[Exclusive] French Banks Withdraw from Mozambique over Human Rights and Environmental Issues, While Korean Policy Finance Continues Investments

BNP Paribas and Credit Mutuel
French Financial Institutions Withdraw Investment from Mozambique LNG Project
From Civilian Massacre Allegations Against Project Owner
To Issues of Greenhouse Gas Emissions
Korean Companies Participating Across the Board
Export-Import Bank of Korea: "Investment Review Underway"
On Existing Loans: "Agreed to Adjust Project Schedule"

Leading banks, including France's largest financial institution, have announced that they will halt investments related to gas development projects in Mozambique, Africa. The decisions are due to concerns over reversing the global decarbonization trend and the emergence of human rights issues, such as civilian massacres. In contrast, the Export-Import Bank of Korea appears to be effectively continuing its investments or maintaining its review of the project, as it has agreed to adjust the project schedule. Some voices are calling for a careful review of the appropriateness of public financial support, given the controversies surrounding the project.

According to the financial sector on July 18, BNP Paribas, the largest financial group in France, told this publication that it will not invest in the Mozambique liquefied natural gas (LNG) project. BNP Paribas stated, "We do not provide funding for any LNG export terminals, and the mentioned project is no exception," adding, "This is consistent with the bank's position, as reflected in our oil and gas policy, not to encourage development in the exploration and production sectors." Specifically, the bank clarified that it will not be involved in ship financing for the 17 LNG carriers to be deployed in the project, nor in investments related to the export terminal.

Since 2023, BNP Paribas has announced that it will no longer provide financial support for new oil and gas development (upstream) projects. In addition, the bank is reducing financial support for the midstream (transportation and storage) and downstream (distribution and sales) sectors due to excessive greenhouse gas emissions. Credit Mutuel, one of France's six largest banks, also recently announced that it will not participate in financing LNG carriers.

The Mozambique natural gas development project is underway across Blocks 1 to 6. Korean companies are mainly participating in Blocks 1 and 4. In Block 1, Daewoo Engineering & Construction won contracts for the construction of the LNG plant and export terminal, while HD Hyundai Samho and Samsung Heavy Industries secured contracts for the construction of LNG carriers. The Export-Import Bank of Korea approved a $500 million (approximately 696.2 billion won) loan for this project in December 2020.

Block 4 involves the development of a floating liquefied natural gas (FLNG) facility. FLNG refers to a plant that liquefies, stores, and ships natural gas extracted offshore directly on a floating platform. The goal is to produce about 3.4 million tons of gas annually for 20 years starting in 2027, with Korea Gas Corporation participating with a 10% stake. The Export-Import Bank of Korea and Korea Trade Insurance Corporation are also considering providing about $1.9 billion in funding. Samsung Heavy Industries has signed a 'preliminary work contract prior to the main contract for offshore production facilities' with a shipowner in Africa, which is reportedly related to this project.

The two French banks are reluctant to invest in this project for two independent reasons: the emergence of human rights issues and the fact that the project does not align with the decarbonization trend due to greenhouse gas emissions. In the case of Block 1, the project was suspended until recently due to rebel attacks, but the Mozambique government has declared a resumption of the project. In 2021, as attacks by Islamic militant groups intensified in Cabo Delgado Province, Mozambique, TotalEnergies declared force majeure (a legal term that excuses parties from liability or obligations under certain circumstances) and announced the suspension of the project. The problem was that, at the time, there were allegations that Mozambique special forces guarding TotalEnergies’ facilities detained civilians in containers, tortured or starved them, resulting in dozens of deaths, prompting the local government to launch an investigation. In response, French prosecutors launched an investigation into TotalEnergies, the project owner, over civilian massacre allegations, and the governments of the Netherlands and the United Kingdom conducted their own investigations and suspended support for the project.

Block 4 is also problematic because it runs counter to the carbon neutrality trend. The International Energy Agency and others have emphasized the need to halt new development, pointing out that even the existing fossil fuel infrastructure in this block results in significant carbon emissions.

However, the Export-Import Bank of Korea appears likely to proceed with its existing loans and is reportedly reviewing new investments positively. When asked whether it plans to conduct its own investigation into human rights issues, as seen in the cases of France, the Netherlands, and the United Kingdom, the bank replied, "There are no plans for an independent investigation." Regarding its existing loan approval for Block 1, the bank explained, "Public export credit agencies (ECAs) and international organizations from the United States, Japan, Italy, South Africa, and Thailand, including our bank, have agreed to adjust the project schedule to reflect the period during which the project was suspended due to the declaration of force majeure." As for Block 4, the bank stated, "We are reviewing whether to support this project," adding, "Since this project contributes to the stabilization of supply chains by supporting Korean companies’ exports, orders, and resource acquisition, it is necessary to consider it from a national interest perspective. Together with the project owner and the syndicate, we plan to closely examine the environmental and social impacts of the project."

Given the controversy surrounding the project, some argue that public financial support should be approached with caution. Shin Eunbi, a researcher at Solutions for Our Climate, said, "The International Energy Agency projects that global gas demand will peak by 2030 and then decline, raising questions about the long-term economic viability of gas infrastructure, including LNG carriers." She added, "Major French financial institutions have decided not to support ship financing for Mozambique LNG, taking these issues into account. Korea should also carefully reconsider the appropriateness of public financial support, given the downward revision of LNG demand forecasts and structural changes in the market."