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Tanzania on the road to LNG exports with BG and Statoil

The companies are to cooperate with an LNG export complex

The UK's BG and Norway's Statoil, operators of the two offshore licences holding gas discoveries, are to cooperate in planning a liquefied natural gas (LNG) export complex. The companies are due to name their preferred location for the complex, on the southern part of the coast, in a presentation to the authorities in the second quarter.

News of cooperation between the two operators came after BG achieved a high flow with its first production-test, while Statoil made its third large discovery. With flow-rates comparable to those shown by the fields in Mozambique's waters, to the south, and recoverable reserves likely to total well over 500 billion cubic metres (cm), an LNG complex with two to four trains is being sketched-in.

BG said the flow-test at its Jodari field, discovered in March last year, completes the appraisal programme at the field, where three wells have been drilled. The test on Jodari-1 gave an equipment-limited 2.0m cm/d - a very high test-flow - and showed better-than-expected reservoir properties and high connectivity. The UK's Ophir Energy, BG's partner in the licence, estimated that production wells at Jodari could flow up to 5.7m cm/d each - the same rate as Anadarko is projecting for its Prosperidade field off Mozambique.

Jodari lies in 1,150 metres of water, about 39 km offshore in Block 1, held by a 60:40 venture between BG and Ophir. The operator has not given an estimate of reserves at Jodari, but Ophir said earlier that the six discoveries made by the venture across Blocks 1, 3 and 4 hold up to 595bn cm of gas-in-place. The next well to be tested will be the Mzia-2 appraisal well in Block 1, some 22 km north of Jodari.

Statoil's discoveries are in Block 2, lying between BG's blocks, where the company operates for a 65:35 venture with ExxonMobil. After the latest well, Tangawiza-1, drilled in 2,300 metres of water, Statoil raised its estimate of reserves in the block to 425bn-481bn cm of gas-in-place, of which 283bn-368bn cm is seen as recoverable. The previous discoveries, all closely-grouped, were made with the Zafarani-1 and Lavani-1 wells, and a separate reservoir was found with Lavani-2.

Tanzania's progress to LNG exports is not expected to be rapid: Statoil is hinting that a final investment decision is unlikely before early-2016, so start-up will be towards the end of the decade. As in Mozambique, much infrastructure - port facilities, service bases, roads and accommodation - will have to be constructed before the development work can start.

Planned new oil and gas legislation will also have to be in place before work moves forward. The authorities are still working on their new gas policy, which is expected to prioritise inland use, linkages to other sectors of the economy, and local procurement of goods and services. Legislation to bring in competitive licensing - up to now, licences have been awarded on a discretionary basis - is promised, and there are to be measures to improve transparency and revenue management. The role of the state's Tanzania Petroleum Development Corporation is also being reviewed.

There are also local issues to be resolved. Groups in the southern, and poorly developed, Mtwara region are pressing for a greater share of the gas benefits, which they see as likely to go mainly to the capital, Dar es Salaam, in the north. There were violent protests earlier this year when the government said it will construct a pipeline from the Mnazi Bay and Msimbati gasfields, onshore in the Mtwara region, to Dar es Salaam, where the gas will be used for electricity generation. The government has secured Chinese finance for the 532 km pipeline. The fields are operated by Maurel et Prom.

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