East African nation of Tanzania close to final agreement on $40Bln LNG export project with energy majors

Monday, 22 May 2023
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The East African nation of Tanzania said it was close to final agreement with a consortium comprising Shell, ExxonMobil and Norway’s Equinor along with several other licence partners in a $40 billion liquefied natural gas export project.

“The important negotiations with the government of Tanzania have concluded and the Host Government Agreement (HGA) and a Production Sharing Agreement (PSA) are expected to be signed soon,” said a statement from Shell’s office in the Tanzanian capital Dar Es Salam.

Charles Sangweni, the Chief Tanzanian government negotiator in the LNG talks, told local media that the main agreement had just to be approved by the Tanzanian Cabinet and Parliament and would involve total investments of $42Bln.

Sangweni, who is also Director General of the country’s Petroleum Upstream Regulatory Authority, said he hoped that the project’s first formal agreement could be signed before the end of July 2023.

Big step

“We are happy. It is a big step towards the implementation of the project although we still have a lot to do,” he added.

Tanzania's southern neighbour Mozambique became an LNG export in November 2022 with the start of a floating export project led by Italian major Eni while France's TotalEnergies is set to resume its onshore export development in the northeast Mozambican province of Cabo Delgado.

Shell operates Tanzania's Block 1 and Block 4, which hold 16 trillion cubic feet in estimated recoverable gas.

All three parties involved signed a framework agreement in June 2022 aimed at bringing closer the start of the project's construction.

Equinor and Shell, along with US major ExxonMobil and Pavilion Energy of Singapore, had previously discussed building the LNG export plant in the southern Lindi region of Tanzania.

Tanzanian President Samia Suluhu Hassan has said that the LNG project would play a crucial role in creating jobs and advancing economic developed not only in the Lindi and Mtwara regions but in the whole country.

Offshore blocks

Equinor has the operatorship of Tanzania's offshore Block 2, in which ExxonMobil also holds a stake and which is estimated to hold more than 20 Tcf of feed gas.

Equinor has said it also aimed initially to work on the LNG project with Shell, which operates Block 1 and Block 4.

Tanzania already uses some of its natural gas discoveries for power generation and to run manufacturing plants. It also plans to build a fertiliser plant.

The government has put the country's total estimated recoverable gas at close to 60 Tcf.

Analysts note that the development of Tanzania's offshore gas resources has been held up for years due to regulatory and political delays.

The other consortium partners are Indonesia’s MedcoEnergi and Pavilion along with Tanzania Petroleum Development Corp., the state-owned energy company.

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