The British government has decided to withdraw its $1.15-billion backing for the TotalEnergies-led Mozambique Liquefied Natural Gas project, it said on Monday.

Britain had promised financial support for the $20 billion project via UK Export Finance in 2020, shortly before it pledged to stop providing direct government support for overseas fossil fuel projects.

The development has been slated to make Mozambique a major LNG exporter to Europe and Asia, but was halted in 2021 due to an Islamist insurgency.

Total lifted force majeure on the project in November, but made restarting construction conditional on the Mozambican government's approval of a new budget, which the president said he may dispute.

"In preparation to restart the project, UKEF was presented with a proposal to amend the financing terms it had agreed originally," British business minister Peter Kyle said in a statement.

"My officials have evaluated the risks around the project, and it is the view of His Majesty’s Government that these risks have increased since 2020."

"This view is based on a comprehensive assessment of the project and the interests of UK taxpayers, which are best served by ending our participation in the project at this time."

TotalEnergies declined to comment.

TOTAL INSISTS ON ITS RIGHTS AROUND EXPORT FINANCE
In February TotalEnergies CEO Patrick Pouyanne told investors that Mozambique LNG shareholders were ready to exercise their contractual rights to ensure UKEF and Atradius, the Netherlands' export finance arm, approved the funds initially promised.

Kyle said UKEF would pay back the project for any premium paid. A UKEF spokesperson declined to name the amount.

A spokesperson for Dutch export arm Atradius said in July an independent human rights due diligence review was ongoing, but that "there is no clearly defined deadline" for that review.

In March, the US Export-Import Bank approved a nearly $5-billion loan for the project.

CRITICISM FROM ENVIRONMENTAL, HUMAN RIGHTS GROUPS
The project has been criticised by environmental and human rights groups.

Human rights nonprofit ECCHR last month filed a criminal complaint against TotalEnergies, alleging it was complicit in torture and enforced disappearances allegedly carried out by government soldiers in Mozambique. The company has said there is no evidence.

In April, UKEF hired law firm Beyond Human Rights Compliance to investigate risks around Mozambique LNG following media reports of the alleged torture, three people interviewed by the firm told Reuters.

A London court in 2023 dismissed a court challenge by environmental group Friends of the Earth against the British government's funding for the project.

TotalEnergies holds a 26.5% operating stake in Mozambique LNG. Japan's Mitsui owns 20% in the project and Mozambique State firm ENH 15%, alongside smaller stakeholders including India's ONGS and Oil India.