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Minister clears air on LNG project delays

Minister clears air on LNG project delays

THE delay on liquefied natural gas (LNG) plant investment is partly caused by international investors and government weighing several risks associated with the project, the Minister for Energy, Dr Medard Kalemani has said.

He said in Dar es Salaam yesterday that the nature of the huge investment on the proposed project which is estimated to cost 30 billion US dollars and associated risks have made it necessary for both the government and the international investors to take time to scrutinise proposed terms of investments to maximise a win-win situation.

"There are issues of investment criteria considered by the investors and the government which would require time to study..." said the minister at the 2nd Oil and Gas Congress that has attracted international investors as well as industry stakeholders to explore business and investment opportunities in the booming oil and gas industry.

Dr Kalemani said investors would like to make sure the proposed investment was commercially viable in the light of proposed terms by the government and global trend on natural gas business and the government would like to see that it maximises the benefits of the investment on the people.

"There are several risks associated with the project to investors and the government. So both have to take it seriously and that takes time," he said.

Tanzania boasts estimated recoverable reserves of over 57 trillion cubic feet (tcf) of natural gas in Lindi and Mtwara regions. BG Group, which was acquired by Royal Dutch Shell in 2016, alongside Statoil, Exxon Mobil and Ophir Energy, plans to build a $30 billion onshore LNG export terminal in partnership with the state-run Tanzania Petroleum Development Corporation (TPDC).

However, a Host Government Agreement, seen as a crucial step towards reaching a final investment decision for the long-delayed project has not yet been reached.

The Resident Chairman of Shell Tanzania, Axel Knospe was quoted by media yesterday as saying there were significant differences between the government and a consortium of investors on proposed terms for a Host Government Agreement.

"The differences are still very significant and there are currently an on-going efforts to understand each other positions," he was quoted as saying noting however that complexities of an LNG plant should not be underestimated.

Mr Knospe further said the government had decided to hire an expert consultant to assist them in negotiation.

TPDC said in April it was searching for a consultant to develop a commercial, legal and technical framework for the LNG project.

“The objective of the assignment includes ... to build capacity and facilitate the government negotiation team (GNT) and to devise the best approach to undertake negotiations of the host government agreement,” TPDC said in a tender announcement.

The transaction advisor was expected to complete the work in two years. President John Magufuli ordered government officials in August 2016 to speed up long-delayed work on a planned LNG plant, saying implementation of the project had taken too long.

"I want to see this plant being built, we are taking too long. Sort out all the remaining issues so investors can start construction work immediately," he was quoted as saying during talks with Oystein Michelsen, Statoil's Tanzania country manager and senior Tanzanian government energy officials.

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