Cape Town, Oct 8, 2024 – Norway’s Equinor has reaffirmed its commitment to the long-delayed $42 billion liquefied natural gas (LNG) project in Tanzania. This comes despite recent setbacks stemming from proposed changes to a financial agreement reached last year between the company and the Tanzanian government.
Speaking on the sidelines of an African oil and gas conference in Cape Town, Equinor’s Senior Vice President Nina Koch stated, “Our focus now is to agree on the commercial agreements for Tanzania LNG.” She emphasized the company’s commitment to the project, adding that discussions with both the government and its partners will continue, although no specific timelines have been set for a resolution.
The Tanzanian government, which has not yet commented publicly on the changes, has been reviewing the financial aspects of the agreement that was initially reached in May 2024.
Tanzania’s LNG Mega Project: A Long-Awaited Development
The Tanzanian LNG project, which has faced multiple delays, involves major energy companies including Shell and ExxonMobil, along with Tanzania’s national oil company TPDC. The project aims to unlock vast offshore gas resources estimated at 16 trillion cubic feet in recoverable gas. Originally estimated to cost $30 billion in 2014, recent inflation and cost escalations have brought the total expected investment closer to $42 billion.
In May 2024, Equinor, Shell, and ExxonMobil reached a milestone deal with the Tanzanian government for the development of an LNG export terminal. The agreement outlines the framework for regulatory and production-sharing aspects, setting the stage for further engineering work and eventual implementation.
Steps Toward Final Investment Decision
While the recent changes to the financial agreement have caused delays, the parties involved remain optimistic. Tanzania’s Chief Negotiator, Charles Sangweni, expressed confidence in the project’s progression, saying, “If everything goes as planned, I am confident that the final investment decision will be reached in 2025.”
Equinor’s Tanzania Country Manager, Unni Fjaer, emphasized that the agreement in May “paves the way for the series of milestones that need to follow to realize this fantastic LNG opportunity for the country and the world.”
As part of the project, Shell and Equinor are joint operators, while ExxonMobil, Pavilion Energy, Medco Energi, and Tanzania’s TPDC serve as partners. The next phase involves detailed engineering design work to be carried out by Shell.
Boosting Tanzania’s Gas Industry
The Tanzanian government, under President Samia Suluhu Hassan, has shown a strong commitment to expanding the country’s mining and energy sectors. The government aims to raise the mining and energy sector’s contribution to Tanzania’s GDP from 6.7% in 2020 to 10% by 2025. The LNG project is expected to be a key driver in achieving this goal, creating jobs, boosting revenue, and positioning Tanzania as a leading energy producer in East Africa.
However, the road to full project implementation remains challenging. Analysts suggest that the Tanzanian government and its partners need to swiftly resolve any outstanding commercial and regulatory issues to meet the ambitious 2025 deadline for a final investment decision.
The eventual success of the LNG project could transform Tanzania into a significant player in the global LNG market, with benefits rippling through the local economy for decades to come.
