Strong doubts about the benefits for Maputo, while the disadvantages for the Cabo Delgado ecosystem are certain
Susanna De Guio – published on Nigrizia.it
About fifty financial institutions around the world may decide to financially support the construction of a new gas extraction and liquefaction platform off the coast of Mozambique, called Coral North Floating LNG.
The Italian multinational Eni, leading the project, is trying to close the deal as soon as possible: it is about financing an infrastructure that would be devastating for the marine environment and climate-changing emissions, as well as damaging to the Mozambican economy. This is because the platform project is subject to a contract that mainly benefits the proponent companies. In addition, the infrastructure could be considered unnecessary because it would increase the availability of liquefied gas on a saturated world market.
Say no! to gas
These are the main reasons that should push banks and export credit agencies to back out of a project that, moreover, would burden a country that is facing a moment of strong political instability and would be located in a province, Cabo Delgado, that has been the scene of a bloody armed conflict in recent years. All these arguments were pointed out by civil society organisations from around the world, gathered in the “Say No! To Gas in Mozambique” coalition, in a letter sent last December to all financial institutions that are able to decide still not to invest in Coral North.
The project would be built 10 kilometres away from its sister plant, Coral South, also built by Eni in 2022 and the only one so far operating in the immense fossil gas fields of the Rovuma basin, mostly discovered again by Eni, which has been present in Mozambique since 2006.
Who is pulling out and who could be in
Among the banks that had supported the first platform was UniCredit, which will not be in the game this time due to its own rules that prevent it. The British, Dutch and US export credit agencies, which were involved in the Mozambique LNG terminal in the same province, are not interested in financing Coral North. The French commercial bank BNP Paribas and the Dutch ABN Amro have also stated that they will not finance the project, in response to the letter sent by the NGOs.
However, many more financial institutions have not yet made sufficient commitments to avoid promoting highly climate and planet-damaging projects such as fossil gas extraction and liquefaction. This is the case of Intesa Sanpaolo, which has not responded to the letter, and which on the contrary has been betting heavily on liquefied gas production in recent years, for example by financing storage and export terminals on the Texas coast.
Although the new US President Donald Trump has already assured that he will give new impetus to US gas exports, his announcements go against the grain of energy market analyses: for at least three years, institutions such as the International Energy Agency (IEA) have been warning of the risks of an oversupply of liquefied natural gas on a global scale.
The rhetoric of energy security
In Italy, the energy security narrative has supported the search for new gas supplies since the first sanctions against Russia for the war in Ukraine in 2022. After the contract signed by Europe to receive LNG from a US task force, the agreements between Italy and several African countries mentioned in the Mattei Plan also point in the same direction. In the control room of the Plan is Eni, the second largest producer of oil and gas in Africa, the continent where it generates more than half of its profits.
However, all the gas extracted from Coral South is sold to the British fossil company BP, which takes it mainly to Asian markets and only a small part reaches Italy. There is therefore no precedent for thinking that the new Coral North platform would instead be used to supply Italy or Europe with gas, or to ensure its energy security.
On the other hand, the new project would not be beneficial for Mozambique either: last December, the Centro de Integridade Publica (CIP) denounced that Eni had allegedly put pressure on the outgoing government of Felipe Nyusi to close a new contract for the exploitation of Coral North gas by eliminating two clauses that were important for the Mozambican economy. This version was rejected by Eni.
The existing case of Coral South FLNG also makes it possible to evaluate already, concretely, the losses and economic risks faced by Mozambique, which would be repeated with a sister project: in essence, since the government contracts associated with the projects are front-loaded in favor of the companies, Mozambique is not reaching most of the revenue for several years. In addition, the investment protections and investor-state dispute settlement (ISDS) clauses says that if government proposes regulatory or fiscal changes affecting profitability, investors like Eni would be entitled to ask for compensation.
Sea (and fishermen) in danger
The installation of platforms for gas exploitation off the coast also means, for the population of the area, the loss of their livelihoood, linked to fishing. The Environmental Impact Assessment (EIA) of the new Coral North project shows numerous shortcomings, according to Mozambican NGO Justiça Ambiental and the South African Natural Justice in their comments on the EIA made in June last year.
The report allegedly failed to adequately consider the impacts on marine fauna and flora, lacked proper assessments of drilling effects and necessary mitigation measures, the prediction of oil spills and gas condensates during extraction, as well as the cumulative effects that a second installation in addition to the existing one would produce in a still relatively pristine marine area.
In essence, the EIA would not comply with either the rules of the Mozambican Constitution or international directives such as the United Nations Convention on the Law of the Sea (UNCLOS), the United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Agreement.
Mozambican failure
Since 2010, the exploitation of the third largest gas reserve in Africa – 2.8 trillion cubic metres – has attracted major fossil fuel companies to the country, but this has not brought economic growth or industrialisation. On the contrary, the country’s debt has grown, and poverty and inequality rates have increased. Furthermore, a violent conflict has been raging in the Cabo Delgado region since 2017, which is still active, and which adds to the ongoing protests against the election result of the consultations last 9 October.
If Coral North were to be approved, the ‘resource curse’ would return to Mozambique: there are no good arguments to argue that a new gas project in this territory would benefit anything but, so far, the coffers of the oil and gas majors.
