Government, oil giants hope to break ‘deadlock’ over $30bn LNG project

19Sep 2018
Winnie Henry
DAR ES SALAAM
Financial Times
Government, oil giants hope to break ‘deadlock’ over $30bn LNG project

THE government and a consortium of five international oil companies are still far apart on crucial issues on the proposed liquefied natural gas (LNG) terminal, with differences between the state and foreign investors on the way forward for the project said to be "very significant."

A lack of agreement between the government and oil companies threatens to further delay the $30 billion project that could potentially transform Tanzania's economy.

Royal Dutch Shell, Statoil, Exxon Mobil, Pavilion and Ophir Energy plan to build the natural gas export terminal in partnership with the state-run Tanzania Petroleum Development Corporation (TPDC).

The Bank of Tanzania (BoT) believes that just starting work on the massive plant could add another 2 percentage points to annual economic growth of around 7 per cent.

But government negotiators and foreign oil companies are seemingly stuck on reaching consensus on a host government agreement (HGA), which would finally pave way for the start of the long-awaited project.

An HGA is a legal agreement governing the rights and obligations of foreign investors and the host government to the development, construction and operation of the LNG project.

Many HGAs include a stabilisation clause designed to minimise the financial and political risks posed to foreign investors as a result of sudden changes in national law.

 

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