Equinor, Shell call on Tanzania to seize LNG opportunity
Anglo-Dutch Shell and Norway's Equinor have urged Tanzania to "seize the opportunity" to capitalise on its gas resources, by concluding negotiations on the stalled Tanzania LNG project. The message comes a few weeks after the death of the longstanding, autocratic president, John Magufuli.
Negotiations on the project, expected to produce 7.5mn metric tons/year, have been on hold since late 2019. Equinor, which operates Tanzania LNG with a 65% interest, wrote off $982mn in January, after concluding that the scheme was uncompetitive. But the company said it would continue trying to work out commercial, fiscal and legal terms with Tanzania's government that might make the project viable.
"2021 must be the year when action is taken to conclude the negotiations," Frederik Grootendorst, managing director and country chair for Shell in Tanzania, and Mette Halvorsen Ottoy, Equinor Tanzania's senior vice president and country manager, said in an op-ed published in the country's The Citizen newspaper on April 13.
The appeal comes weeks after Tanzania swore in Samia Suluhu Hassan as its new president following the death of her predecessor John Magufuli. Hassan has stressed she is eager to see the LNG project revived, and has instructed the energy ministry to push ahead with talks with investors. Positive recent comments by Hassan are "a clear sign from the top of the political will of the government of Tanzania to realise the project," the Shell and Equinor executives said.
Equinor has been working in Tanzania since 2007, when it signed a production-sharing agreement to explore the offshore Block 2, estimated to hold 20 trillion ft3 (566bn m3) of in-place gas. ExxonMobil holds the remaining 35% interest in the project, but Equinor signed a memorandum with Shell in January to collaborate in developing the liquefaction facility.
"A mega project like this takes years to plan, design and execute and hence critical decisions are required now in order to supply the Tanzanian industries of the future with energy," the Shell and Equinor executives wrote. "As the global energy transition gathers pace, perhaps aided by the coronavirus pandemic, demand growth for oil and gas could be slower than previously anticipated and the value of natural gas resources over the long term may decrease."
The two noted that "the huge opportunity for Tanzania to benefit from its rich natural gas resources is within its grasp."
"Creating thousands of jobs and enabling thriving large scale and small scale businesses, having its own reliable supply of natural gas to feed power stations, unlocking economic growth in the wider industrial sector with gas as feedstock for production of fertiliser, fuel for the transport sector, fuel for smelting operations and many other industrial applications are potential benefits to the country," they said.