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October 16, 2018

Shell and Equinor reaffirm commitment to Tanzania LNG project

Shell and Equinor have confirmed their commitment to the $30bn Tanzania LNG project that will allow the African nation to export natural gas.

By Talal Husseini

Shell and Equinor have confirmed their commitment to the $30bn Tanzania LNG project that will allow the African nation to export natural gas.

Both companies have planned to build a natural gas plant since 2014, but the project has been delayed by political uncertainty within Tanzania’s mining industry. The government reformed mining legislation, which came into effect on 3 March, giving them the power to renegotiate contracts, a move that has concerned investors.

However, the energy companies have said they are prepared to continue with the project.

Shell spokesperson Sally Donaldson told Bloomberg: “For now, the focus is on agreeing to the Host Government Agreement that is to set the legislative, regulatory and fiscal terms for the project.”

Donaldson added that before the investment decision can be completed, Shell will conduct a two-year, multi-million dollar engineering study, with the natural gas plant expected to take up to five years to construct. The project was originally due for completion by 2020.

NKC Africa Economics analyst Jacques Nel told the news agency: “The government’s hard-line approach to dealing with large foreign investors in the natural resources sector also puts a dampener on foreign investor sentiment, particularly when considering the magnitude and timelines of LNG investments.”

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According to Tanzania Petroleum Development Corporation acting managing director Kapuulya Musomba, the government is working to push forward with the project, and has invited bids for a financial advisor to begin negotiating the terms of the project. Equinor has already invested $2bn in exploration for the Tanzania LNG project.

Equinor executive vice-president for development and production Torgrim Reitan said: “We would like to see this project happen. What we need now is clarity on the commercial framework. When that is settled then it will allow us to move forward.”

The company holds a majority 65% working interest in Block 2 offshore Tanzania, while ExxonMobil holds the remaining 35% stake.

In June, Equinor (formerly Statoil) and ExxonMobil found an additional two to three trillion cubic feet of natural gas in the Piri-1 well, increasing total discovered reserves to around 20 trillion cubic feet.

Shell and Ophir Energy hold interests in Blocks 1 and 4 offshore Tanzania.

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