Tanzania LNG project talks drag on

DAR ES SALAAM, Tanzania

Tanzania is moving cautiously in its lucrative natural gas deals with no end in sight of the Host Government Agreement (HGA) negotiations, which resumed recently but are set to take longer than expected.

Fresh discussions on the HGA over the multibillion-dollar project are being held in Arusha, northern Tanzania, after the negotiating teams finalised preliminary talks last November.

After being in limbo for nearly two years, preliminary discussions on the HGA resumed in November 2021 with assurances from the new Minister of Energy January Makamba.

In November 2021, while opening a fresh HGA discussions, Mr Makamba told stakeholders that the government was committed to having the Liquefied Natural Gas (LNG) project implemented.

The negotiations are expected to proceed by discussing every stage of the project. The discussions will also address the nature of Tanzania Petroleum Development Corporation participation, fiscal framework, including tax exemptions, stability of terms and local content.

“The discussions with the government are vital in co-creating a stable fiscal, legal and regulatory framework to enable a global competitive project and further investments by the LNG investors,” said Ola Morten Aanestad, spokesperson of International Upstream.

Fedister Agrey, the LNG project manager at the Tanzania Petroleum Development Corporation, said the HGA negotiations are ongoing.

Meanwhile, Mozambique, which shares a border and gas reserves with Tanzania, last week received Africa’s first deep-sea floating LNG facility ahead of gas production from an offshore field. It has a capacity to liquefy 3.37 million tonnes of natural gas annually.

The Coral Sul FLNG floating plant arrived in the Rovuma Basin last week, Mozambique’s National Petroleum Institute said, adding that the plant is critical to the $7 billion Coral South project, operated by Italian oil and gas company Eni. It will produce and sell gas extracted from the southern part of the field.

The 220,000-tonne vessel, the main component of which was constructed by Samsung Heavy Industries in South Korea, is the first FLNG built for deep waters and the first specifically built for Africa. It is 432 metres long and 66 metres wide, with a capacity to liquefy 3.4 million tonnes of natural gas per year.

Mozambique has the potential to produce more than 30 million metric tonnes of LNG a year, but four years of insecurity causing disruption and unrest, stalled the project.

Operated by French firm TotalEnergies, Maputo’s LNG could start in 2026 if work at Afungi is revived in 2022.

Currently, Tanzania has proven natural gas reserves of 57 trillion cubic feet, with at least 49.5 trillion cubic feet of these far offshore in the Indian Ocean.

As Mozambique makes strides in its gas sector, in Tanzania talks are still on going for the third month now between Dodoma and international oil companies on the terms of developing a $30 billion Liquefied Natural Gas (LNG) project in Lindi, in the southeast of the country.

The EastAfrican understands that for nearly two years now, the $30 billion project has been in limbo waiting for the conclusion of the HGA. This is the pact that governs the rights and obligations of parties with respect to the development, construction, and operation of the project.

Talks on a commercial framework agreement between Tanzania and a Norwegian oil and gas firm, Equinor, and Royal Dutch Shell Plc with their counterparts were to be finalised in September 2019, and project was set to take off in 2020.

The project is expected to bring an additional 10 percent LNG for domestic use in the country.

Equinor, and its partner Exxon Mobil Corp, hold Block 2 offshore with a 65 per cent stake in partnership with ExxonMobil, which holds a 35 per cent. TPDC has an offer of a 10 per cent stake in the same Block.

Equinor has had nine gas discoveries out of the 15 exploration wells in Block 2 since 2011.

“We see a window of opportunity for the Tanzania LNG project still and the ability to move efficiently to complete the discussions and progress the project will create value for all partners involved and Tanzania as a country. We are planning for a successful outcome and we will put forth the necessary resources to deliver a positive outcome,” Mr Aanestad said.

Shell is cautious, saying that an LNG plant being a costly project, all parties must come to an agreement before it takes off.

Royal Dutch Shell Plc drilled 18 wells out of which 16 trillion cubic feet of natural gas has been discovered and it holds interests for Blocks 1 and 4 with Ophir Energy.

Construction is set to start in 2023 after being postponed three times. Once in operation; the LNG project is expected to add 10 percent gas to Tanzania’s domestic use.

Tanzania has been exploring for oil and gas for the past 64 years, making the first natural gas discovery in 1974 at Songo Songo Island and at Mnazi Bay. Currently the country has proven natural gas reserves of 57 trillion cubic feet, with at least 49.5 trillion cubic feet of those reserves far offshore in the Indian Ocean. – The East African