Process to Fast-Track Tanzania LNG Plant Construction Starts

“We have reached a good stage toward project implementation,” TPDC Official says as President Magufuli Orders Speed.   

Prof. Sospeter Muhongo, Minister for Energy and Minerals

Prof. Sospeter Muhongo, Minister for Energy and Minerals


By TZ Business News Staff.

The process to speed up construction of a $30 billion Liquefied Natural Gas  (LNG) plant in south  eastern Tanzania has started in the wake of a presidential order  to speed up the construction.

The Acting Director of Upstream Business at the Tanzania Petroleum Development Corporation (TPDC), Mr.  James Andilile, said the Government has now already formed its team to discuss the Host Government Agreement (HGA) with investors in the LNG project, adding that discussions had already started.

The progess report comes in the wake of a recent order made by President John Pombe Magufuli that construction of the LNG plant in Lindi region  should start without further delay.

The President ordered officials in August to speed up the long-delayed work,  complaining that implementation of the LNG project had taken way too long. Media reports quoted  President Magufuli  as telling stakeholders who convened at his office: “I want to see this plant being built, we are taking too long. Sort out all the remaining issues so investors can start construction work immediately.”

In a statement made available to TZ Business News, Mr. Andilile said “we have reached a good stage toward project implementation after  the government acquired the land where the plant will be build in Lindi.”

He said the current stage has been  the start of  discussions with participating investors in order that construction may start. In the same statement, the Minister for Energy and Minerals, Prof. Sospether Muhongo has identified participating investors in the LNG project as  Statoil Corporation from Norway, ExxonMobile from the United States of America, Shell from Holland, BP from the UK, Orphir  also from the UK and the Singaporean company, Pavillion.

Acting Director of Upstream Business at the Tanzania Petroleum Development Corporation (TPDC), Mr. James Andilile

Acting Director of Upstream Business at the Tanzania Petroleum Development Corporation (TPDC), Mr. James Andilile

The Minister said the investors have asked for time before starting the LNG construction work due to some concerns on the taxation regime.

TPDC officials had said earlier this year 2016, that the Government would not change the existing taxation structure, but Genevive Kasanga, the spokesperson at Statoil Corporation–which is one of the lead investors–re-affirmed that  the  issue of tax was indeed a stumbling block.

The proejct was facing delays mainly due to the recently enacted Petroleum Act 2015  which had introduced new requirements for investors to fulfil,  the investors said.

Statoil and ExxonMobil,  the lead investors in the project, had planned to finalise the project concept by the third quarter of 2014. They had expected to make the final investment decision during the second half of 2016, and to award the engineering, procurement and construction contract with plans to ship first vessels from the Tanzania LNG plant by 2021.

But the Tanzanian government asked Statoil and ExxonMobil to follow the Mozambique LNG project model, where all gas prospectors were asked to team up to jointly build the LNG plant.

The Tanzania government asked its Block-2 gas prospectors Statoil and ExxonMobil to team up with the other companies prospecting in nearby blocks, BG/Shell with its partners exploring Block-1, Block-3 and Block-4, in order to optimise infrastructure, while the state-owned Tanzania Petroleum Development Corporation (TPDC) is also a team member.

But the increased interest  in the project has also created the need for harmonization of the interests because team members have differing Production Sharing Agreements with the government. This is one reason why HGA discussion have become crucial,  the spokesperson for Statoil Tanzania, Genevive Kasanga said.

The spokesperson said the Petroleum Act 2015 introduced new issues that will be addressed in the HGA discussions,  adding that the HGA discussions will also focus on other areas to support a robust business framework. The issues to be discussed will include regulation of the LNG project, confirmation of the tax and fiscal conditions, commercial structure of the project and the tariff system.

A recent press statement from statehouse in Dar es Salaam  quoted President Magufuli as issueing  an order for the LNG project to be fast-tracked. He is said to have issued the instructions during talks with Oystein Michelsen, Statoil’s Tanzania country manager, at meeting also attended by senior government officials from the ministry of energy and minerals.

The statement did not give the construction schedule for the project, but said once completed the LNG plant would have an expected economic lifespan of more than 40 years. Tanzania  has discovered some 57 trillion cubic feet of natural gas in the south eastern cost of the East African nation.