Business Monitor International: Risks Increasing to Tanzania's LNG Project

With limited domestic and regional gas demand, the development of liquefied natural gas (LNG) export capacity remains key to the monetisation of Tanzania's substantial offshore gas resources. The Tanzania LNG export facility is targeting final investment decision (FID) in 2016. Given standard project lead times, this could see the facility brought online by 2022. Although this remains our core forecast scenario, the balance of risk lies increasingly to the downside. 

Continued legal and regulatory uncertainty has been a major drag on progress. Most damaging has been delay in passage of the country's Natural Gas Act. The act, which will be the main legislation governing the gas sector, is unlikely to pass ahead of the 2015 presidential elections.

The recent fall in Brent also poses substantial downside risk to FID in 2016. LNG contracts remain heavily indexed to oil and a period of sustained lower oil prices would threaten the project's commercial viability. MORE