5 October 2018

Tanzania: President Magufuli Wants Gas Talks Expedited

Photo: The Citizen
Proposed liquefied natural gas plant.

Dar es Salaam — President John Magufuli has sought the support of newly appointed Norwegian ambassador to Tanzania in speeding up talks between the two countries over the multi-billion dollar liquefied natural gas (LNG) project in Lindi Region.

Foreign Affairs and East African Cooperation minister Augustine Mahiga revealed that the President made the appeal to Ms Elisabeth Jacobsen when she presented her credentials at State House on Thursday October 04.

The LNG project, said to be among the largest south of the Sahara when completed, has been delayed over lack of progress in talks between investors and the government. The plant was to make use of the trillions of cubic feet of natural gas discovered off the coast in the southern region, and with the potential to drastically transform the economy and create thousands of jobs in the value chain. Prospects for the roll out of the project have recently faltered, with investors holding back over the implication of several new natural wealth laws passed by Tanzania Parliament. President Magufuli is relying on the new legal regime to raise the country's stake in the exploitation of its vast mineral wealth, including gold and gas discoveries.

No details have been made public over the progress in the talks but indications from both the parties is that little ground has been made so far. The Parliamentary Budget Committee has already warned that the stalemate has seen a huge decline in gas and oil exploration activities in the country.

Yesterday's appeal by President Magufuli would be an attempt to unlock any of the bottlenecks. "The President has asked the Norwegian Ambassador to intervene and make sure the LNG plant becomes a reality," said Dr Mahiga during an interview shortly after the President received the new envoys who included those from Kuwait, Belgium, Palestine and Sweden.

Dr Mahiga did not however expound on what exactly the President asked of the new Norwegian ambassador. The minister did not also say what the ambassador told Dr Magufuli.

But Dr Magufuli recently expressed frustration over the exploitation of the natural gas resource, suggesting the government may not have much room to manoeuvre. He appeared to suggest at a public rally that engagement with the foreign investors was not impressive enough.

In a post on their website, the Norwegian company Equinor ASA, formerly Statoil, expected to play a leading role in the project has also hinted on what it sees as the way forward.

It says: "To enable the development of the gas resources discovered in Block 2 to take place, it is important to develop, agree and implement the legal, fiscal and commercial framework that will apply for the onshore LNG project.

This is a currently ongoing process together with the Government Negotiation Team (GNT)."

Energy minister Medard Kalemani told Parliament earlier this year that actual construction of the LNG plant would start in 2022.

He said the government was doing well with its negotiations with multinational firms that are interested in the project and that actual construction would start in 2022, noting that the ongoing delays was basically due to the fact that the firms were competing with each other regarding who should be the leader in the project execution.

"We met the investors recently and everything is progressing well... What is happening now is that the multinational firms are competing among themselves regarding which one should lead the project execution. By 2022, actual construction will start," he told Parliament.

The views were an apparent response to the Parliamentary Budget Committee which asked the government on June 18 to conduct a thorough analysis of the reasons behind a fall in natural gas exploration activities in Tanzania amid reports that some investors were contemplating to sell their stakes in the country.

Ms Hawa Ghasia said reports that an American multinational, Exxon Mobil, was contemplating to sell its stake in Tanzania's natural gas industry was bad for the goal of setting up an LNG plant in the country.

Earlier in June 2018, Exxon Mobile announced that it was seeking buyers for its stake in a large undeveloped gas field off Tanzania so it could focus on the development of an even bigger project in neighbouring Mozambique.

Exxon Mobil holds a 35 per cent stake in Tanzania's deep water Block 2 field. The company holds an estimated 23 trillion cubic feet (Tcf) of gas out of Tanzania's proven reserves of 57.08 Tcf.

Last year, the company also bought a 25 per cent stake in Mozambique's offshore gas-rich Area 4 development from Eni.

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