Delayed gas project could hurt Tanzania’s FDI chances

Delays in the setting up Tanzania’s first liquefied natural gas export facility could hurt the country’s chances of attracting foreign direct investments for projects in the extractive industry, warns a new report by Deloitte.

The $30 billion project has been on the drawing board since 2014, following confirmation of huge offshore natural gas discoveries in the Indian Ocean.

But progress in negotiations with the group of foreign oil and gas companies entrusted with the project has been painstakingly slow, with Deloitte’s report citing uncertainty over the direction that Tanzania’s extractive industry is taking following recent regulatory reforms as a key reason for the apparent impasse.

Energy Minister Medard Kalemani recently disclosed fresh plans to reach a concrete host government agreement with the investors by September.

“We are keen to get this key project for the country’s sustainable economic wellbeing off the ground as soon as possible,” said Mr Kalemani.

The host government agreement will mark a crucial step towards reaching a final investment decision for the project.

Norway’s Equinor ASA, Exxon Mobil of the US, Britain’s Ophir Energy and the Royal Dutch Shell company form the multinational consortium behind the project, with the role of the state-run Tanzania Petroleum Development Corporation being one of the areas still being thrashed out at the negotiating table.

Tanzania has estimated recoverable natural gas reserves of over 50 trillion cubic feet.

According to the Deloitte report, once the Lindi onshore LNG facility becomes operational, the country will earn approximately $5 billion in estimated annual export revenues.

The report, African Oil and Gas State of Play, notes that Tanzania, Uganda and Mozambique are poised to challenge Nigeria’s dominance in sub-Saharan Africa in terms of FDI numbers directly related to the oil and gas sector.

At least 10 FDI projects with a total value of $3.2 billion have been announced in the past eight years.