Page 6 - GLNG Week 16 2021

GLNG AFRICA GLNG

Shell, Equinor call on Tanzania to make

“critical decisions” about LNG project

POLICY REPRESENTATIVES of Royal Dutch Shell
(UK/Netherlands) and Equinor (Norway) have
urged Tanzania’s government to wrap up talks on
an ambitious LNG project as quickly as possible,
so that the scheme is not sidelined or otherwise
affected by the upcoming transition to renewable
fuels.
In an editorial published by the Citizen, a
Tanzanian newspaper, Equinor’s country man-
ager Mette Halvorsen Ottoy and her counter-
part at Shell, Frederik Grootendorst, asserted
that the time had come for “critical decisions”
on the Tanzania LNG project.
“Natural gas has a key part to play in the global
energy transition, but the window in which to
act to develop new resources is limited,” they
wrote. “Tanzania is encouraged to do so now by
demonstrating its commitment and successfully
restarting negotiations on the host government
agreement and pledging to conclude them in a
timely manner.”
Fast action will help the East African state The Tanzania LNG scheme envisions the
realise the potential of its offshore gas reserves, construction of a gas plant with two or three liq-
they added. “A huge opportunity for Tanzania uefaction trains in Lindi, a coastal town in the
to benefit from its rich gas resources is within south-eastern part of the country. The facility
its grasp. 2021 must be the year when action is would use gas from three deepwater offshore
taken to conclude the negotiations,” they said. sites containing about 35 trillion cubic feet
(991bn cubic metres) – Block 2, assigned to
Political considerations Equinor, and Blocks 1 and 4, assigned to Shell
Ottoy and Grootendorst were referring to Tan- – as feedstock for LNG production.
zanian authorities’ decision to suspend talks Equinor has expressed scepticism about the
on the LNG project in late 2019 in response viability of Tanzania LNG. Earlier this year, the
to then-President John Magufuli’s demand Norwegian major wrote the book value of the
for a review of the country’s production-shar- project down by $982mn, saying that its break-
ing regime. The Magufuli administration had even price was likely too high to be profitable.
Equinor has intended to resume discussions late last year, It has stopped short of abandoning the scheme,
after Tanzania’s presidential election. However, though, and says it may resume work at a later
expressed this decision to wait did not pay off; Magufuli time.
scepticism about did win another term, but he did not return to Meanwhile, the project is running far behind
the matter of Tanzania LNG before his death in schedule. Tanzanian officials had previously
the viability of March 2021. said they hoped to sign a host government
agreement (HGA) with Shell and Equinor
By contrast, his successor Samia Suluhu Has-
Tanzania LNG. san has said she wants to push the long-delayed in 2019, and this would have allowed the two
project forward. Earlier this month, Hassan majors to begin work in 2022. However, these
urged the Ministry of Energy and Minerals to deadlines were not met, partly because of com-
bring negotiations on the $30bn LNG project to mercial disputes between the companies and
a close as quickly as possible. She also instructed the government, partly because of Magufuli’s
the ministry to determine whether Tanzania push to review the production-sharing regime
LNG was facing any specific obstacles, saying: and partly because the Magufuli administration
“It is time to know if the project is viable or not regarded the East Africa Crude Oil Pipeline
and understand who is blocking it.” (EACOP) project as a higher priority.
The president was quoted as saying that According to Ottoy and Grootendorst, these
these measures would allow her administra- delays have narrowed the window for develop-
tion to decide whether to continue working ment of the offshore gas reserves. “Timing is
with Equinor and Shell or to look for another critical in terms of the project’s success,” they
partner. “If the existing investors are not willing, wrote in the editorial. “A mega-project like this
then you [the ministry] must find others,” she takes years to plan, design and execute, and
remarked. hence, critical decisions are required now.”™

P6 www. NEWSBASE .com Week 16 23•April•2021