Report identifies gaps limiting Tanzania's gains from natural gas wealth

Tanzania holds an estimated 57.5 trillion cubic feet (tcf) of natural gas reserves, largely discovered in deep offshore waters off Lindi and Mtwara regions. The reserves position the country among East Africa’s major energy players.

However, the report notes that the key challenge lies not in the availability of resources but in the governance and economic systems managing them.

Without stronger institutions, transparency and broader integration with the domestic economy, Tanzania risks falling into the so-called “resource curse,” where natural resource wealth fuels inequality and corruption instead of inclusive growth, the report says.

The study also cautions that weak management could push the country towards resource-backed borrowing, where governments take on heavy debt based on expected future revenues from oil and gas projects.

Potential remains

Despite the concerns, the report says the natural gas sector still holds significant transformative potential for Tanzania’s economy.

If effectively managed, revenues from gas projects could finance infrastructure development, expand social services, stimulate industrial growth and support economic diversification.

According to the study, some structural factors limiting the country’s ability to maximise benefits from the gas sector include weak governance and limited institutional capacity, which can undermine effective regulation of the oil and gas industry and increase the risk of corruption and mismanagement of revenues.

Another challenge is the sector’s structure as what analysts describe as an “enclave economy.” Large-scale gas projects are dominated by international companies, while linkages with the domestic economy remain limited.

Delays in LNG project

Progress in developing Tanzania’s gas sector has also been slowed by prolonged negotiations with investors over a planned $42 billion liquefied natural gas (LNG) project in Lindi Region.

The project involves a consortium led by Shell and Equinor, alongside ExxonMobil, Pavilion Energy, Medco Energi, and the state-owned Tanzania Petroleum Development Corporation (TPDC).

Although a framework agreement was signed in 2022, the Final Investment Decision (FID) has yet to be reached as negotiations on legal and financial arrangements continue.

Oil and gas investment expert Silas Olang said prolonged negotiations risk delaying Tanzania’s ability to benefit from its gas resources.

“I can say we may have missed an opportunity. Since 2013 the government has been negotiating with investors. If those talks had been completed earlier, Tanzania would already be benefiting from gas revenues,” he said.

Mr Olang noted that global efforts to reduce fossil fuel production under the Paris Agreement on Climate Change, which aims to significantly cut fossil fuel use by 2050, mean the window for developing gas projects could narrow over time.

He added that investors are likely weighing global gas prices and profitability, while the government is seeking to secure favourable terms to avoid criticism that national resources are being undervalued.

Government outlook

Speaking in London, United Kingdom, in January 2026, the Minister of State in the President’s Office for Planning and Investment, Prof Kitila Mkumbo, said commercial negotiations on the LNG project had largely been completed.

“We have largely completed commercial negotiations. Now we are discussing the legal framework of these agreements,” he said.

He noted that due to the scale of the project, a special legal framework was required.

According to a Reuters report published in January, Tanzania expects to sign a final agreement for the LNG project before June 2026, with gas production projected to begin about eight years after the final investment decision.