Race for Lead in LNG Production may be too costly

A planned liquefied natural gas (LNG) export plant to develop Tanzania’s vast gas reserves could cost up to US$ 30bn, the energy minister said, but declined to reveal the proposed site for the liquefaction facility. East Africa has become one of the world’s hottest new oil and gas areas after a string of discoveries, which producers hope to exploit to feed energy-hungry Asia. Many top companies such as BG Group, Exxon Mobil and Statoil are at work in Tanzania to tap its gas reserves. Tanzania and its southern neighbour, Mozambique, are locked in a race to be first to export gas from Africa’s eastern seaboard after huge discoveries offshore recently that could transform their struggling economies.

h3. Costly LNG Terminal

“The investment in this LNG plant is between US$ 20bn and US$ 30bn,” the Energy and Minerals Minister Sospeter Muhongo told a news conference yesterday. “Preparations are underway… we will make formal announcements when everything is ready.” Muhongo declined to give details on how the cost of the LNG project would be met, or say if the government had given final approval for the location of the LNG terminal. He said the LNG terminal would be the “biggest investment in the history of the country” and that the government was in talks with the energy majors over the launch of the project.

Tanzania is estimated to have 53.2 trillion cubic feet (tcf) of gas, which it said could rise four-fold over the next five years, putting it on par with some Middle East producers. Britain’s BG Group and its partners, Ophir Energy, Exxon Mobil and Statoil plan to invest in a two-train LNG plant in Tanzania’s southern Lindi region, according to energy sources.

h3. New Gas Legislation

Muhongo said the government was in the final stages of drafting a long-delayed new gas legislation, but declined to reveal when it would be sent to parliament for approval. “The gas legislation is about 75% complete. We will make sure the legislation is in place before major investments are made,” he said. Analysts warned that recent demands by a parliamentary committee for all oil and gas contracts in Tanzania to be made public could further delay progress in the sector. Muhongo said the government would not make the contracts public without the consent of investors due to confidentiality clauses.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top