Tanzania says construction of LNG plant to start in 2022

DAR ES SALAAM (Reuters) - Tanzania expects a consortium of international oil companies to start building a long-delayed liquefied natural gas (LNG) project in 2022, its energy minister said on Tuesday.

Construction of an LNG export terminal near huge offshore natural gas discoveries in deep water south of the East African country has been held up for years by regulatory delays.

The government said in March it planned to conclude talks in September with a group of foreign oil and gas companies led by Norway’s Equinor on developing the LNG terminal.

Equinor, alongside Royal Dutch Shell, Exxon Mobil and Ophir Energy and Pavilion Energy, plan to build the onshore LNG plant in Lindi region.

“Construction of this project is expected to start in 2022 and will be concluded in 2028,” Medard Kalemani, Tanzania’s energy minister, said in a budget presentation to parliament.

The country’s central bank believes just starting work on the $30 billion plant would add another two percentage points to annual economic growth of around 7%.

“The project will have capacity to produce 10 million tonnes per annum (MTPA) of liquefied natural gas,” he said.

The international oil companies (IOCs) will develop the project in partnership with the state-run Tanzania Petroleum Development Corporation (TPDC).

Kalemani told parliament that the government launched a new round of talks in April with each company in order to speed up the process.

“We instructed the government negotiation team to hold separate talks with each individual investor, instead of the previous arrangement of holding joint talks with all the investors,” he said.

“We expect these talks to be completed within seven months.”

The talks are aimed at negotiating a “host government agreement” which is seen as a crucial step towards a final investment decision for the project.

Tanzania has estimated recoverable reserves of over 57.54 trillion cubic feet (tcf) of natural gas.

Tanzania already uses some of the gas for power generation and running of manufacturing plants. It also plans to build a fertilizer plant.

Kalemani said construction of the $1.9 billion fertilizer plant will start in 2021 and is expected to be commissioned in 2024.

The project is a joint venture between TPDC and German firm Ferrostaal Industrial Projects, Danish industrial catalysts producer Haldor Topsoee and Pakistan’s Fauji Fertilizer Company.

Reporting by Fumbuka Ng’wanakilala and Nuzulack Dausen; Editing by George Obulutsa and Emelia Sithole-Matarise