LNG terminal project inches closer

AS President Samia Suluhu Hassan marks two years in the office, there is growing optimism about Tanzania’s prospects of joining the prestigious Liquefied Natural Gas (LNG) exporters club.

Soon after assuming power in March 19th 2021, President Samia put LNG scheme in frame. In April 2021, the Head of State directed the Ministry of Energy to accelerate talks with project proponents Shell and Equinor.

“We have been singing the LNG song for a very long time,” Hassan said. “I remember when I was sworn in as Vice President (in 2015), I tried to work on it, but discovered it was beyond my power and stopped,” she said.

New updates on the planned 40 billion US dollars liquefied natural gas export project in Lindi Region ushered in hopes that finally Tanzania will be able to harness her vast offshore natural gas resources estimated to reach 57.54 trillion cubic feet in southern regions of Lindi and Mtwara.

The Ministry of Energy reported recently that negotiations for construction of the LNG terminal with Norway’s Equinor and Britain’s Shell were complete and contract preparations were underway.

“Minister January Makamba said negotiations on the construction of the LNG project were complete, and now experts are at work drafting contracts,” the energy ministry said on its Twitter account.

“Of these contracts, one is about the Host Government Agreement and another is on joining blocks 1, 2 and 4, which will provide natural gas for the LNG project,” it said.

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

Norwegian oil and gas producer Equinor also operates Block 2, in which ExxonMobil holds a stake and which is estimated to hold more than 20 trillion cubic feet of gas.

Equinor and Shell, along with Exxon Mobil, Ophir Energy and Pavilion Energy, plan to build the LNG plant in Lindi region.

Last June, all three parties involved signed a framework agreement aimed at bringing closer the start of the project’s construction. The government aims to reach a final investment decision in 2025 for the facility.

The LNG project is expected to have enormous financial and economic benefits to the nation. It is 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).

Stanbic Bank Tanzania said in a report last year that the project could transform the economy, stimulating domestic investment and securing Asian markets if the plan moves ahead on time.

Implementing the project could boost Tanzania’s GDP by 6.5-7.5 per cent, and add to the economy up to 15 billion US dollar (about 35tri/-) annually, the report says.

While Tanzania LNG will only require around 500 workers when operational, it will need around 6,000 workers during construction.

“GDP is envisaged to annually increase in real terms 2021 by 7.0 billion US dollars through to 15 billion US dollars,” read part of the report.

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.

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