Tanzania playing catch up on LNG project
The NOC wants to get a stalled LNG project moving, but doubts remain over the operating environment
Tanzania's announcement that it is seeking to hire consultants to reinvigorate stalled negotiations on a proposed liquefied natural gas development will likely be welcomed by the industry. But problems elsewhere in the oil and gas sector suggest that relations between government and producers remain strained.
State-controlled Tanzania Petroleum Development Corporation (TPDC)
said in April that it had invited bids from consultants to help it devise a commercial, legal and technical framework for the LNG project, which could require around $30bn of investment.
Since 2016, Shell—through its acquisition of BG—in partnership with Exxon Mobil, Ophir Energy and Statoil, have been seeking government agreement to build an onshore LNG export terminal in southern Tanzania, adjacent to large offshore gas finds. The country has recoverable reserves estimated at around 57 trillion cubic feet.
The main discoveries are in the Rovuma Basin, which has yielded even larger discoveries in Mozambique, just across the border. But, unlike its southern neighbour, where Eni's Coral South floating LNG project has been sanctioned and an Anadarko-led LNG development may not be far behind, Tanzania's plans are still struggling to get off the drawing board.
An agreement on the Tanzanian project has yet to be reached with the industry citing drawn-out, bureaucratic land acquisition procedures and delays in approving a new regulatory framework for the oil and gas sector.
Given that a final investment decision on the project already seems improbable before the early 2020s, the earliest likely start date for LNG exports would be well into the second half of that decade, regardless of how quickly the deadlock can be broken.
Two laws passed last year that gave the government greater control over natural resources exploitation have also unsettled investors. These allow the government to renegotiate contracts and take a greater share of revenues.
The government's determination to keep a tight grip on the industry's reins was evident earlier this year, when it requested a delay in the acquisition by Tanzanian-listed Swala Oil and Gas of up to 40% of the subsidiary of Canada's Orca Exploration Group that holds exploration and production rights for natural gas in the Songo Songo gas-producing block in partnership with TPDC. Songo Songo is Tanazania's oldest gas development, discovered in 1974, some 15km offshore in the south of the country and entering into production three decades later.
TPDC said it had not been consulted on the deal, which could be worth as much as $130m, and wanted to look in more detail at how it would affect an existing natural gas production sharing agreement (PSA) between PAE PanAfrican Energy Corp—the Orca unit—and the government.
Swala said the deal met legal requirements and rejected TPDC's contention that it had not been informed. The dispute has yet to be resolved. Water wars
Now, Swala has had another run in with the authorities. In late April, the company
declared force majeure under the PSA for its Kilosa-Kilombero joint venture in southern central Tanzania. It cited a request by the natural resources ministry to carry out a last-minute environmental assessment on the impact of its water usage by its Kito-1 well drilling programme on the water resources in the catchment area of the planned Stiegler's Gorge hydropower scheme, which is located in a UNESCO-designated game reserve.
Swala claims the water required for drilling would be a tiny fraction of the amount of water involved in the dam project and that it had already carried out an Environmental Impact Assessment for the project, which had been approved by the government in 2017.
The company's chief executive David Mestres Ridge said it was "disappointed and frustrated" by the move, noting that the venture had invested $20.7m in exploring over the last six years, and had been trying for three years to drill a prospect. He claimed it would be worth almost $10bn to Tanzania and benefits local communities.
"At this point, the joint venture has no alternative but to declare
force majeure under the PSA but fully expects that the force majeure shall be lifted once all permits are in place to allow the safe drilling of Kito-1 in 2019," he said.
comments powered by Disqus.