Reported by
Faridah N Kulumba
The government of Tanzania is planning to start the construction of a delayed $30 billion Liquefied Natural Gas (LNG) project which had stalled for more than a year during President John Pombe Magufuli’s regime.
This followed President Samia Suluhu Hassan calling for a resumption of negotiations with the giant companies including Norway’s Equinor and London-Shell.
Tanzanian Energy Minister Medard Kalemani informed parliament on Thursday that the construction of LNG is planned t.o kick off in 2023,, and is expected to take about five years, Bloomberg reported.
How the LNG project gained momentum
Plans for a Liquefied Natural Gas plant on Tanzania’s southern coast and pipeline connecting offshore fields have been under consideration since 2014.
But after President Hassan was sworn in as the new president of Tanzania in March 2021, she directed her administration to fast-track delayed investments.
On 29 April 2021, President Hassan ordered a speedy conclusion of the agreement, after the government’s negotiation team was formed.
She ordered for the resumption of negotiations with the companies in May, a month after one of the developers, Equinor took a $982 million impairment on the project in January, which it is said would be reversible, after failing to settle terms with Tanzania’s government.
The hurdles
The negotiations between the Tanzania government and International Oil Gas Companies (IOGC) on Liquefied natural gas stopped in 2017, because they failed to agree on modalities together and later they agreed to undertake it separately.
The negotiations resumed in 2018, but encountered a hitch after the Production Sharing Agreements were taken to the Attorney General for review. Tanzania sought to scrap sections on the contract that seem tilted against it.
In 2019 the negotiations were expected to be concluded but Marie Msellemu Tanzania’s Petroleum Development Corporation, communications manager explained that they were finalising compensation for the land in Lindi for LNG.
Overcoming the obstacles
Tanzania’s Energy Minister Kalemani said that they expect to conclude negotiations for a host government agreement and review production sharing agreement by the end of 2022.
He revealed that the government has finalised compensation procedures with more than 600 residents of the southern Tanzanian town Lindi to pave way for the project.
Tanzania, Shell, Equinor and other international companies including Royal Dutch, Exxon Mobil Corp, Ophir Energy Ltd and Pavilion Energy Pte and are discussing a proposed two train onshore LNG plant to export gas from the East African nation.
The beneficiaries
Tanzania’s project is set to benefit Mozambique who suspended Total SE work to a similar plan following insurgent attacks.
Mozambique’s projects, with companies including Total, Eni SPA and Exxon Mobil and a projected investment of at least $60 billion, are threatened by an insurgency in the nation’s gas-rich region.
Tanzania and Mozambique have for more than a decade been-Saharan Africa’s foremost gas frontier-investment destinations after explorers found more than 100 trillion cubic feet of the resources in their territories.
Mr Kalemani also said that Tanzanian government is separately building a pipeline network to connect and distribute gas to more than 10,000 homes and factories, mostly in the commercial hub of Dar es Salaam.
