-
Energy multinationals Shell, Equinor, and ExxonMobil have finalised vital talks on Tanzania’s $40 billion Liquified Natural Gas investment.
-
The move paves the way for final agreement on how to execute the long-delayed energy project that will significantly boost Tanzania’s revenues and create jobs.
-
President Samia Suluhu Hassan’s government expects the construction of the project to start in June 2025.
Tanzania is preparing the final deal to guide harnessing her $40 billion offshore gas reserves following the conclusion of talks with energy giants Shell, Equinor, and ExxonMobil. A final agreement on the $40 billion gas investment is in the works with signing expected in the coming weeks.
“The work is done… companies (IOCs) have gone to sit with their boards, and we are now awaiting the next steps. The government expects construction to start in June 2025” Managing Director of the Petroleum Upstream Regulatory Authority (PURA), Charles Sangweni, said the project’s fate, manifesting into a gigantic economy transformer. LNG in Tanzania is about to go mainstream.
Agreement on $40 billion gas project expected in weeks
On May 20th, the Tanzanian government concluded negotiations with an international energy consortium for a long-delayed $40 billion gas project. The conclusion of the talks is paving the way for final agreements to be signed in the coming weeks.
The consortium comprises Equinor, Shell and ExxonMobil and looks forward to developing an onshore LNG plant south of Tanzania.
Read also: Tesla set to use Tanzania’s graphite in mining deal
President Samia Suluhu Hassan revived the discussions of the $40 billion gas project online in 2021 at the time of Covid-19 pandemic, when she took office. Since then, the oil and gas industry has been featured in a series of negotiations which could yield lucrative results.
Shell Vice President and Tanzania Chair Jared Kuehl said, “important negotiations with the government of Tanzania have concluded.” In a statement posted on LinkedIn, Kuehl added that the significant deals—the so-called Host Government Agreement (HGA) and a Production Sharing Agreement (PSA)—may be signed “over the coming weeks.”
PURA Managing Director noted that Tanzania’s Cabinet and Parliament must approve the proposed Host Government Agreement before coming into effect, where the total investment cost will be $42 billion.
Last year, Tanzania saw another crucial step taken in the oil and gas industry when the government opened the door to complete the HGA negotiations.
According to PURA’s head, the deals reached after 18 months of talks include a marine lease, land lease and security agreement. Further, the Tanzanian army will oversee the project’s security.
Business opportunities in Tanzania gas project
The oil and gas industry is now getting more value in local content. Around 1,763 Tanzanian companies have registered to capture business opportunities for providing services and products during the project construction phase.
LNG is one of Tanzania’s lucrative resources, ready to transform the nation’s economy on a wide scale. The country of over 65 million people has made substantial discoveries of natural gas in recent years, with estimated reserves exceeding 57 trillion cubic feet.
“The project is expected to employ about 8,000 people. Providers of such services as finance, accommodation, energy, and many other aspects will also benefit from the project,” January Makamba, Tanzania’s Energy Minister, commented.
Read also: Tanzania project to transform East Africa’s LNG sector
Jared Kuehl, Vice President and Country Chair for Shell Tanzania argued that such ambitious projects, usually take decades to realise. However, Shell’s top boss noted that the time to utilise the industry is now as the demand for gas in the market is higher.
The Tanzania LNG micro-economic Report of the Stanbic Bank showed that local companies would reap an average of $7 billion out of the $42 billion expected to be injected into the project through the construction phase within five years.
The ambitious LNG project is one of its kind for Tanzania’s energy sector. The multi-billion project involved the construction and processing of more than 47 trillion cubic feet of gas discovered in the Indian Ocean in the southern regions.
Tanzania gas contribution to revenues
On a broader scale, the project is set to amplify Tanzania’s oil and gas sector’s contribution to national revenue. The Head of Local Content and Stakeholder engagement at PURA pointed out wins and challenges facing the sub-sector.
We have already submitted our proposals to the relevant ministry. However, the capital muscles are a challenge for many Tanzanians, so we are imparting capacity building to them so that they can identify the criteria for obtaining capital by connecting them with stakeholders,” said Mr Nyangi.
According to The Citizen, apart from improving the PSAs, there will also be more than 70 other agreements that will be signed between the companies and the TPDC during the various stages of the project’s implementation.
Also, the HGA includes prioritising local companies in providing services and sales of all products needed during the construction, except that foreign companies will be allowed if there is no local company capable of delivering the required service.
In terms of longevity, the $40 billion gas project will have a life span of around 40 years upon completion. What’s more, there is the critical issue of local content, an essential aspect in the extractive sector that has rallied for decades.
Further, a consortium of 22 insurance companies in Tanzania has also been formed to work on oil and gas projects. Their scope will include the LNG project and the $3.5 billion East African Crude Oil Pipeline (Eacop).
Principal Internal Auditor (Ag Director of Internal Audit) at Tanzania Petroleum Development Corporation Charles Nyangi said two years before the project’s construction, they had already signed an MoU with the Dar es Salaam Maritime Institute (DMI) to produce rescue and security experts.
Capital muscles are a challenge
“Those skills are the number one requirement for the project. We have already submitted our proposals to the relevant ministry. However, the capital muscles are a challenge for many Tanzanians, so we are imparting capacity building to them so that they can identify the criteria for obtaining capital by connecting them with stakeholders,” said Mr Nyangi.
The ambitious project offers locals opportunities to provide services and sales of products required during the construction. However, foreign firms will inject their service when local companies fail to deliver.
