Tanzania LNG exports may start in at least eight years

Thursday May 16 2019

 

By Alfred Zacharia @azacharia3 azacharia@tz.nationmedia.com

Dar es Salaam. With delayed negotiations over the construction of the liquefied natural gas (LNG) plant, Tanzania has at least eight years from now to start exporting the resources.

And that is only possible if the current discussions between the government and the investors come to the conclusion this September as expected.

Tanzania Petroleum Development Corporation (TPDC)’s manager for the LNG project, Mr Felix Nanguka, told journalists at a recent workshop that the Host Government Agreements (HGAs) may conclude in September, this year, as the government is engaging the financiers individually.

After the agreement is signed, there will be three years of studies before the start of construction that will last for five years.

Mr Nanguka said the HGAs will discuss only key terms of the project with other issues to be discussed in the course of construction of operationalising other procedures.

“The three years will be for conducting Preliminary Front End Engineering Design (Pre-Feed) and Front End Engineering Design (Feed) processes which are usually conducted after completion of the HGAs,” he noted.

According to him, the steps take a conceptual design or a feasibility study and various other studies to figure out technical issues and estimate rough investment cost before the start of engineering, procurement and construction (EPC).

“Normally, Pre-feed step takes up to 18 months, but due to some delays on negotiations, it will take 12 months (one year) only. This is because some of the activities were conducted before the HGAs are concluded,” he said without mentioning the activities.

For the case of Feed step, he said it will take two years of completion.

“Once HGAs are concluded in September, the Pre-Feed and Feed studies will start in early 2020,” he predicted.

According to him, the studies will also include the legal and commercial plans of the project.

Tanzania has so far discovered 57 trillion cubic feet of natural gas from both onshore and in the Indian Ocean.

Currently, the government is engaging international oil companies like Equinor and Shell individually on the terms of developing the $30 billion LNG project. Implementation will also be done individually, but the gas will be put at one government facility.

Both Equinor and Shell confirmed that they are already in the negotiation process and say the actual construction of the project will take up to five years.

Equinor Tanzania head of communications Ms Genevieve Kasanga said the company was well placed to pursue the project with its partner ExxonMobil.

Equinor and ExxonMobil hold block 2 while Shell and Ophir Energy own Block 1 and 3 of natural gas.

The firms plan to develop the project in partnership with the state-run TPDC.

“We have been waiting for this chance for a long time and we have spent a lot of money for the project. Starting the negotiations gives us a hope to start the construction of the LNG plant,” she noted.

She said with more than $2 billion investment, Equinor together with its partner have discovered above 20 TCF of the natural gas.

“We expect that the construction of the LNG export terminal near huge offshore natural gas discoveries in deep-water south of the country will take five years to complete,” she noted.

According to her, the construction will enable them to take natural gas which is found some 2500 metres below sea level to the seabed, constructing a 100-kilometre pipeline which will transport the gas from the deep-water to the shore and building up the plant facility.

“Once completed, we will be exporting at least 7.5 million tonnes of liquefied gas per year,” she said.

She added that, 10 per cent of the natural gas will go directly to domestic uses.

According to her, the plant will operate for 30 years after completion.

On the other side a Royal Dutch Shell Plc has also confirmed to have started the negotiations with the government.

Ms Patricia Mhondo, external relations manager at Shell told the BusinessWeek through a phone that the new HGAs were decided by the government and they have nothing against it.

“We are ok with the HGA negotiations process and when they are over, we will officially announce our next steps,” she noted.

The LNG Plant

The plant is expecting to be constructed in Lindi, covering a total of 2077 square hectors, according to Mr Nanguka.

The capital investment of more than $30 billion, equivalent to Sh67 trillion will be used to construct the project.

So far, according to him, the government has revoked ownership of seven farms, which were found within the plot’s boundaries.

“The government will compensate for the assets available to the farm owners. Only 21 households near the plot are set to be paid,” he said.

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