19,000 acres available for LNG plant in Lindi

Saturday January 16 2016

Investors select Likong’o-Michinga area as best site for $30 billion plant, leaving Mtwara in the cold. TEA Graphic

Tanzania has revoked ownership of 19,000 acres at Likong’o- Mchinga in Lindi to pave the way for a $30 billion liquefied natural gas plant. TEA GRAPHIC | FILE 

By ERICK KABENDERA

Tanzania has revoked ownership of 19,000 acres at Likong’o- Mchinga in Lindi to pave the way for a $30 billion liquefied natural gas (LNG) plant.

Prime Minister Khassim Majaliwa made the announcement while on a tour of Southern Tanzania early last week. This is seen as a major step in government gaining trust of international oil and gas companies (IOCs) who were frustrated by the government’s inability to secure the land since it was identified two years ago.

Analysts say the government delay in securing the identified land and handing it over to the Tanzania Petroleum Development Corporation (TPDC) on behalf of the companies, was the key reason why the IOCs had delayed the decision further.

Mohammed Dewji’s Mohammed Enterprises Tanzania owned the land in question and had used it for years to grow sisal.

Under Tanzanian laws, the president may revoke the rights of occupancy of the landholder. However, sources told The EastAfrican that after the land was identified, President Jakaya Kikwete didn’t revoke the ownership and the owner is said to have demanded a $100 million compensation from the OICs.

But the companies rejected, saying that under the agreements it was the Ministry of Lands that was required to acquire the land and hand it over to TPDC, which represents government interests in the LNG investment.

“At the same time the government evaluation report on the value of the land had shown that the land was worth less than $20 million,” said a source at the Ministry of Lands.

“President Magufuli has already revoked the land ownership and LNG partners are free to use the land for investment,” the prime minister said at the rally in Southern Tanzania town of Lindi.

Due diligence

However, a TPDC statement, which was released early this week, contravened with the Prime Minister’s statement. The statement said that Kikwete revoked the land ownership on October 30, 2015, hardly a week before President Magufuli was sworn in.

The statement further said that the title deed for the land has been handed over to TPDC ready for the development of the LNG project. It further said that the site would also be used to set up industries for making different products from natural gas.

“Once the LNG project is completed, it will help produce natural gas for the domestic use and the rest will be transported out of the country,” the statement that was signed by TPDC Managing Director, Dr James Mataragio said.

Once the land is handed over to TPDC and LNG partners, the IOCs will use it to secure loans from international lenders for the project. But before the lenders approve the loan, they will carry out due diligence to establish the circumstances under which the land was granted, among other things.

The due diligence process alone might take over two years which means that the investment decision might be delayed for another two years, according to multiple interviews with industry analysts.

Even after land has been secured, the biggest challenges would be to deal with political tensions in Southern Tanzania which led to several deaths in 2013 after the government had confirmed the construction of a $1.2 billion 524km gas pipeline from Mtwara to Dar es Salaam.

There has also been a tussle over where the LNG project would be built between Lindi and Mtwara.

President Magufuli assured OICs and other investors immediately after he was sworn in as that he would fast track the construction of the LNG plant.