TotalEnergies’ Investment Decision in Cabo Delgado: A Real Options Theory Perspective
Torres Filipe Charles1*, Francis Pol Costoy Lim2,3
Abstract
The main objective of this study is to analyze TotalEnergies’ investment decision in Cabo Delgado in light of Real Options Theory (ROT) for the period from 2021 to 2025. The research sought to identify the risk factors that led to the postponement of the Mozambique LNG project, assess the incorporation of strategic flexibility in the company’s decisions, and discuss the economic and strategic impacts of applying TOR in Mozambique. The results revealed that the option to wait was the most valuable (8,308,327 MZN), allowing TotalEnergies to reduce risks and maximize the value of the project. The option to abandon (1,677,000 MZN) proved effective in mitigating losses in negative scenarios, while the option to expand (2,648,000 MZN) showed the potential to capture opportunities in favorable contexts. The application of the Black-Scholes model, with approximate data, estimated the value of the option at USD 15.8 billion, financially justifying the decision to postpone. It is concluded that real options’ theory represents a superior approach to traditional investment valuation methods, as it captures the value of flexibility and adaptability in volatile environments, such as the Mozambican extractive sector.
Keywords:
Real Options Theory, TotalEnergies, Mozambique LNG, Strategic Flexibility, Investments in an Environment of Uncertainty
