Page 7 - DMEA Week 24 2022

DMEA COMMENTARY DMEA

these two majors might face any unusual or spe- A way out?
cific challenges as they sought to develop their There is, potentially, an alternative. Tanzania
gas-bearing blocks, he identified Tanzania’s could follow the examples set by other countries
status as a “nascent, undeveloped and inexperi- such as Mozambique and Senegal, which are pre-
enced host country” as a bigger problem than the paring to launch floating LNG (FLNG) projects,
nature of the assets themselves. or the Republic of Congo (ROC) and Maurita-
“The gas is also deepwater, which doesn’t nec- nia, which have arranged to use the Fast LNG
essarily push up complexity – particularly for the modular solution offered by US-based New For-
operators, which are experienced and capable in tress Energy (NFE).
that environment – but it does push up costs,” he On the positive side, both FLNG and mod-
commented. ular LNG solutions tend to be cheaper, easier
and faster to build than the large-scale gas lique-
Unfortunate timing faction plants envisioned in the Tanzania LNG
One problem for Tanzania, of course, is that the scheme, with modular LNG solutions having an
longer it must wait to bring its gas resources on even bigger edge than FLNG. But on the nega-
line, the harder it will be to take direct advantage tive side, FLNG and modular LNG plants tend
of the current heightened demand for new gas to be considerably smaller than large onshore
suppliers. facilities – and again, the difference is even more
Thomson noted that challenge, pointing out stark with modular solutions.
that if Tanzania LNG came online around 2030, Moreover, Thomson noted that switching to
it was likely to face competition from other another type of gas liquefaction facility (or, pre-
producers that would have already succeeded sumably, even adding one into the mix) would
in capturing many of the same markets it was likely lead to further slow-downs for the project,
targeting. partly because of the need for more negotiations
These include companies based in Qatar and and partly out of concerns related to economy
the US that already have key advantages such as of scale. Also, Tanzania’s government might not
established high-capacity LNG export systems, be willing to approve such a shift, as it sees the
plans to add extra capacity by the end of the dec- large-scale onshore liquefaction plant as a means
ade and long-standing reputations as reliable of accomplishing its economic goals, he said.
suppliers, he said. “Possibly, but this would require a full
They could also include producers in re-design of the possible development,” he told
Mozambique, Tanzania’s neighbour to the south, NewsBase when asked whether an FLNG or
which is due to see its first LNG project come on modular solution would help with fast-tracking
line later this year, he added. Tanzania LNG. He continued: “Tanzania wants
Meanwhile, competition from other LNG an onshore project to support domestic growth
producers is not the only factor, he added. Tan- and jobs. Also, given Tanzania’s very large gas
zania LNG will also have to cope with deadlines reserves, it would likely highly benefit from the
for carbon emissions reductions, he explained. economies of scale of a large onshore LNG pro-
Since many EU member states have committed ject, rather than a small FLNG project, from a
to making major cuts by 2030 and achieving cost and profitability perspective.”
net zero by 2050, European gas demand may As such, there is a chance that Suluhu’s
not remain strong enough through the 2040s to administration may be throwing its weight
sustain the kind of long-term supply contracts behind a deal that does not reach its full poten-
needed to support an FID, he said. tial, owing to unfortunate timing.™

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