March 18, 2013 / 8:26 AM / 7 years ago

UPDATE 3-Statoil plans East Africa LNG plant after Tanzania gas find

* Statoil, BG to advise Tanzania on location in second quarter

* ‘Ballpark figure’ for plant costs is $10 billion

* Investment decision not seen before at least early 2016

By Gwladys Fouche and Balazs Koranyi

OSLO, March 18 (Reuters) - Statoil and Britain’s BG Group plan to build a $10 billion East African liquefied natural gas (LNG) terminal well placed for exports to Asia, after the Norwegian company made a new find off the coast of Tanzania.

“We have enough gas to move forward,” Statoil’s head of exploration, Tim Dodson, said on Monday after it announced the discovery of between 4 trillion and 6 trillion cubic feet (tcf) of gas in the Indian Ocean.

“We are working with BG to come up with a recommendation for a landing site. We should be making that recommendation to Tanzanian authorities fairly early in the second quarter,” Dodson told Reuters.

The latest find, Statoil’s third in the area within a year, brings its total recoverable resources there to 10-13 tcf.

BG has interests in three blocks off Tanzania together with Ophir Energy.

On Monday, BG announced that results from its Jodari well drilled off Tanzania, near Statoil’s own finds, were “excellent”.

The U.S. Geological Survey has estimated that more gas lies off the shores of Kenya, Tanzania and Mozambique than off Nigeria, Africa’s biggest energy producer.

East Africa is attractive to oil firms because of its relative proximity to Asia’s big LNG consumers.

To allow exports of the fuel to major markets, there will be a need for installations to turn gas into freezing liquid for transport by ship. Statoil and BG are on course to build one of the first.

Anadarko and Eni are planning to build an LNG export terminal in Mozambique.

The plant to be built by Statoil and BG would have at least two processing units, or trains, to process gas from Statoil’s Block 2 and BG’s Block 1.

“In addition to the 10-13 tcf that we have, they (BG) have a similar kind of number (in Block 1),” said Dodson.

“So if we have 20 tcf, there will be a discussion on whether you develop all of that straight away or whether you build two trains and then add a potential third train, or even a fourth.”

Statoil would extract the gas from the seabed via a big offshore development before piping it to the export terminal on land, Dodson said.

He said $10 billion was a fair ballpark estimate for the cost of developing the plant. An investment decision would be at least three years away, not before early 2016, he added.

Statoil operates the hydrocarbon licence for Block 2, with a 65 percent working interest, and ExxonMobil holds the remaining 35 percent.


There is political risk to the project, with oil and gas becoming a divisive issue in Tanzania.

While oil and gas could be a much-needed source of revenue for the developing country, there are fears energy could prove to be a “resource curse”, bringing the kind of unrest experienced by Democratic Republic of Congo and Nigeria.

In the southern region of Mtwara, residents are threatening to block a gas pipeline project until they see more of the benefits.

The government has accused opposition leaders of inciting opposition to the pipeline, which it hopes will boost generation of cheap electricity and end chronic energy shortages.

Opposition politicians and activists have been calling for a halt to the issuance of oil and gas exploration licences until Tanzania revamps laws regulating its fast-growing energy sector.

The government has unveiled a draft national gas policy and plans to have new legislation in place this year.

Statoil has drilled five wells off Tanzania so far and expects further wells this year, most likely towards the end of the year after geologists analyse data provided from fresh three-dimensional seismic surveys this summer.

“We can expect more discoveries,” Dodson said.

Statoil will also drill two wells off Mozambique, primarily seeking oil, with drilling of the first well due to start in the first week of April. There, again, Dodson saw potential for significant finds.

In Angola, on Africa’s west coast, Statoil hopes to drill another well towards the end of the year. Dodson said he believed there could be very big finds as the geology is similar to the oil-rich pre-salt blocks off Brazil, across the Atlantic.

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