Japan's Largest Natural Gas Development in Africa Gets a Red Light: ‘IS’ Finally Halts Operations of Mitsui /Total Announces 'Force Majeure'

Dr. Sayaka Funada-Classen (International Peace Research Institute, Meiji Gakuin University)

*The English version based on the article originally written in Japanese and published by Asahi Shimbun (https://webronza.asahi.com/politics/articles/2021042700008.html).

* The translation was provided by Office BALéS and supported by MISEREOR.

Once touted as one of the “largest development project in Sub-Saharan Africa”, the large-scale development projects spearheaded by the Government of Japan, Mitsui & Co., and others through public-private partnerships under the Abe administration have almost come to a complete halt marking huge losses.

Developing one of the largest natural gas reserves in the world was the most important and significant project of all for the Japanese stakeholders. The project, in particular the construction of a natural gas liquefaction (LNG) plant, was financed with investments from Mitsui, the Japan Oil, Gas and Metals National Corporation (JOGME), and the Japan Bank for International Cooperation (JBIC), a government-affiliated financial institution. Following repeated attacks by the armed groups calling themselves ‘the Islamic State’ (IS), the "total withdrawal" of 3,000 staff members, and resulting suspension of plant construction work, Total, the primary beneficiary of the project, finally declared today (April 26, 2021) a "force majeure situation".

For the past decade, the Japanese public and private sectors have provided one of the largest aids and investment to Mozambique, located in southeastern African, facing the Indian Ocean. The focus was on the underground resources and "vast uncultivated land” in the northern part of the country. However, these large-scale development projects have been met with strong resistance from peasants, who make up the overwhelming majority of the local population, forced to cease one after another. This was due to social division and widespread dissatisfaction caused by corruption, inequality, and power-grabbing, as well as increased environmental awareness worldwide. The following are the highlights of these events. 

i. Suspension of JICA's large-scale agricultural development project ProSAVANA in the three northern provinces (August 2020)[1]

ii.   Sale by Mitsui & Co. of the Moatize Coal Mine/Nacala Corridor Rail and Port Infrastructure Project (JBIC loan of nearly JPY 111.3 billion[2]) for "1 yen" (January 2021)[3]

iii.   The suspension of a natural gas development project (LNG plant construction) in the northern tip of Mozambique (near the border with Tanzania) led by Mitsui & Co. and for which JBIC has pledged a loan of USD 3 billion (about JPY 320 billion).[4]

The armed attack by armed groups to the natural gas development site and its surrounding areas in Cabo Delgado Province that began in October 2017 was also covered in the previous article in a series by the author, “The ‘IS’ Attack on Mozambique: No longer ‘an incident in a distant African country’ for Japan with heavy concern on impact to natural gas imports”. The series, which began on June 15, 2019, pointed out the various issues surrounding natural gas development that were already erupting at the time, and alerted the public about their connection to corruption among government officials, including the past and present presidents (e.g. the scandal related to ‘Hidden Debts’).

The armed attack by armed groups to the natural gas development site and its surrounding areas in Cabo Delgado Province that began in October 2017 was also covered in the previous article in a series by the author, “The ‘IS’ Attack on Mozambique: No longer ‘an incident in a distant African country’ for Japan with heavy concern on impact to natural gas imports”.[1] The series, which began on June 15, 2019, pointed out the various issues surrounding natural gas development that were already erupting at the time, and alerted the public about their connection to corruption among government officials, including the past and present presidents (e.g. the scandal related to ‘Hidden Debts’).

However, four days later, on June 19, Mitsui announced its final investment decision in a press release entitled "Final Investment Decision for the Mozambique LNG Project," which made no mention of the existing risks and/or the corruption that was already visible.[6]

In fact, throughout 2020, the armed groups not only seized the key sites essential for natural gas development, but also repeatedly attacked villages within 1-5 kilometers away from the LNG plant construction site (Cabo Delgado’s Palma District in Afungi Peninsula) between December 29, 2019, and January 1, 2020. These attacks resulted with them fighting with local police and security forces. In response to this, Total decided on January 2 to temporarily evacuate its personnel, and the number of personnel involved with the construction was reduced from around 10,000 to about 1,000. Just as they started to return, on March 24 of this year, the armed groups launched a massive attack in Palma District capital six kilometers away, forcing Total to evacuate all staff by air and sea.[7]

Although Total insisted to announce that there was "no change in plans" to start exporting natural gas in 2024, on April 26, the company finally declared a "force majeure" situation.[8] 

Considering the evolution of the security situation in the north of the Cabo Delgado province in Mozambique, Total confirms the withdrawal of all Mozambique LNG project personnel from the Afungi site. This situation leads Total, as operator of Mozambique LNG project, to declare force majeure. 

In other words, the development project for the world's largest natural gas reserves, which had been spearheaded by the Japanese public and private sectors, has hit a dead end. And because of the "force majeure" caused by the fighting, they are requesting immunity, which will likely burden investors, lending institutions, and insurance companies. There is no denying the possibility that the final buck will be passed on to the Japanese taxpayers and the public, who are the bearers of public funds.

The armed attacks in the Province of Cabo Delgado within a week in mid-April occurred in the following locations. Not only were the attacks spread across the entire province, but it also shows most heavily attacked areas centered (1) along the coast where natural gas oil fields are concentrated, (2) the LNG plant construction sites (Palma District and Afungi Peninsula), (3) the logistics hub in Mocimboa da Praia, and (4) the government military base in Mueda. Moreover, it is also clear that attacks have been launched (5) in the southern part of the province, just outside the provincial capital of Pemba (in Mecufi). 

As a researcher on the current and past socio-political situation of the region, particular focus given on the questions related to war, violence, peace, and development, for more than 25 years since 1994, I have warned these consequences: That the political fragmentation and militarization caused by the problems brought forth by foreign investments, including these large-scale development projects, would eventually lead to the collapse of these projects. This is in fact what is happening now. In this new series of articles, I will focus on the issue of natural gas development projects, which are now in a state of emergency.

In this article (Volume I of Three), under the following structure, I will mainly examine the feasibility of the Mitsui and JBIC loans:

1.    Escalation of attacks and "serious humanitarian crisis” - more than 700,000 people displaced

2.    Involvement of Japan's public and private sectors in natural gas development projects - targets of the attack

3.    Growing dissatisfaction among residents and opposition from environmental groups

4.    JBIC's perception and response to local situation/opposition and risk analysis (from the minutes of the debate with Japanese NGOs)

5.    Visit to Japan and JBIC by a local environmental group

6.    Largest attack in three years just before JBIC loan decision

7.    Growing international opposition and problems of natural gas development (land grabbing, corruption, human rights, militarization, environment)

8.    The loan agreement between JBIC and Mitsui, regardless of the situation and the eventual suspension of the project

*****************

1. Escalation of attacks and "serious humanitarian crisis” - more than 700,000 people displaced

In the Cabo Delgado province at the northern tip of Mozambique, where the natural gas development sites are located, the armed attacks by the ‘Islamist’ militant groups and hostilities with government forces have continued since October 2017, resulting in 2,811 attacks, nearly 3,000 deaths and 715,000 displaced people to date.[9] More than a year has passed since the United Nations warned of a "serious humanitarian crisis," but the number of evacuees has not only continued to rise, but displaced people within the province have begun to flood into neighboring provinces, leaving the entire northern part of Mozambique in serious crisis situation.

Since late last year, these armed groups have targeted natural gas development projects and have been intensifying their attacks on LNG plant construction sites near the Tanzanian border.[10] In August 2020, they recaptured the port of Mocimboa, a police station, the administrative districts, and other ports that are essential for tactical logistics, and have succeeded to hold them despite repeated counterattacks by government forces. The IS has even declared Mocimboa to be the capital of the Islamic State Central African Province (ISCAP).[11] The transportation network in the area has also been disrupted by the ambush attack, forcing the government and businesses to resort to transport by air or sea.[12] 

These armed groups have also launched attacks on islands around gas field drilling sites in the Indian Ocean,[13] showing how inadequate the perception of "sporadic attacks" and "terrorism" claimed by Japan and the local government is. 

2. Involvement of Japan's public and private sectors in natural gas development projects - targets of the attack 

The Japanese public and private sectors (Mitsui and JOGME) have been involved in this development project as the second largest concession holder (20%) of the “Rovuma Offshore Area 1 concession”, together with the French oil giant Total (26.5%). In particular, Mitsui & Co. has been investing its own funds[14] and applying for loans from the Japanese public institution JBIC since 2015 for the construction of an onshore LNG plant and submarine natural gas production facility.

JGC Corporation, which lost many victims in the Algerian hostage crisis,[15] along with Chiyoda Corporation, whose 47% of revenues stem from the construction of LNG plants, were awarded the contract for the basic design of the LNG plant in 2019.[16] In addition, Tokyo Gas and Tohoku Gas have entered a contract for the purchase of natural gas.[17] 

3. Growing dissatisfaction among residents and opposition from environmental groups

In the province of Cabo Delgado, where the natural gas field is located, armed attacks such as the one described above began in October 2017. This resulted not only in hostilities with government forces, but also in social discontent among fishermen and farmers who lived near the construction site of LNG facility in Afungi situated across the ocean from the natural gas field, and those who were forced to vacate and relocate.

This can be seen in the 2018 video "Broken Lives, Stolen Future" by a local environmental NGO (Justi?a Ambiental: JA!). In addition, as pointed out in the prior series of articles, the overwhelming majority of these residents are Muslim, with a network that historically includes Tanzania, Kenya, and in some cases, Somalia. This was discussed in detail in "The Origins of War in Mozambique: A History of Unity and Division " (The African Minds, 2013).[19]

In addition to the above issues, JA! has been calling for a halt to the project, pointing out that the development of the natural gas field will not only lead to the destruction of the environment of the Quirimbas Archipelago, a cultural and natural heritage site recognized by UNESCO,[20] but will also increase Mozambique's emissions of carbon that would induce climate change by more than 10%, thus promoting global warming contrary to international agreements (see Volume II of the prior series).[21] 

In response, Japanese civil society groups including NGOs have also taken up the issue as an agenda item at the regular consultative meetings with the Ministry of Finance (MoF), calling on the Japanese government and JBIC to abandon the loan.

4. JBIC's perception and response to situation/opposition and risk analysis (from the minutes of the debate with Japanese NGOs) 

A group of three Japanese NGOs asked about the "loan availability" and "guidelines for risk areas, risk analysis methods and current status" at the first consultation with the MoF and JBIC on the issue of natural gas development (Dec. 24, 2019). Naoki Takahashi (Head of Unit 2, Mineral Resources Department, JBIC) responded as follows:[22] 

As regards to the natural gas project in which Mitsui Co., and JOGMEG are participating, at this time, we have not made any financing decisions for the project in Mozambique.

As regards to how we analyze the risks that are developing, in general terms, when there is a deterioration in public safety in a project location, JBIC first asks the project proponent about the local situation and specific measures to be taken to implement the project. In addition, if necessary, we seek the opinions of outside experts to provide information, risk analysis, and other such requests. We gather the necessary information and consider the loan while checking the appropriateness of security measures and measures involving labor conditions.

The following exchange between Ms. Naoko Watanabe of the Japan International Volunteer Center (JVC) and Mr. Takahashi can be confirmed in the minutes as their response.

• JVC Watanabe: In question 7, we asked about the risk analysis of natural gas development areas, and you explained the general method of risk analysis. If possible, based on that, please share with us your perception of the current situation in this region.
• JBIC Takahashi: Regarding risk analysis in question 7, you asked about how we perceive the current situation in this region...
•  JVC Watanabe: If you have not done any particular analysis, I would still appreciate if you could answer accordingly.
• JBIC Takahashi: You are correct.

From this conversation, we can see that at this stage, six months before the loan decision was made, JBIC indicated that it had not conducted its own risk analysis or have recognized the situation. After this, JBIC made the excuse that "the person who responded at the time was not the person in charge, and that we had passed on incorrect information." However, the agenda and questions were submitted in advance, and it would be unnatural if they did not know whether risk analysis was being conducted at a public consultation meeting where verbatim minutes are kept.[23] From the JBIC's subsequent response and explanations, it is clear that they underestimated the risk, as they described it as "sporadic clashes". This will be discussed in Volume II.

It should be noted that, at least at this point, JBIC had not yet decided on the loan, and had stated that it would confirm the "risk analysis" and "appropriateness of security measures" for the loan.

5. Visit to Japan and JBIC by a local environmental group

However, not only did the situation continue to deteriorate, but in January 2020, a representative of JA! (Ms. Dipti Bhatnagar) came to Japan and visited JBIC together with four Japanese organizations to point out the deteriorating situation and problems with the project in the region, making repeated requests not to provide loans.[24] On the JBIC side, Mr. Tatsumi, Mr. Hosoi, Mr. Ohno, Mr. Imai, and Mr. Awaya (full names unknown) responded to this request, and the NGO's minutes reveal that the following exchange took place between Mr. Tatsumi and Ms. Dipti on this matter.[25]

• JBIC Tatsumi: I am aware that the threats from Islamic fundamentalist and other armed groups are scattered throughout the province and that the government of Mozambique has begun to take measures against these threats.
• JA! Bhatnagar The threat is not only from Islamic fundamentalist militant groups, but that the cause is still unclear. The government is sounding the alarm about this situation but has not done anything concrete. We need to figure out why this is so. In other words, there is the problem of private military companies, the desire to evict the residents, and the deteriorating situation. In any case, what is happening in Cabo Delgado is a matter of impunity, and the militarization is the so-called "resource curse" that comes with the development of gas fields. So long as we are uncertain about who is doing what, JBIC should refrain from doing anything.

In response to Mr. Tatsumi's answer, Mr. Watanabe, the member of JVC, asked about the method of loan decision-making and what conditions must be met before a loan decision can be made. The same records reveal that Mr. Tatsumi responded as follows

With regards to the security issue, we have discussed with the local operators how to manage the risk and have confirmed the results with an external security consultant before deciding.

It is difficult to state exactly to what degree security matters affect our decision, but we do recognize that it is one of the top priorities that must be considered.

6. Largest attack in three years just before JBIC loan decision

But in fact, on July 16, 2020, just as the attacks were escalating and the situation was deteriorating, JBIC announced its decision to provide the loan.[26] Two weeks before this on July 2, the Nikkei Shimbun reported the following as a scoop: "Public and private sectors to finance JPY 1.5 trillion LNG development in Africa, diversifying procurement sources.”[27]

The government and private sector will co-finance JPY 1.5 trillion for the development of liquefied natural gas (LNG) in Mozambique, Africa. The Japan Bank for International Cooperation (JBIC) and three megabanks will provide loans, and Nippon Export and Investment Insurance (NEXI) will cover the risk of loan losses. The group is investing money in this project as they see it as a good opportunity to promote long-term stable production and diversification of procurement sources. JBIC will lend USD 3 billion (about JPY 320 billion) of the USD 14.4 billion (about JPY 1.5 trillion) ...

However, the article not only fails to report the seriousness of the existing situation at the development site, but also emphasizes the relevance and safety of this development, comparing it to the Strait of Hormuz:

Japan is the world's largest importer of LNG. Most imports come from Australia, Qatar, and other countries, but the Strait of Hormuz, the shipping route from Qatar, has become a geopolitical risk, as a Japanese tanker was attacked in 2019. From Mozambique, it can be transported to Japan without passing through the Strait of Hormuz.

As a major news organization, they should be able to see with a little research that the reality was quite different.

The following is a graph showing the evolution of the number of cases of political violence in the province, as reported in the weekly report “Cabo Ligado” on the situation in Cabo Delgado published by the International Crisis Group and two independent Mozambican newspapers, Zitamar News and Mediafax 31 August-6 September, 2020).[28]

This shows a dramatic increase in the number of attacks by July, the month in which JBIC announced its investment decision. In fact, the four months immediately preceding and following the investment decision (April-July 2020) coincide with the most intense period of armed attacks in the past three years, and the militants have not only expanded the geographic scope of their attacks but have also succeeded in seizing each of the district capitals.

On June 27, just prior to June 30, 2020, when the Japanese press reported the JBIC loan decision, there was a simultaneous attack on the district capital of Mocimboa, a logistics hub, and the police and executive branch were destroyed, looted, and occupied. However, the Mozambican government forces were helpless, and the occupation continued for more than ten days. I want to make it clear that these were investment decisions and news reports made during such time.

The following is the distribution of the locations of the attacks that occurred during the week of June 22-28. We can also confirm that already at this stage, the attack on Palma District and Afungi, where the LNG plant is located, has begun.

7. Growing international opposition and problems of natural gas development (land grabbing, corruption, human rights, militarization, environment)

Local and global calls to halt this natural gas development preexisted before these attacks. A month earlier on June 4, a statement of opposition was released by Mozambican NGOs (JA! Friends of the Earth Mozambique, among others), signed by 20 Mozambican environmental organizations, 14 international organizations, 19 regional organizations, 151 national organizations, and 206 individuals.[29] This international statement begins with the following:

Cabo Delgado is being ravaged. And it’s clear who is responsible. The gas industry is causing devastation in this northernmost province of Mozambique, with communities starving and landless, even before any gas has been extracted.

This international statement pointed out the actual five damages and problems caused by the natural gas development in Cabo Delgado as the “realities of the destruction" and called on the transnational corporations involved in the development, buyers of natural gas, and investors, to immediately halt all activities related to the development.

(1)   Land grabbing and loss of livelihoods: Natural gas development has deprived people of access to farmland and the sea, the source of their livelihoods. In the construction site of liquefaction plant, 550 fishing and farming families were deprived of their land and homes.

(2)   Widening disparity between the rich and the poor: International investment in resource industries is not enriching local communities, but rather is widening the disparity between the rich and the poor (Mozambique ranks 180th out of 189 countries in the Human Development Index: HDI).

(3)   Deterioration of governance: Community leaders who criticized natural gas development and journalists who were reporting from the area remain missing. There are also several people who were detained without charges.[30] The natural gas industry is perpetuating a culture of impunity, corruption, and human rights abuses.

(4)   Outbreak of armed conflicts and repression: In natural gas development sites, attacks by Islamic armed groups have become a regular occurrence, resulting in more than hundred thousand displaced persons. These armed groups are joined by local youths who have been deprived of their livelihood and have watched the wealthy state elites get even richer. As a result, natural gas development facilities have also been the target of attacks. In response, the Mozambican government has militarized the region with the premise to safeguard the natural gas industry, resulting in continued attacks and repression of the population by military and police personnel.

(5)   Environmental degradation and climate change: The Quirimbas Archipelago, which is adjacent to a natural gas development site, is threatened by gas development despite its designation as a UNESCO Biosphere Reserve. And while development companies are "greenwashing" the idea that natural gas is ‘environmentally friendly’, the reality is that natural gas development is a step backwards in decarbonization.[31] Development of three natural gas sites in Northern Mozambique could emit seven times more greenhouse gases than France's annual emissions.

(6)   Spread of the COVID-19 virus: Natural gas developers (especially Total and LNG construction workers) brought COVID-19 to the area and spread it among the workers due to lack of countermeasures.

Based on the above, the statement said Mozambique is on the brink of becoming “a country that falls into the ‘resource curse’” and demanded that “all transnational companies, all purchasers, and all international investors involved in gas extraction in Mozambique cease all activities right now.” Nonetheless, JBIC’s decision to provide the loan was made a month after this, with no improvement seen in the security situation.

 In response, eleven Japanese civil society organizations jointly issued an opposition statement dated on July 22, entitled, "We call on the Japanese government to stop the massive public financing of natural gas development which is harmful and causing human suffering." The statement was delivered to JBIC and the Ministry of Finance. At the end of the statement, a formal request was made to "Japan's public and private sectors as major proponents of natural gas development," and to "the Japanese government and Japanese corporations” with the following perspectives:

In other words, it can be said that the natural gas development led by the Japanese public and private sectors has created a battle zone for international conflicts, increasing the damage to the residents. Regardless, the decision by JBIC, a public institution, was made at a time when the situation was seriously deteriorating.

In response to the above, as Japan’s civil society organizations and non-governmental organizations, we once again call for an immediate halt to the involvement of the Japanese public and private sectors in natural gas development, which is already harming the lives and livelihoods of the local people and setting back efforts to address climate change.

We also adamantly oppose loans and insurance underwriting using public funds being promoted at a time when armed conflict has broken out and development sites are prime targets. Those funds are the precious financial resources of the Japanese people and residents.

8. The loan agreement between JBIC and Mitsui, regardless of the situation and the eventual suspension of the project

These repeated warnings and opposition requests were largely ignored, and the loan decision was finally made on February 16, 2021. As indicated at the beginning of this report, the loan agreement was announced while the construction of the LNG plant was suspended due to the intensified attacks at the end of the year.[33] The total amount of loans amounted to USD 894 million (about JPY 96.6 billion).

A month later March 24, the Palma District capital located 6 kilometers from the plant construction site which serves as a base for logistics and personnel essential to the continuation of the project, was attacked by as many as 100 militants, who destroyed, occupied, and looted banks, hotels, stores, and police stations. The armed forces occupied the Palma District capital for more than a week, until April 4. The incompetence of the Mozambican government forces was now apparent. Today's suspension of operations and declaration of "force majeure" by Total came amidst casualties and evacuation of over 10,000 people.

(To be continued...)

[1] https://webronza.asahi.com/politics/articles/2020080500001.html?page=1

[2] https://www.jbic.go.jp/ja/information/press/press-2017/1128-58878.html

[3] https://www.mitsui.com/jp/ja/release/2021/1240454_12148.html

[4] https://www.nikkei.com/article/DGXZQOGR07D3F0X00C21A4000000/

[5] https://webronza.asahi.com/politics/articles/2019061300001.html?iref=wrp_rnavi_new

[6] https://www.mitsui.com/jp/ja/release/2019/1228888_11203.html

[7] https://www.theguardian.com/world/2021/apr/03/mozambique-french-energy-giant-total-withdraws-after-militant-attacks

[8] https://clubofmozambique.com/news/just-in-total-declares-force-majeure-on-mozambique-lng-project-press-release-190411/

[9] https://www.caboligado.com/reports/cabo-ligado-weekly-12-18-april-2021

[10] https://www.spglobal.com/platts/en/market-insights/latest-news/natural-gas/010521-frances-total-removes-staff-at-mozambique-lng-as-insurgency-closes-in

[11] https://apnews.com/article/1d76838397ef4d18b6a63bb22f8cd254

[12] https://apnews.com/article/international-news-islamic-state-group-mozambique-91fd3cfdfe7f279d10ccc63deabf5193

[13] https://www.telegraph.co.uk/news/2020/09/20/jihadists-launch-assault-mozambiques-luxury-tourist-island/

[14] https://www.mitsui.com/jp/ja/release/2015/1208410_6498.html

[15] https://www.afpbb.com/articles/-/2922289

[16] https://www.jgc.com/en/news/2019/20191009_01.html

[17] https://www.jetro.go.jp/biznews/2019/02/0adb8b4869c00b26.html

[18] https://www.youtube.com/watch?v=LCE6tYbEAss

[19] https://www.africanminds.co.za/the-origins-of-war-in-mozambique-a-history-of-unity-and-division/

[20] https://whc.unesco.org/en/tentativelists/5380/

[21] https://webronza.asahi.com/politics/articles/2019101700001.html?page=2

[22] https://jacses.org/614/

[23] https://mozambiquekaihatsu.blog.fc2.com/blog-entry-455.html

[24] https://www.youtube.com/channel/UCoZCgmP4w-1Ttbw65YqRtGQ

[25] https://mozambiquekaihatsu.blog.fc2.com/blog-entry-455.html

[26] https://www.jbic.go.jp/en/information/press/press-2020/0716-013514.html

[27] https://www.nikkei.com/article/DGXMZO61072270S0A700C2EE8000/?n_cid=NMAIL007_20200702_Y

[28] https://www.caboligado.com/reports/cabo-ligado-weekly-31-august-6-september-2020

[29] https://www.foei.org/take-action/gas-human-rights-covid-mozambique

[30] https://rsf.org/en/news/mozambique-case-missing-mozambican-journalist-referred-un

[31]https://www.foei.org/wp-content/uploads/2020/06/Gas-in-Mozambique_Friends-of-the-Earth_Executive-Summary_English.pdf

[32] https://www.ngo-jvc.net/jp/projects/advocacy-statement/2020/07/20200729-mozambiquestatement.html

[33] https://www.jbic.go.jp/ja/information/press/press-2020/0216-014303.html