Equinor, Tan­za­nia to start talks on gas project

The East African - - MARKETS -

Nor­we­gian en­ergy firm Equinor is ready to start talks with Tan­za­nia on de­vel­op­ing a liq­ue­fied nat­u­ral gas project based on a deep­wa­ter off­shore dis­cov­ery, the com­pany said last week.

Tan­za­nian Pres­i­dent John Magu­fuli has told gov­ern­ment of­fi­cials to pro­ceed with ne­go­ti­a­tions to work out the com­mer­cial and fis­cal frame­work for the LNG project.

Equinor is a ma­jor­ity sta­te­owned en­ergy com­pany formerly known as Sta­toil.

“Equinor will now pro­ceed with part­ner Exxonmo­bil to ne­go­ti­ate for a host gov­ern­ment agree­ment,” said a spokesman for the com­pany. He added that it was too early to say how long talks with the gov­ern­ment would take and how much the project would cost.

In 2014, Tan­za­nia said that a planned LNG ex­port plant would cost up to $30 bil­lion. Royal Dutch Shell, which op­er­ates deep­wa­ter Blocks 1 and 4, ad­ja­cent to Equinor’s Block 2, pre­vi­ously sought to de­velop the LNG project in part­ner­ship with Equinor and Exxon Mo­bil.

“Shell con­tin­ues to work with Tan­za­nia to es­tab­lish the most cost-ef­fec­tive and com­pet­i­tive so­lu­tion for the LNG project in the coun­try,” a com­pany spokes­woman said in an e-mail. “We be­lieve the gov­ern­ment is best placed to lead the way for­ward to de­liver the project.”

Shell de­clined to say whether it would join Equinor and Exxon Mo­bil or would pur­sue sep­a­rate talks with the gov­ern­ment. Shell said on its web­site the three blocks had suf­fi­cient gas re­serves to build an on­shore LNG plant, but the com­pany was not im­me­di­ately avail­able to com­ment on whether it would join the other two in the talks.

Shell es­ti­mates its two blocks hold about 453 bil­lion cu­bic me­tres of re­cov­er­able gas, sim­i­lar to the vol­umes in Equinor’s Block 2.

In June, Exxon Mo­bil was re­port­edly seek­ing to sell its 25 per cent stake in Block 2 as it was fo­cus­ing on an even big­ger project in neigh­bour­ing Mozam­bique.

But in­sid­ers say the Tan­za­nian gov­ern­ment does not want to re­peat the mis­takes it made when sign­ing min­ing pacts, so it is tak­ing its time in com­menc­ing ne­go­ti­a­tions over the com­mer­cial frame­work agree­ment for the LNG project in the south.

En­ergy Min­is­ter Medard Kale­mani said, “It is not our in­ten­tion to de­lay in­vestors or the take-off of the project, but we want to be con­tent with the agree­ments.”

Tan­za­nia has been ex­plor­ing for nat­u­ral gas for more than 50 years, and started talks for fur­ther de­vel­op­ment in 2016.

The frame­work for the pro­posed plant will out­line and de­fine all at­tributes of the project, who is in­volved, the prices and all ap­pro­pri­ate al­lo­ca­tions. The firms say in­vest­ment de­ci­sions have been put on hold as they await the out­come of ne­go­ti­a­tions with the gov­ern­ment.

Pic­ture: File

Equinor wants to ne­go­ti­ate a deal to de­velop an off­shore liq­ue­fied nat­u­ral gas project in Tan­za­nia.

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