Tanzania nears agreement on $42bn LNG project after years of delays

Tanzania is nearing an agreement on its long-delayed $42bn liquefied natural gas (LNG) project, Finance Minister Khamis Mussa Omar said on October 13, although definitive accords remain unsigned.

“It’s almost there,” Omar told Reuters in London, referring to the LNG agreement, which officials had expected to be signed before June.

The project, led by Norway’s Equinor (OSE: EQNR; NYSE: EQNR) and Shell (LSE: SHEL; NYSE: SHEL), would seek to commercialise offshore discoveries estimated to hold 47.13 trillion cubic feet of natural gas. Other partners include ExxonMobil (NYSE: XOM), Indonesia’s MedcoEnergi (IDX: MEDC), Pavilion Energy and state-owned Tanzania Petroleum Development Corporation (TPDC).

Tanzania signed a preliminary Host Government Agreement framework with Shell and Equinor in June 2022 but missed a target to conclude definitive agreements before June 2026. In September, TPDC Managing Director Mussa Makame said commercial, fiscal and revenue-sharing negotiations were largely complete, leaving legal teams to finalise the agreements and supporting legislation.

Makame said the remaining negotiations were expected to conclude during Tanzania’s 2026/27 financial year, ending in June 2027. Deputy Energy Minister Salome Makamba told reporters in Bangkok on September 15 that new legislation governing LNG investment could be completed by the end of 2026.

See IntelliNews: Tanzania’s $42bn LNG project enters final legal stage ahead of approvals

The outstanding arrangements require government approval before the project partners can make a final investment decision. Financing and a construction timetable have yet to be confirmed.

Reuters reported in September that Equinor’s planned LNG supply portfolio of 10mn–15mn tonnes a year by the early 2030s excludes Tanzania, where the project has been delayed by negotiations with the government.

Tanzanian investment specialist Amne Suedi warned in an October 1 commentary that completing the LNG legislation would not resolve all the project’s financing risks. Suedi, managing director of Shikana Investment and Advisory, said lenders would also assess TPDC’s ability to finance its participation and the creditworthiness of domestic gas buyers.

The government is also preparing a local-content strategy for the project, with the Prime Minister’s Office establishing a team to develop measures intended to increase Tanzanian participation in employment, procurement and skills development.

The proposed LNG facility in the southern coastal region of Lindi would process offshore gas for export while reserving part of production for domestic consumption. Tanzania hopes the investment will support industrialisation, expand energy supplies and strengthen its position in international gas markets.