A multibillion-dollar gas development in Mozambique, the single biggest investment in Africa, faces renewed threat after an Islamist insurgent assault forced Total to suspend work for a second time this year.

Insurgents attacked Palma, a town 10km from the $20bn project in the northern Cabo Delgado region, on Wednesday, killing several foreign workers in a battle that was still raging on Sunday, according to local media.

Total said on Saturday that its workers were not among the victims but that its “absolute priority was to ensure the safety and security of the people who work on the project”. The French energy major said it would reduce its workforce on the liquefied natural gas project “to a strict minimum”.

Total had only just announced it was restarting the project following an earlier insurgent threat, when the attack on Palma began last week. Precise casualties are not yet known because of poor communications with the area, which is roughly 2,700km north of the capital, Maputo, by road.

“The remobilisation of the project that was envisaged . . . is of course now suspended,” Total said. It declined to give details of how many staff were being withdrawn.

President Filipe Nyusi’s government said last week that it had begun an offensive to retake Palma but it has not provided any information since. A defence spokesperson did not respond to a request for comment.

The insurgency in Cabo Delgado has killed thousands of people since it began in 2017 and forced almost 700,000 in the province to leave their homes. Badly equipped and trained government forces have struggled to regain the initiative in the conflict.

Locator map of Mozambique

The insurgency has gradually gained momentum and recently became a direct threat to the exploitation of huge offshore gas discoveries that have the potential to transform one of the world’s poorest nations if production can begin.

ExxonMobil, the US energy group, is leading another $30bn LNG project in Cabo Delgado but is yet to make a final decision on whether to go ahead with investment.

“For the first time, insurgents are specifically attacking foreigners in the ongoing fighting in Palma,” Joseph Hanlon, a Mozambique expert at the UK’s Open University, said. “The attacks will raise serious questions about the expected development of the multibillion-dollar gas liquefaction plants”, which are based on the nearby Afungi peninsula, Hanlon said.

Insurgents staged an earlier attack near Afungi this year. Total made resumption of LNG development conditional on security forces being able to enforce a cordon at least 25km around the LNG project. Palma is well within that zone.

Analysts said the attack on Palma was unlikely to be linked to Total’s plans to restart the LNG project and that insurgents appeared to have mounted a meticulously planned assault to gather supplies and humiliate security forces.

Palma had been in a virtual state of siege in recent weeks and had filled with refugees fleeing abductions and beheadings. Food aid had recently arrived and could have been an objective of the insurgents, analysts said.

Human Rights Watch said local residents had reported bodies lying in the streets and intense fighting as the attack began on Wednesday, before phone lines were severed.

Over the weekend, insurgents reportedly attacked a convoy coming to rescue almost 200 Mozambican and foreign workers and officials who had taken refuge in a hotel. Rescue efforts by sea were under way on Sunday. Data from MarineTraffic, the ship-tracking website, indicated that several international vessels had diverted towards Palma.

South Africa’s government said on Saturday that its citizens had been affected by the attacks and it was sending more staff to its embassy in Mozambique to deal with the aftermath.

Researchers say the insurgency is rooted in local grievances about corruption and anger at being left out of development in what is Mozambique’s poorest province.

Isis has claimed credit for some past attacks and this month the US government said it viewed the Cabo Delgado insurgents as being linked to the global terrorist group.

The Nyusi government has turned to private security contractors to supply and toughen up its forces and has also been forging security ties with the US in particular. US Green Berets have been training Mozambican soldiers.