Lindi to host $30b LNG plant, but land issues may provoke protests

Saturday March 29 2014

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

Tanzania’s first liquefied natural gas plant will be located at Likong’o–Mchinga in the southern town of Lindi if the decision of Statoil AS and BG Group Plc is upheld.

The firms selected the area as the best location for the $30 billion project following a request by the government for companies to evaluate viable site options for building an onshore LNG plant.

READ: $15bn for construction of Tanzania gas plant

But the decision to build the LNG plant in Lindi may not go down well with the residents of Mtwara region. In June last year, the government promised Mtwara residents that the plant would be built in their area to promote economic growth.

The residents had protested against a proposed state-owned project to construct a $1.2 billion 524km gas pipeline from Mtwara to Dar es Salaam.

READ: Mtwara protests expose gaps in oil, gas, mineral laws management


According to Subiro Mwapinga, an independent oil and gas consultant, selecting Lindi may provoke fresh riots, although oil and gas companies would still use Mtwara as the supply base.

“The government promised to build so many things but most of them are not feasible. For example, the government doesn’t have resources to build ports in both Mtwara and Lindi,” he said.

Some 30 sites were considered for the LNG plant project.

Before the government asked the partners to develop the plant, Statoil had selected Rushungi but its partners chose Likong’o.

Industry analysts fear that the chosen 6,800-acre site, which will have an LNG plant on 2,000 acres, and an industrial park, could lead to a dispute between the owner of the land and the government as the Lands Ministry embarks on invalidating the title deed.

The ownership will be moved to the Tanzania Petroleum Development Corporation (TPDC) on behalf of the stakeholders, who include the government. On Thursday, TPDC signed a memorandum of understanding that gives the government the responsibility of securing the land.

Sources said the process of acquiring the land had stalled the project for six months, a delay which may affect investors’ confidence.

The plant will receive and treat reservoir gas from the fields in blocks 1, 2, 3 and 4, where discovery of 45 trillion cubic feet (tcf) of natural gas in massive deep offshore waters was made.

Further discoveries could lead to estimated recoverable reserves of more than 100tcf by 2015. Production is expected to start in 2022.

Tanzania BG is a designated operator of offshore blocks 1, 3 and 4, with Ophir as its partner. Statoil Tanzania AS has discovered recoverable gas reserves in offshore block 2. Statoil is the designated operator of block 2, with ExxonMobil as its partner.

Despite the site being an important milestone towards realising an LNG development in Tanzania, observers warn that it is not a commitment to a final investment decision by the partners because it could be subject to further project definition and analysis.

Mr Mwapinga said a pending land dispute and security concerns due to the selected site being located in the open sea makes the Rushungi site, which has a natural harbour and is owned by the government, ideal for the project.

Mr Mwapinga said the selected area is owned by Mohammed Enterprises Tanzania Ltd (METL), one of the largest regional conglomerates. The company acquired the site, which was a sisal estate, in the 1960s, but never developed it. METL owns the land through Tasco Estate.

The land has seven different title deeds, and the company is said to have used them to borrow Tsh2.4 billion ($1.5 million) from a bank in Malaysia. The Ministry of Lands wrote a letter to the company notifying them of the government’s intention to revoke the title deed.

“Over the years, villagers have intruded into the estate because it has been dormant. According to the land laws, the government can retract the title deed if the land hasn’t been in use for three years, and it could also do so in the public interest,” said Mr Mwapinga.

The site valuation report says despite the site requiring little or no dredging, the most technically viable location for the plant site will require the relocation of Rushungi village, and will occupy most of the productive land currently being used for agriculture.

“The site is relatively isolated and distant from the urban areas of Lindi town and Mtwara. Consequently, development of the site is unlikely to support regional level development. In addition, the likely influx of people and associated unplanned development would be difficult to manage and has the potential to disturb elephants that occasionally forage nearby,” states the report.

The report further says that minimal physical resettlement and its marine conditions would provide for a safe and reliable LNG harbour, and its proximity to Lindi and Mtwara towns makes the Likong’o site preferable.

Minister for Energy and Minerals Sospeter Muhongo did not confirm whether Likong’o had been selected, but said a potential site had been chosen after the stakeholders conducted scientific research. He said the site was selected over 10 others, which were evaluated before a decision was made.

“The government would be liable if it made the mistake of choosing a site for the companies and anything went wrong,” said Mr Muhongo.

Mr Muhongo said the project partners were still evaluating the amount of land that would be required, but the government wasn’t compelled to rush the process because it wanted to make sure the country’s interests were put first.