Tanzania well set to start reaping LNG benefits

TANZANIA is set to start reaping economic and social benefits from the US 40 billion dollars (about 92tri/-) Liquefied Natural Gas (LNG) project in Lindi Region from 2025, when the Final Investment Decision (FID) is signed.

The Director General of Petroleum Upstream Regulatory Authority (PURA), Eng Charles Sangweni, told ‘Daily News’ in a telephone interview that the government is currently drafting the final Host Government Agreement (HGA).

The initial HGA was signed between the government of Tanzania and investors involved in the mega project in June, last year, during a ceremony which was witnessed by President Samia Suluhu Hassan at Chamwino State House in Dodoma.

“We are now finalising the process of drafting the final HGA, these are legal documents and hence there is a need to have a clear interpretation of all provisions of the agreement.

“If all goes as planned, we expect to sign the final HGA by February this year to pave the way for signing of the final investment decision by 2025,” Eng Sangweni explained.

Once the FID is inked in 2025, construction work will kick off in the same year after which, production and exports of natural gas to the global markets will start by 2030.

Speaking during the World AIDS Day on December 1, last year, in Lindi Region, President Samia said the government has had fruitful discussions with investors involved in the project.

“We have had fruitful discussions with the investors and I have met some of them on separate occasions. The signing of the final HGA is crucial for the implementation of the project.

“I call upon residents in Lindi Region to accord maximum cooperation to the investors to facilitate smooth implementation of the venture,” Dr Samia said then, while addressing a public rally at Ilulu grounds in the region.

President Samia assured residents in the gas-rich region that the LNG project will play a crucial role in creating jobs and bolstering development of Lindi and Mtwara regions.

“The LNG project will take some time before it starts production and as such you should cooperate with the investors to enable them to undertake the project smoothly,” she appealed.

The initial HGA was signed between the government of Tanzania on one hand and investors of the project on the other. They include Shell and Equinor ASA companies, who are the main partners in implementation of the project.

Other investors who are partners of the multi-million project which is one of its kind in Tanzania including ExxonMobil, and Pavilion Energy.

Speaking after signing of the initial agreement, the Minister for Energy, Mr January Makamba, said the project will change the image of the country’s economy and will be carried out in parallel with the development of infrastructure on the petroleum upstream sector to facilitate harvesting of the resource.

Minister Makamba noted that during the construction of the project which is expected to span for between four and six years, a total of 10,000 jobs are expected to be created, while 500 permanent jobs will be generated after its completion.

In an exclusive interviews with ‘Daily News’ after the signing of the initial HGA last year, local analysts called for prompt inking of the final HGA since the global market for natural gas is ripe.

“This is commendable and good for the economy, not only on the FDIs (Foreign Direct Investments) and employment creation, but also as a sustainable source of foreign exchange,” Alpha Capital Head of Research and Financial Analytics, Imani Muhingo told the ‘Daily News’.

Mr Muhingo said the completion of the discussion and signing of the deal is timely, adding that the “market is ripe,” especially now, when Europe hastens to untangle from Russian energy dependence.

The project was delayed by years of prolonged negotiations but gained urgency as European countries look for LNG projects that can be long-term replacements for energy supplies from Russia.

Tanzania’s natural gas reserves are estimated at 57 trillion cubic feet (tcf) with a total annual production of 110 billion cubic feet from three fields in Songo Songo Island, Mnazi Bay, and Kiliwani North.

Africa’s natural gas reserves are over 620 tcf as of last year. Tanzania, with 57.54 trillion cubic feet, stands at the sixth position in the top ten countries with abundant natural gas reserves in the continent.

Apart from the LNG plant, there will also be an industrial park and Special Economic Zone (SEZ) at the site of the project which will be constructed at Likong’o and MtoMkavu villages in Lindi Municipality.

In her speech during the signing of the first HGA, President Samia highlighted a number of socio-economic benefits that Tanzania will get during and after implementation of the project, including 7tri/- from domestically sourced goods and services for the project.

Reacting to the development during a telephone interview with ‘Daily News’, a board member of the Tanzania Private Sector Foundation (TPSF), Mr Octavian Mshiru, said the apex body of private sector is out to mobilise its members and ordinary citizens to explore opportunities from the LNG project.

“We have had a lot of experience on oil and gas projects from the East African Crude Oil Pipeline and this will enable us to mobilise our people to benefit from the LNG project,” Mr Mshiru, who doubles as TPSF’s Chairman of Service Cluster, remarked.

Mr Mshiru was hopeful that the Tanzania Petroleum Development Corporation (TPDC) will work closely with TPSF to prepare industry players and ordinary citizens on the whole value-chain in implementation of the mega project.

“We at TPSF congratulate President Samia for the progress which has been achieved for implementation of the project which has been dilly-dallying for almost six years,” he observed.

Mr Mshiru noted further that the apex body seeks to partner with vocational training colleges to produce technicians who will work on the project.

Commenting on the signing of the HGA, the Commissioner of Insurance at Tanzania Insurance Regulatory Authority (TIRA), Dr Baghayo Saqware, said the inking of the agreement was an opportunity for local insurance companies.

“Insurance players will fully participate in maximising the potential of the project through the formation of a consortium of companies to offer insurance cover for some segments of the project,” he stated.

Dr Saqware elaborated that insurance companies in Tanzania have been forming consortiums to extend insurance cover for large scale and high-risk projects like Standard Gauge Railway (SGR) and aviation industry.

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