US cautions Tanzania on LNG project delays

Saturday March 02 2024

An aerial view of large liquefied natural gas storage tanks. PHOTO | SHUTTERSTOCK


The United States this week warned Tanzania of a likely exodus of investors in its long-anticipated, multimillion-dollar liquified natural gas project if it continues to be bogged down by delays over negotiation technicalities.

US Deputy Assistant Secretary of State Joy Basu told The EastAfrican in Dar es Salaam this week that companies such as Exxon Mobil that have been pushing the deal with Tanzanian authorities had reached a point where they were now “willing to walk away.”

“There is LNG in lots of places around the world now, and for Tanzania the window for this particular investment is closing fast. Such windows do not remain open forever,” said Ms Basu whose portfolio in the Joe Biden administration includes overseeing economic and regional affairs in Sub-Saharan Africa.

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She said the status of the project was a major agenda item in meetings that she held with Tanzanian government officials during her visit this past week to follow up on progress of a US-Tanzania commercial dialogue that was launched in October last year.

Exxon Mobil, based in Houston, Texas, is one of several multinational firms that have stakes in the LNG project in southern Tanzania whose estimated cost has risen from $30 billion initially in 2014 to $42 billion by last year.


Others are Britain’s Shell and Norway’s Equinor — which have been earmarked as joint main operators of the project — Exxon Mobil, Pavilion Energy (Singapore), Medco Energi (Indonesia) and the state-owned Tanzania Petroleum Development Corporation as partners.

But there has been no official word on progress since March last year when Tanzania’s energy ministry said negotiations with the investors were complete, paving the way for drafting of a Host Government Agreement to be.

According to a Bloomberg news agency report this week, Shell and Equinor have said they are still hoping for the HGA, production sharing agreement and final investment decision to be signed soon so that they can start developing the project.

“We had hoped to see these agreements signed faster, but we remain ready to continue to work with the government on competitive and investable agreements, consistent with what we agreed last year,” the agency quoted a Shell spokesperson as saying.

However, it also quoted Tanzania’s Energy Minister Doto Biteko, who doubles up as Deputy Prime Minister, as saying the HGA was “still under negotiation.”

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Ms Basu said she met with Tanzania’s ministers of works, transport and deputy minister of trade and industry along with officials from the Planning Commission, President’s office and the Tanzania Investment Centre.

“Regarding the LNG project I made it clear to them that it would be really unfortunate for Tanzania if these companies were forced to leave because of delays that are not in good faith and based on the right reasons,” she said.

She said there was a “very real risk” of investors becoming wary of a deal that was “still being renegotiated after so many years” and starting to wonder if they could “trust the government’s word when it comes to a multi-year negotiation. But more than that, I’m afraid of the signal it will give to other big investors who want to invest in Tanzanian foundational infrastructure if they can’t rely on the government keeping its side of the bargain,” she added.