The United States will provide a $4.7-billion loan to a fossil gas plant in Mozambique that has been described as a “carbon bomb” and is beset by allegations of human rights abuses.
The US Export-Import Bank (EXIM), a government agency, on Thursday approved financial support for the liquefied natural gas (LNG) project run by French energy giant TotalEnergies in the country’s northern Cabo Delgado region.
US EXIM has yet to publicly confirm the deal, but its approval has been widely reported.
The US backing was seen as key to unlocking financing for what is set to be one of Africa’s largest-ever energy projects, with a total expected cost of $20 billion. The loan also marks a U-turn from a possible ban on public funding for oil and gas developments abroad that rich countries, including the US, were on the verge of agreeing at the end of last year.
Risky investment
The US export credit agency had already agreed to finance the Mozambique project in 2019 during President Donald Trump’s first stint in office, but fresh approval was required after TotalEnergies triggered a contractual “force majeure” pause in 2021.
The French energy giant halted construction on the facility following an attack by the Al-Shabaab militant group in the Cabo Delgado region where the plant is located. Up to 1,200 civilians are estimated to have died or gone missing in the assault.
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French authorities began investigating Total last year for possible involuntary manslaughter after survivors of the attack accused the company of failing to ensure the safety of its subcontractors. Total has rejected the accusations.
An investigation by Politico also alleged that Mozambican soldiers operating out of Total’s plant abducted, raped and killed dozens of civilians. The company’s Mozambican subsidiary told Politico it had no knowledge of the events.
Total had hoped to restart construction at the site in 2024 but conceded this January that it would not begin operations before 2029 amid security concerns and funding uncertainties.
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Patrick Pouyanné, CEO of TotalEnergies, launched a lobbying blitz at the end of last year, hoping to secure the backing of the Biden administration for the project, but his efforts ultimately failed.
Speaking to Bloomberg this week on the sidelines of CERAWeek, Poyuanné asserted, “now you have a functional US EXIM” after President Trump appointed a new board at the agency.
The Total boss added that “most of the contracts have been awarded to US companies”, which he described as the “driver” of the US government’s support for the project.
‘Carbon bomb’
Opposing the mega-project, climate campaigners have described the Mozambique LNG venture as a “carbon bomb” that threatens the world’s chances of keeping global warming in check. It could produce up to 121 million tonnes of CO2 equivalent every year over its life-cycle of close to four decades, including emissions generated from the final use of the gas, according to calculations by Friends of the Earth.
Collin Rees, US campaign manager at Oil Change International, called the project “a climate and human rights nightmare”.
“The Trump administration is committing billions in taxpayer funds to a fossil fuel project linked to severe human rights violations, while simultaneously cutting federal jobs and essential public services for working families [in the US],” he added.
Kate DeAngelis, economic policy deputy director at Friends of the Earth US, described EXIM’s decision as “the pinnacle of government waste and an egregious abuse of taxpayer dollars”.
Since taking office in January, the Trump administration has cancelled more than 80% of US international aid programmes – including dozens of projects in Mozambique – claiming they did not serve the country’s national interests.
“Clearly, the only aid Trump supports is foreign aid for billionaires and foreign gas companies,” DeAngelis added.
Decision time for UK and Netherlands
Total’s LNG venture in Mozambique also won support from the British and Dutch export credit agencies before the project’s halt in 2021. The two lenders have been reportedly reassessing their financial commitment and have yet to announce a final decision.
The Financial Times reported last month that the UK government was taking legal advice on whether it could withdraw its £1.15-billion ($1.49-billion) support for the project without facing legal repercussions.
Oil Change’s Rees said UK Prime Minister Keir Starmer should “show courage and break with the previous UK government’s foolish decision to support this nightmare”.
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US EXIM approved billions in support for oil and gas developments abroad under former President Joe Biden, even though the US had joined 33 other countries at the COP26 climate summit in pledging to end direct public finance for overseas fossil fuel projects by the end of 2022.
The Biden administration made a late attempt to change course before Trump’s return to the White House by belatedly backing a proposal to ban export credit support for oil and gas abroad, put forward by member states of the Organisation for Economic Co-Operation and Development (OECD).
But the push, led primarily by the EU and the UK, failed after opposition from South Korea and Türkiye stalled the discussions. Negotiators met again in Paris this week, but an observer told Climate Home that the deal now appears to be off the table given the seismic geopolitical changes since Trump took office in January.
