UK withdraws $1.15bn loan from Mozambique gas project over climate and security risks

The UK government has withdrawn its backing for a $1.15bn (£870m) loan to a major gas development in Mozambique, citing escalating concerns over climate impact, human rights violations and the deadly insurgency that engulfed the region.

Business secretary Peter Kyle confirmed on Monday that the UK Export Finance (UKEF) agency would pull its support for the long-delayed Mozambique liquified natural gas project, led by French energy giant TotalEnergies. The decision comes five years after the scheme became a focal point for environmental protests and accusations that it was fuelling instability in Cabo Delgado province.

The project has been frozen since 2021, when Islamist militants stormed the nearby town of Palma, killing more than 800 people and forcing Total to evacuate staff and halt operations. The company is preparing to restart work in the coming months after enhanced security measures were deployed in the area.

Kyle said UKEF’s withdrawal followed “a comprehensive assessment of the project and the interests of UK taxpayers”, adding: “Whilst these decisions are never easy, the government believes that UK financing of this project will not advance the interests of our country.”

The UK had initially approved the loan in 2020, shortly after MPs on the environmental audit committee urged the previous Conservative government to end financial support for overseas fossil fuel projects, warning such backing undermined the UK’s climate commitments.

UKEF originally argued the scheme could support more than 2,000 UK jobs, benefit small businesses and deliver economic development for Mozambique. A 2019 agreement with Centrica also raised the possibility that gas from the project could supply British households.

But environmental groups and development campaigners have long criticised the project’s climate impact and the forced relocation of communities living near the construction zone. They also argued that Mozambique — one of the countries most vulnerable to climate change — should be supported to expand renewable energy capacity instead.

Antoine Bouhey of Reclaim Finance said the UK’s withdrawal showed the project was “riddled with problems and cannot be supported”, adding that major lenders including Standard Chartered, Crédit Agricole and Société Générale should now follow suit. “It has been blatantly clear for years that this project is a disaster for local communities and for the climate,” he said.

Friends of the Earth chief executive Asad Rehman said the government’s decision was long overdue. “This gas project is a huge carbon timebomb, linked to serious human rights abuses,” he said. “It should never have been given UK taxpayer-funded support in the first place.”

Rehman urged other governments to withdraw backing and called on the UK to shift support toward climate adaptation efforts and clean energy projects in Mozambique, where 60% of the population still lacks access to electricity.

Amy Ingham

Amy is a newly qualified journalist specialising in business journalism at Business Matters with responsibility for news content for what is now the UK’s largest print and online source of current business news.