LNG project to inject 35tri/- to economy annually

THE liquefied natural gas (LNG) project will add to the economy 15 billion US dollar (about 35tri/-) annually, a macroeconomic study of the project by Stanbic Bank shows.

The study report which was launched in Dar es Salaam on Wednesday further shows that the LNG project that comprises a major deep offshore development and construction of a large LNG plant will add between 7.0 billion US dollars and 15 billion US dollars per year.

“GDP is envisaged to annually increase in real terms 2021 by 7.0 billion US dollars through to 15 billion US dollars,” read the report of the project seen to be of transformational macro-economic importance for Tanzania and in line with objectives of the 2025 Development Vision and the third Five Year Development Plan (FYDP III).

The LNG project will also boost Tanzania’s long-term projected GDP annual growth from 6 to 6.5 percent and up to 7.5 per cent, the report shows.

The country’s balance of payment is expected to benefit by between 3.4 billion US dollars and 13 billion US dollars per year and fiscal proceedings are expected to range between 2.2 billion US dollars and 6.0 billion US dollars per year.

The Minister for Energy January Makamba, who received the report said they would sign a host government agreement with Equinor and Shell in December this year as planned.

He said negotiations were going on well with investors for the project that comprises a major deep offshore development and construction of a large LNG plant.

“We’re getting there. We’re nearer now. We have confidence we will sign it in December, said the minister at the launch of the report which shows the LNG project will have enormous financial and economic benefits to the nation.

The government signed a preliminary host government agreement for the LNG project, which represent roughly half of the country’s Gross Domestic Product, with Norway’s Equinor and Britain’s Shell, the main partners in implementation of the project in June this year.

The host government agreement will pave the way for final investment agreement earmarked for 2025.

The Minister said the envisaged LNG project with its huge financial and economic impact to the nation would bring about changes on the way public and private institutions would operate.

“It can’t be business as usual. It is huge investment…It is something never done before. Public and private institutions will be required to be able to execute their jobs on top global levels,” he said.

The government was building capacity for the Tanzania Petroleum Development Corporation (TPDC) which holds government stake in the project and Tanzania Electric Supply Company (TANESCO) to be able to work as capable partners in the envisaged gas economy.

He said the government took up 1.2 billion US dollar debt to cleanse the balance sheet of the corporation.

“We are going to make sure TPDC becomes a capable partner. The government has decided to take off 1.2 billion US dollars loan off its balance sheet. So the TPDC balance sheet is lighter now,” said the Minister.

The government had also turned TANESCO’s 2.4 billion US dollar loan to equity to ease financial burden to the power supply firm,” he said.

“Those are bold government decisions. President Samia Suluhu Hassan has been bold enough to make these decisions to make TPDC a better partner,” he said.

He said the report should, however, be taken with caution as some of the assumptions might change in the course of negotiations with the investors.

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