Page 6 - GLNG Week 24 2022

GLNG COMMENTARY GLNG

Tanzania LNG’s

potential pitfalls

SINCE she assumed office in March of last year, can begin operating in the same year. If so, this is
Tanzania’s President Samia Suluhu Hassan has a more ambitious timeline than previously dis-
COMMMENTARY said repeatedly that she views the oft-delayed cussed, as Tanzanian authorities have said in the
Tanzania LNG scheme as one of her highest past that they believed construction work on the
economic priorities. LNG plant might start in 2023, in time for pro-
In doing so, she has set herself apart from her duction to begin in 2028.
predecessor John Magufuli, who devoted much
more of his attention to the East African Crude Ambitious schedule
Oil Pipeline (EACOP), the midstream compo- But according to David Thomson, vice president
nent of the Lake Albert Development Project for sub-Saharan Africa research at Welligence
(LADP). EACOP will pump more than 200,000 Energy Analytics, all of these target dates could
barrels per day (bpd) of oil from the Kingfisher be overly optimistic.
and Tilenga fields along a 1,443-km route from Thomson emphasised that Tanzania did have
western Uganda to the Tanzanian port of Tanga. the resource base needed to support the pro-
Suluhu is a firm supporter of EACOP, which posed LNG plant, assuming that it is the same
is expected to account for about half of LADP’s size as previously discussed – that is, equipped
$10bn budget. But she has also been working with two production trains, each with a capacity
for more than a year to restart negotiations on of 5mn tonnes per year (tpy). “Each 1mn tpy of
the $30bn Tanzania LNG project and keep them LNG production requires approximately 1.1 tril-
going – unlike Magufuli, who did little to sort out lion cubic feet (31.15 cubic metres) of feed gas to
the commercial disputes that arose between the operate for 20 years,” he explained to NewsBase.
government and the international oil companies “Therefore Tanzania appears to have more than
(IOCs) that were involved in the project. enough gas reserves for these two LNG trains.”
Her efforts have now borne fruit. On June He was referring to the fact that the three off-
11, her government signed an initial Host Gov- shore licence areas that will provide gas to the
ernment Agreement (HGA) on the project with plant – Block 2, assigned to Equinor, and Blocks
Equinor (Norway) and Shell (UK), the opera- 1 and 4, assigned to Shell – are known to con-
tors of the three offshore blocks that are slated tain 35 trillion cubic feet (991bn cubic metres)
to supply feedstock to the future Tanzania LNG of gas. Additionally, he mentioned Tanzanian
plant. In turn, this document paves the way for Energy Minister January Makamba’s statement
additional negotiations toward a final HGA and on June 11 that the country’s total gas reserves
the other agreements needed to secure a final amounted to around 57 trillion cubic feet (1.614
investment decision (FID) on the scheme. trillion cubic metres).
Suluhu said after the signing ceremony that Despite its ample resources, Thomson said,
she expected Tanzania LNG to benefit the coun- Tanzania is not necessarily in a good position to
try in many ways. This project is “very unique, as meet the deadlines it is looking to set. Even with
it brings both capital and revenue,” she remarked. demand on the rise following the EU’s decision
“Therefore, when completed, the project will to phase out Russian gas imports, the country
change the country’s economic outlook and does not have the LNG experience or the infra-
unlock the economic growth and capture ben- structure it needs to remain on schedule, he
efits from LNG exporting in the global market.” remarked. Under current circumstances, both
She also indicated that she expected work on 2025 and 2028 appear to be overly optimistic, he
the scheme to move forward quickly now that indicated.
this first step had been taken. “I long to see phase “It will be a major challenge for Tanzania to
two of the negotiations being timely wrapped up produce any LNG in the 2020s,” he told News-
[in December of this year], so that we pave the Base. “Any project FID will require long-term
way for the project’s implementation as planned (at least 15-year) LNG contracts with buyers to
later in 2025,” she was quoted as saying by The underpin its financing.”
Citizen. Shell and Equinor could face similar chal-
The president appears to be saying that her lenges with respect to the upstream component
administration expects work to proceed quickly of the project, he noted. When asked whether
enough that Shell and Equinor can start offshore these two majors might face any unusual or spe-
gas production in 2025 – and that the LNG plant cific challenges as they sought to develop their

P6 www. NEWSBASE .com Week 24 17•June•2022