LNG deal back on track after signing

Arusha. The long awaited liquified natural gas (LNG) project is back on the rails after stalling for years.

Negotiations for its actualisation formally kicked off here yesterday after inking of a crucial agreement.

If completed, the massive project would supply liquified gas for the households and for the export market.

It would require an investment of a staggering Sh70 trillion, said the minister for Energy, Mr January Makamba.

He revealed this here after the signing of a pact to kick start talks between the government and other parties under a transaction advisor.

The Tanzania Petroleum Development Corporation (TPDC) inked the deal on behalf of the Tanzania government.

The UK-based Baker Botts LLP inked as a transaction advisor to the government on the multi-trillion shilling project.

The signing at Gran Melia Hotel followed two days of talks between the global legal firm and senior government officials.

Discussions to have the project back on the rails began in November last year following a directive by President Samia Suluhu Hassan. “We used local experts. Later we realized we need international experts given the magnitude of the project,” Mr Makamba said.

The minister said it was at that juncture that the government was forced to look for external consultants to lead the discussions. The search commenced through an international tender which, he said, was won by Baker Botts (UK) LLP. “We hope with this agreement, the road is cleared for realisation of the project,” he told journalists.

Tanzania has an estimated 57 trillion cubic feet of natural gas reserves, mostly off shore, in Lindi Region.

Out of these, 43 trillion cubic feet are recoverable while 23 to 25 trillion cubic feet qualify for commercial exploitation.

Mr Makamba said the government was keen to see the take off of the project so that the economy can benefit from the huge gas resources.

According to him, discussions between the government and other partners would last until mid this year.

“Thereafter, an agreement will be signed. This will give a timeframe for the implementation of the project and the like”, he said.

It is, however, projected that it would take between three and five years for the first LNG to reach homes and the export markets.

Charles Sangweni, the acting director general of Petroleum Upstream Regulatory Authority (Pura) is leading the government team in the negotiations.

He defended the cost of the project, saying it would involve construction of pipelines, storage tanks and natural gas processing facilities.

A lead partner with Baker Botts (UK) LLP Hamish McArdo said he was optimistic on the swift conclusion of key issues in the project.

He said his London-based firm was experienced in upstream oil and gas projects, especially in legal,technical and commercialization aspects.

The Tanzania Liquified Natural Gas Project (TNGP) or Likong’o-Mchinga LNGP has been on cards for some time even after the discovery of huge gas reserves.

In 2018, the government began the search for a transaction advisor to guide in the development of a technical, legal and commercial framework.

In 2019, the ministry of Energy officials were quoted saying that construction of the required structures of the project would take off this year and be concluded in 2028.