Page 5 - AfrOil Week 24 2022

AfrOil COMMENTARY AfrOil

Ambitious schedule capturing many of the same markets it was tar-
But according to David Thomson, vice president geting. These include companies based in Qatar
for sub-Saharan Africa research at Welligence and the US that already have key advantages
Energy Analytics, all of these target dates could such as established high-capacity LNG export
be overly optimistic. systems, plans to add extra capacity by the end
Thomson emphasised that Tanzania did have of the decade and long-standing reputations
the resource base needed to support the pro- as reliable suppliers, he said. They could also
posed LNG plant, assuming that it is the same include producers in Mozambique, Tanzania’s
size as previously discussed – that is, equipped neighbour to the south, which is due to see its
with two production trains, each with a capacity first LNG project come on line later this year, he
of 5mn tonnes per year (tpy). “Each 1mn tpy of added.
LNG production requires approximately 1.1 tril- Meanwhile, competition from other LNG
lion cubic feet (31.15 cubic metres) of feed gas to producers is not the only factor, he added. Tan-
operate for 20 years,” he explained to NewsBase. zania LNG will also have to cope with deadlines
“Therefore Tanzania appears to have more than for carbon emissions reductions, he explained.
enough gas reserves for these two LNG trains.” Since many EU member states have committed
He was referring to the fact that the three to making major cuts by 2030 and achieving
offshore licence areas that will provide gas to net zero by 2050, European gas demand may
the plant for processing – Block 2, assigned to not remain strong enough through the 2040s to
Equinor, and Blocks 1 and 4, assigned to Shell sustain the kind of long-term supply contracts
– are known to contain 35 trillion cubic feet needed to support an FID, he said.
(991bn cubic metres) of gas.
Additionally, he mentioned Tanzanian A way out?
Energy Minister January Makamba’s statement There is, potentially, an alternative. Tanzania
on June 11 that the country’s total gas reserves could follow the examples set by other coun-
amounted to around 57 trillion cubic feet (1.614 tries such as Mozambique and Senegal, which
trillion cubic metres). are preparing to launch floating LNG (FLNG)
Despite its ample resources, Thomson said, projects, or the Republic of Congo (ROC) and
Tanzania is not necessarily in a good position to Mauritania, which have arranged to use the Fast Tanzania LNG
meet the deadlines it is looking to set. Even with LNG modular solution offered by US-based
demand on the rise following the EU’s decision New Fortress Energy (NFE). will have to cope
to phase out Russian gas imports, the country On the positive side, both FLNG and mod-
does not have the LNG experience or the infra- ular LNG solutions tend to be cheaper, easier with competition
structure it needs to remain on schedule, he and faster to build than the large-scale gas lique-
remarked. Under current circumstances, both faction plants envisioned in the Tanzania LNG from other LNG
2025 and 2028 appear to be overly optimistic, scheme, with modular LNG solutions having an producers and
he indicated. even bigger edge than FLNG. But on the nega-
“It will be a major challenge for Tanzania to tive side, FLNG and modular LNG plants tend deadlines for
produce any LNG in the 2020s,” he told News- to be considerably smaller than large onshore
Base. “Any project FID will require long-term facilities – and again, the difference is even more reductions in
(at least 15-year) LNG contracts with buyers to stark with modular solutions.
underpin its financing.” Moreover, Thomson noted that switching to carbon emissions
Shell and Equinor could face similar chal- another type of gas liquefaction facility (or, pre-
lenges with respect to the upstream component sumably, even adding one into the mix) would
of the project, he noted. When asked whether likely lead to further slow-downs for the project,
these two majors might face any unusual or spe- partly because of the need for more negotiations
cific challenges as they sought to develop their and partly out of concerns related to economy
gas-bearing blocks, he identified Tanzania’s of scale.
status as a “nascent, undeveloped and inexpe- Also, Tanzania’s government might not be
rienced host country” as a bigger problem than willing to approve such a shift, as it sees the
the nature of the assets themselves. large-scale onshore liquefaction plant as a means
“The gas is also deepwater, which doesn’t of accomplishing its economic goals, he said.
necessarily push up complexity – particularly “Possibly, but this would require a full
for the operators, which are experienced and re-design of the possible development,” he told
capable in that environment – but it does push NewsBase when asked whether an FLNG or
up costs,” he commented. modular solution would help with fast-tracking
Tanzania LNG. He continued: “Tanzania wants
Unfortunate timing an onshore project to support domestic growth
One problem for Tanzania, of course, is that the and jobs. Also, given Tanzania’s very large gas
longer it must wait to bring its gas resources on reserves, it would likely highly benefit from the
line, the harder it will be to take direct advantage economies of scale of a large onshore LNG pro-
of the current heightened demand for new gas ject, rather than a small FLNG project, from a
suppliers. cost and profitability perspective.”
Thomson noted that challenge, pointing out As such, there is a chance that Suluhu’s
that if Tanzania LNG came online around 2030, administration may be throwing its weight
it was likely to face competition from other pro- behind a deal that does not reach its full poten-
ducers that would have already succeeded in tial, owing to unfortunate timing. ™

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