CAPE TOWN - Banks and other financiers should withdraw their support of TotalEnergies' $20 billion liquefied natural gas (LNG) terminal in Mozambique, environmental lobby groups urged in a letter sent to more than two dozen project funders on Friday.

The letter, seen by Reuters, comes at a crucial juncture for the French energy company as it prepares to relaunch Africa's largest foreign direct investment project.

Activists warn the project may worsen climate change and fuel human rights abuses in the impoverished southern African nation.

"As a critical financial supporter of the project, you bear a direct and important responsibility in its dreadful impacts," the letter, supported by more than 100 organisations, including ActionAid International and Greenpeace France, said.

Last month, lawmakers in the Netherlands said they would insist on being consulted on safety and human rights concerns before they can approve a 1 billion euro ($1.06 billion) loan guarantee for the project, stalled since April 2021.

Welcoming the Dutch decision as an important signal, Lorette Philippot, private finance campaigner with Friends of the Earth France, said activists are "hopeful that other financiers will conduct proper assessments and withdraw from this time bomb project".

TotalEnergies said before Friday's letter that arrangements for project finance remain in place despite a 'force majeure' halt in 2021 when Islamist militants threatened the project site.

Financing agreements for the project were struck in 2020 with direct and covered loans from eight export credit agencies, 19 commercial banks and the African Development Bank (AfDB).

Societe Generale, one of the main commercial banks involved, declined to comment. The AfDB also declined to comment.

Some $15 billion in financing is currently being reviewed as part of restarting procedures, a credit official with knowledge of current negotiations said.

South Africa's Export Credit Insurance Corporation planned to seek board approval early next year to support the project, acting CEO Ntshengedzeni Maphula told Reuters.

The project delay has led some investors to reassess their previous cost assumptions in light of inflation and global gas market swings.

The U.S. Exim bank, which is guaranteeing $5 billion, said it was conducting due diligence on plans to resume construction.

"EXIM will review and evaluate any proposed changes to the terms of its approved financing of the Mozambique LNG project," Reta Jo Lewis, the bank's president told Reuters earlier this month.

(Reporting by Wendell Roelf in Cape Town; Toby Sterling in Amsterdam, Nellie Peyton in Johannesburg, Forrest Crellin and Mathieu Rosemain in Paris and Yuka Obayashi in Tokyo; Editing by Tim Cocks, Olivia Kumwenda and Elaine Hardcastle)