TPDC chief says talks with LNG energy investors to start soon

04Sep 2020
The Guardian
TPDC chief says talks with LNG energy investors to start soon

NEGOTIATIONS between the government and international oil companies on revenue sharing from the U$30 billion liquefied natural gas project in Lindi Region will restart soon.

An artist’s impression of a modern LNG plant.

Tanzania Petroleum Development Corporation’s Managing Director, Dr James Mataragio said in Dar es Salaam last week that the host government agreement talks with the consortium of IOCs led by Royal Dutch Shell and Equinor will pave way for a final investment decision.

“We are making progress because we have just completed land acquisition after compensating all affected people in Lindi Region,” Dr Mataragio noting that progress has been made with TPDC paying over 5.4bn/- compensation to villagers in Lindi Region the pave way for the gigantic project.

“We are preparing to resume HGA negotiations that will lead us to FEED. The HGA negotiations are due to start any time from now,” the TPDC Head added.  FEED stands for Front End Engineering Design.

In June, Energy Minister, Dr Medard Kalemani told parliament that, “Construction of this project is expected to start in 2022 and will be concluded in 2028. The project will have capacity to produce 10 million tonnes of LNG a year.”

In his budget speech for 2020/21, Dr Kalemani noted that the government has been holding individual talks with the oil companies to agree a “host government agreement” since last year with reported deadlocks on how to share revenue from the exports.

Commenting on progress being made in implementing the LNG project, Equinor ASA Press Spokesman, Erik Haaland said for the LNG project to proceed, it will depend on having a solid framework in place. The key project agreements are the production sharing agreement and HGA, together because they form the framework for the investor to mature the project towards a final investment decision.

“Any delay in agreeing and establishing these agreements, will result in postponement of the project start-up. Equinor believes there is a good opportunity for the parties to negotiate a framework that will benefit Tanzania, Equinor and the other partners in the project,” Halaand stated.

The entire oil and gas industry, including the LNG markets, has gone through turmoil these last months, however, Equinor believes in a long term sustainable LNG market. Other members of the consortium led by Equinor along with Royal Dutch Shell are Exxon Mobil, Ophir Energy and Pavilion Energy.

Seconding Equinor’s position, Shell Tanzania’s External Relations Manager, Patricia Mhondo said the company is keen to move forward with the HGA discussions and look forward to government’s guidance and clarity on how and when that process will recommence.

“The HGA is an important milestone as it seeks to establish a clear legal, fiscal and commercial framework for the LNG project. The completion of this required project framework will provide a clear milestone towards maturation,” Mhondo said.

She further noted that Shell Tanzania which is a subsidiary of Royal Dutch Shell currently the world is facing a challenging macroeconomic environment particularly due to the dual challenges of low energy demand as a result of the global impact of the novel coronavirus outbreak as well as the oversupply of oil and LNG in the market.

“Most international oil and gas companies and their shareholders are increasingly scrutinizing their global project portfolio. With an increasingly cash and capital constrained world, only the best and most competitive projects will get funding going forward,” she alerted.

“We look forward to work with the government of Tanzania to make the project competitive within the global market environment,” the Shell Tanzania External Relations Manager added.

Shell and its partners have so far invested over U$2 billion in exploration and appraisal in the country and are keen to develop and commercialize the gas in blocks 1 & 4 offshore Lindi and Mtwara Regions.

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