Tanzania wraps up negotiations for $40 billion LNG project with group led by Shell, Equinor, ExxonMobil

Fumbuka Ng'wanakilala, Bloomberg May 22, 2023

(Bloomberg) – Tanzania has wrapped up negotiations with an international energy consortium for a long-delayed $40 billion liquefied natural gas (LNG) export project, paving the way for final agreements to be signed in the coming weeks.

The consortium, led by Equinor, Shell and ExxonMobil, wants to develop an onshore LNG plant south of Tanzania, close to huge offshore gas fields, but project talks had stalled for more than a year before resuming in 2021, when President Samia Suluhu Hassan took office.

Shell Vice President and Tanzania Chair, Jared Kuehl, said that “important negotiations with the government of Tanzania have concluded.” In a statement posted on Linkedin., Kuehl added that the main deals — the so-called Host Government Agreement (HGA), and a Production Sharing Agreement (PSA) — may be signed “over the coming weeks.”

Charles Sangweni, chief Tanzanian government negotiator in the LNG talks, said the proposed HGA will have to be approved by Tanzania’s Cabinet and Parliament before coming into effect, and the total project investment could rise to $42 billion.

“It is my wish that the HGA could be signed within a month or two,” Sangweni said in an interview.

The deals reached after 18 months of talks, include a marine lease, land lease and security agreement, while the Tanzanian army will be in charge of the project’s security, Sangweni said.

The other consortium partners are Indonesia’s MedcoEnergi and Pavilion Energy, along with Tanzanian national oil company TPDC.

The LNG project could make Tanzania an important gas market player, given that the West is seeking to cut reliance on Russian energy following Russian President Vladimir Putin’s invasion of Ukraine. The urgency has given fresh impetus to Hassan’s push to move forward with the project.

With recoverable natural gas reserves estimated at more than 57 trillion cubic feet, Tanzania, alongside neighboring Mozambique, could emerge as Africa’s new LNG hub, analysts say.