Tanzania expects to conclude an agreement for a $30 billion liquefied natural gas project within six months after the country’s new president called for a resumption of negotiations that had stalled for more than a year.
Tanzania expects a consortium of international oil companies to start building a long-delayed liquefied natural gas (LNG) project in 2022.
Construction of an LNG export terminal near huge offshore natural gas discoveries in deep water south of the East African country has been held up for years by regulatory delays.
Talks for the host government agreement, or HGA, that will govern the tax, legal and commercial terms for the proposed two-train onshore LNG project fell apart in 2019. Plans for a plant on Tanzania’s southern coast connected to offshore fields by pipeline have been under proposal since 2014.
“The government’s negotiation team has already been formed ahead of the resumption of talks and we will be preparing from next week to restart negotiations with the investors as soon as possible,” James Mataragio, managing director of the Tanzania Petroleum Development Corp., said Thursday by phone.
The country’s central bank believes just starting work on the $30 billion plant would add another two percentage points to annual economic growth of around 7%.
Tanzania has estimated recoverable reserves of over 57.54 trillion cubic feet (tcf) of natural gas.
Tanzania already uses some of the gas for power generation and running of manufacturing plants. It also plans to build a fertilizer plant.
Investor sentiment over Tanzania soured after the administration of former President John Magufuli overhauled mining legislation and ordered contracts renegotiated afresh. His successor, Samia Suluhu Hassan, told lawmakers last week the talks over the LNG plant had dragged on too long and pledged to finish them speedily so the project can be implemented.
One of the developers, Equinor ASA, took a $982 million impairment on the project in January, which it said would be reversible, after failing to settle terms with Tanzania’s government. Other project partners include Royal Dutch Shell Plc, Exxon Mobil Corp., Ophir Energy Ltd. and Pavilion Energy Pte.
Tanzania needs to demonstrate commitment to the project by “successfully restarting negotiations on the host government agreement and pledging to conclude them in a timely manner,” Frederik Grootendorst, Shell’s country chairman, and Mette Halvorsen Ottoy, Equinor’s country manager, said in an opinion piece in Dar es Salaam-based Citizen newspaper on April 13.