Tanzania: Negotiations on $30 Billion Gas Plant Set to Resume in 2017
Posted on :Friday , 23rd December 2016
Dar es Salaam — Major oil and gas companies are now planning to resume negotiations with the government on a production sharing agreement (PSA) next year for the planned liquefied natural gas (LNG) plant.
BG Group which was acquired by Royal Dutch Shell, alongside Statoil, Exxon Mobil and Ophir Energy, plan to build a $30 billion (Sh66 trillion) onshore LNG export terminal in partnership with the state-run Tanzania Petroleum Development Corporation (TPDC) by the early 2020s.
Earlier in the year, the government said it had finalised a land acquisition deal for the site of a planned LNG plant, and was working to compensate and resettle villagers to move forward on a long-delayed project.
TPDC owns title deed for some 2,071.705 hectares of land that have been set aside for the construction of the planned two-train LNG terminals at Likong'o Village in Lindi, which is located close to large offshore gas finds.
Another 17,000 hectares around the site for the proposed LNG terminal has been allocated for an industrial park. However, the companies' final investment decision has in part been held up by delays in finalising issues related to the site.
Statoil's senior vice president and country manager for Tanzania, Mr Oystein Michelsen, told BusinessWeek that the remaining issues for negotiations on PSA for LNG project is the taxation structure and payment modalities.
According to him, Statoil and BG Group already have in place a PSA with TPDC, but it is not concerned about constructing the LNG and other ventures on the commercialisation of natural gas.
There have been reports that some of Tanzania's biggest foreign investors could scale back their operations or expansion plans because of tougher demands placed on companies, including higher tax bills.
But Statoil says their plans were unaffected. "It is not true that we are planning to pull out of Tanzania because we have a long plan for commercialisation of the discovered natural gas. Now we are concentrating in development activities like construction of gas pipelines and LNG plant for selling of processed gas," said Mr Michelsen. He insists that from next year the company will concentrate in commercialisation of gas. "We have wound up exploration work. We are now happy to focus on development to distribute and sell gas."
Statoil signed a PSA for block 2 with TPDC in 2007, whereby its investment value up to 2014 had amounted to Norwegian Krones 2.01 billion (Sh5.1 trillion).
"The block covers an area of 5,500 square kilometres and lies in water depths between 1,500 and 3,000 metres. Statoil Tanzania is the operator with 65 per cent working interest, cooperates with ExxonMobil Exploration and Production Limited as a partner with 35 per cent interest," reads part of Statoil report. Four months ago, Mr Michelson was quoted as saying that after completing the construction of the plant, production is expected to be sustained for at least 40 years with expectation of generating huge revenue and transforming Tanzania's economy.
Energy and Minerals minister Sospeter Muhongo told BusinessWeek that negotiations for the LNG project were going on well. "These companies [Statoil and BG Group] have invested heavily and are strongly committed to ensuring that the LNG project brings intended results." Already TPDC has acquired 2,071.705 hectares for developing the project at Likong'o Village in Lindi.
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