Notice

Category A project supported: Mozambique Liquified Natural Gas (LNG) Project

Published 17 August 2021

1. Project description

UK Export Finance (UKEF) has agreed to provide support to the Moz LNG1 Financing Company Ltd, a special purpose vehicle set up for the purposes of the Project.

The Project entails the development of offshore gas production facilities connected to an onshore gas receiving and natural gas liquefaction facility and related infrastructure in the Afungi pensinsula in Cabo Delgado Province of north-eastern Mozambique.

The Project is being developed and will be operated by TOTAL E&P Mozambique Area 1, Limitada (TEPMA1) (the Project Sponsor), with various goods and services provided from a number of UK exporters.

The three key Project elements are:

• Offshore: Drilling of wells and installation of pipelines on the seafloor to connect the wells and then bring the natural gas to the shore
• Near Shore: Construction of port facilities (jetties and berths) and a material off-loading facility (MOF). The MOF will house support vessels and allow for equipment and materials necessary for onshore construction to be brought ashore. Third party LNG carriers will berth at the jetties while they are filled with the LNG. Access channels to the port facilities will be dredged to allow large ships to reach the jetty and berths. Dredging will also be required to allow pipeline laying
• Onshore: Construction and operation of the LNG Facility and associated infrastructure such as storage tanks, temporary and permanent worker housing (including floatels), construction and maintenance areas, supplemental construction laydown areas, airstrip, power generation facilities (gas turbines), waste disposal facilities, and water and wastewater treatment facilities

The Project will make use of Associated Facilities including quarries.

2. Project sector

The Project is in the energy (gas) sector.

3. Project sponsors

The Project is being developed, and will be operated by, TOTAL E&P Mozambique Area 1, Limitada (TEPMA1).

4. UK exporters

Various.

5. Export credit agent bank

Société Générale.

6. Amount of UK Export Finance support

The principal value of UKEF support is up to USD 1.15 billion.

7. OECD Common Approaches and Equator Principles

UKEF categorised the Project as a Category A (having potentially significant environmental, social and human rights (ESHR) impacts) in accordance with the definition in the 2012 (Revised 2016) OECD Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence (the “OECD Common Approaches”) and the Equator Principles (2020).

As required by the OECD Common Approaches, UKEF disclosed its potential involvement in the Project. A notification was posted on the UKEF website on 20 August 2019, which provided a description of the Project, a contact point to signpost interested parties to environmental and social information, and links to the environmental impact assessment. One enquiry specifically referring to the notification was received by UKEF. UKEF has also received information requests (including under the Environmental Information Regulations 2004) in relation to the Project since the date of the notification.

7.1 Environmental, Social and Human Rights Standards

Project related ESHR documentation was reviewed for alignment against the 2012 International Finance Corporation (IFC) Performance Standards (PS) on Environmental and Social Sustainability and the World Bank Group Environmental, Health and Safety (EHS) Guidelines. The applicable IFC PS and World Bank Group EHS Guidelines were:

• PS1: Assessment and Management of Environmental and Social Risks and Impacts
• PS2: Labour and Working Conditions
• PS3: Resource Efficiency and Pollution Prevention
• PS4: Community Health, Safety and Security
• PS5: Land Acquisition and Involuntary Resettlement
• PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources
• PS8: Cultural Heritage

• World Bank Group EHS Guidelines, of which the following are relevant:

  – General EHS Guidelines (2007)

  – Liquefied Natural Gas (LNG) Facilities (2017)

  – Offshore Oil and Gas Development (2015)

  – Ports, Harbours and Terminals (2017)

8. Nature of ESHR impacts

The review of potential ESHR risks and impacts took into account the following impacts, receptors and issues during the construction and operational phases of the Project:

• air emissions
• climate change
• noise and vibration
• soil quality
• waste, including hazardous waste
• wastewater
• biodiversity
• land acquisition and livelihood impacts
• human rights
• management of third-party contractors and suppliers
• grievance mechanisms
• occupational and community health and safety
• emergency planning and response
• cumulative impacts
• worker welfare
• cultural heritage
• visual impacts
• community engagement

9. Assessment of ESHR impacts

A review was undertaken in line with the requirements of the OECD Common Approaches and the Equator Principles to identify potential ESHR risks and impacts of the Project and how these would be effectively managed.

The review included:

• desk-based review of project-related documentation by an Independent Environmental and Social Consultant (IESC): environmental and social impact assessment, environmental and social management plans
• IESC and lender site visit to the Project area, including meetings with communities and Project personnel
• follow-up meetings and interviews with relevant Project representatives

The results of this review formed the basis for the evaluation of the Project’s alignment with relevant international standards, and recommendations for future compliance and monitoring.

10. Climate change considerations

UKEF considered the Project’s potential direct (Scope 1 and 2) and indirect (Scope 3) greenhouse gas (GHG) emissions and effects of climate change factors on the Project. The Project is a carbon intensive undertaking. It has significant Scope 1 and Scope 2 emissions which exceed relevant thresholds for quantification and reporting set by international standards (eg 25,000 tonnes CO2 equivalent per annum).

The Project’s largest source of emissions however will be its Scope 3 emissions, caused by the end use of the LNG. The potential for gas from the Project to displace or replace both heavier and lower carbon fuels was considered as part of the ESHR review. It is considered that over its operational life, the Project will at least result in some displacement of more polluting fuels, with a consequence of some net reduction in emissions. The ESHR review revealed that the Project design has included measures to mitigate potential physical impacts of climate change such as floods and extreme temperatures.

11. Decision

Various actions have been agreed between the Project developers, operators, and parties involved in the financing, which are necessary to ensure the Project’s on-going alignment with international standards. Following agreement of these commitments, it was concluded that the Project should meet the relevant international standards over the Project cycle. UKEF has therefore decided to provide its support in respect of the supply of capital goods and services by UK exporters to the Project.

A condition of support is that the Project will be subject to assurance monitoring by an IESC, in order to provide satisfaction that the Project is aligned with the relevant international standards throughout the duration of support.

Note: Force Majeure was called by TOTAL in April 2021 due to the deteriorating security situation and therefore IESC monitoring is currently on hold.

UK Export Finance

August 2021