the project costs are paid off, which is more than 12 years away.
If agreement were reached quickly, TotalEnergies could be producing LNG by early 2029 which means some money could be paid to government before the 2029 national elections. That could give Frelimo a big boost. But some senior Frelimo figures want contracts and more money now, and no longer believe promises. In 2013 government said first LNG would be in 2018, five years ago. A decade later, the promise of big gas money is still five years away. Is some gas money before the 2029 election, plus $2bn per year in five years, enough to buy agreement of the Frelimo elite?
Changing attitudes
Palma, the town next to the Afungi peninsula which was the main base for gas contractors, was captured by insurgents on 29 March 2021 and held for a week. They attacked government buildings including the hospital, but left contractor bases untouched. Once the insurgents left, the army and police held the town for a week and systematically looted the banks and contractor bases. TotalEnergies declared “force majeure” (uncontrollable events) and stopped work. It was clear the Mozambican military could not be trusted and would not win the war. Then President Filipe Nyusi brought in the Rwandan forces, which did reduce the insurgent presence in Palma and Mocimboa de Praia districts.
At that point, it looked like there might be a global glut of gas, so Pouyanne did not press too hard. In 2022 he said he was ready to restart, but he wanted to be able to drive around the area without a police escort. “When I see that life is back to normal, with state services and the population, then the project can restart”, he said. “We want to see the population and villages return to their normal lives”. He said he believed government claims that they would end the war. It did not happen.
But the Russian attack on Ukraine in 2022 led to sanctions on Russian gas and oil, while gas companies and governments abandoned climate change goals, so the gas market became much bigger. Mozambique’s gas will be relatively cheap and more profitable.
In 2022 Pouyanne said “we will not build a plant surrounded by troops”. This year he said the opposite. And even Chapo accepts the war will continue. In an interview with Bloomberg in Seville, Spain, on 1 July, he said “If we’re waiting for Cabo Delgado to be a heaven, we won’t lift force majeure.”
Other issues
Other issues also remain unresolved. The cost of the delays cause by force majeure must be paid by the government and negotiations are underway. Cost is likely to be $2bn-$3b. This will be added to Mozambique’s share of the capital costs, which will therefore be paid off some years in the future, slightly delaying the big $7bn/y bonanza.
But the biggest issue is probably local content, jobs and benefits. The civil war is continuing precisely because young people think they do not benefit from the gas, rubies and other minerals. TotalEnergies has largely run down its local support projects, and there seem to be no plans for Mozambican industrialisation using the gas. And turning the Afungi peninsula into a fortress accessible only by sea or air makes it harder to contract local workers and suppliers.
The other face of that problem is the Cabo Delgado Frelimo oligarchs who have become suppliers of construction materials and services. They were benefitting even if the youth were not. And some of these oligarchs fought in the liberation war and will be genuinely upset that part of Cabo Delgado is being controlled by foreign companies. Afungi will become a fortress like the Bagdad ‘green zone’, which was foreign controlled 2003-19. But it is already happening. The first offshore floating platform, Coral Sul, is already operating, with Mozambique earning $80mn per year. It is operated by ENI which has a private security company whose boats ensure that no other boats come within 1 km of the platform.
(Technical note: To ship natural gas it must be cleaned of impurities and then cooled to -162°C, creating LNG – liquified natural gas. This reduces its volume by roughly 600 times, which makes it possible to ship long distances. The bigger units at Afungi cost several billion dollars each. Samsung on 7 July won the $637mn contract to build a second floating LNG platform, which is much smaller than the platforms on land.)
Jose Pacheco named SISE head,
with brief to deal with Cabo Delgado
Jose Pacheco was named head of intelligence services on 17 June and was specifically told by President Daniel Chapo to deal with the Cabo Delgado insurgency. (O Pais 18 June) He is trusted and powerful in Frelimo. SISE is the State Information and Security Service (Serviço de Informação e Segurança do Estado).
He was governor of Cabo Delgado (1998–2005), Minister of Interior (2005–09) and then both Minister of Agriculture (2010–17) and head of the Frelimo Verification Commission, the Frelimo disciplinary body (2012–17). He is from Sofala and thus is not part of any of the main regional factions. His role was shown in February this year when he was sent to sort out a bitter dispute in Frelimo in Zambezia where the party’s then national spokesperson Caifadine Manasse publicly accused five parliamentary deputies of organising drug smuggling via Macuse port in Zambezia. This should have been kept an internal party issue. Calm was restored by Pacheco and Manasse was made Minister of Youth and Sport.
Pacheco clearly has contact with everyone who is important in Cabo Delgado, and will be able to talk with the top oligarchs and well as insurgent leaders. And he has the power to negotiate a deal. The insurgency was started by young people with no jobs and no future challenging the Frelimo elite who controlled the resource wealth. Any deal will involve land, jobs and money, and concessions by the oligarchs.
SISE was at the centre of the secret debt scandal and Director General Gregório Leao and Economic Intelligence head António Carlos do Rosario were sentenced to 12 years in jail. In June they were released on parole. But SISE never recovered. On 2 November 2024 the next director general of SISE was killed in a mysterious car crash in remote Mapai, Gaza province, near the Zimbabwe border. So Pacheco must also build an intelligence service. (Joseph Hanlon This newsletter in pdf is on bit.ly/Moz-649)
=========================================
To subscribe or unsubscribe: https://bit.ly/Moz-sub
This newsletter is distributed on DEV-MOZAMBIQUE@jiscmail.ac.uk.
