Tanzania LNG Slows as State Delays on Signing Agreement With Equinor, Shell

(Bloomberg) -- Tanzania is delaying key agreements needed to realize a $42 billion liquefied natural gas plant, slowing a project that developers Equinor ASA and Shell Plc warn has limited time to become a reality before demand for fossil fuels begins to wane.

Plans to connect offshore gas discoveries to feed an LNG export terminal on the East African nation’s coast have been in the works for a decade. The development appeared to gain momentum last year when Tanzania’s President Samia Suluhu Hassan expressed her support and negotiations were concluded over the host-government agreement — which outlines commercial legal and fiscal terms — and an amended production-sharing deal with the project consortium.

Project partners put their initials to fully termed agreements with the government in May 2023, but since then “progress has indeed been slower than we expected,” said Equinor spokesman Ola Morten Aanestad. “As the world’s energy system is slowly transitioning from oil and gas, we hope to advance Tanzania LNG – an attractive project in many respects – on time.”

Major gas discoveries in Tanzania and Mozambique within the last two decades set the region up as a potential hub for exports of LNG, a fuel that has newfound global importance since Russian gas exports to Europe largely halted. Yet both have faced years of delays. 

Tanzania has had multiple iterations of its project awaiting next steps amid long negotiations over the terms of contracts, land leases and security arrangements. In Mozambique, construction of TotalEnergies SE’s LNG facility remains on hold due to attacks near the site by Islamic State-linked fighters. 

Tanzania had expected to sign the documents last July, pending a final assurance process, with a potential investment decision targeted for 2025. Instead the government has stalled without any indication of what’s behind the delay, according to a person familiar with the talks, who asked not to be identified because of the sensitivity of the matter. There’s no sign of how to resolve the situation, the person said.

“The HGA is still under negotiation,” Tanzania’s Energy Minister Doto Biteko said in a reply to questions from Bloomberg. He declined to comment further. 

“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,” a Shell spokesperson said. 

It’s not the first time Equinor and Shell, who form a consortium for the project that includes Exxon Mobil Corp., called for Tanzania to act quickly on the project. They warned about the complexity and timeline required by mega projects in an article written by their respective country managers and published in a local newspaper in 2021, a month after Hassan was sworn in as the nation’s leader.

Completing Tanzania LNG would add at least $7 billion a year to the nation’s GDP, according to a study by Standard Bank Group Ltd. 

Talks on the host government agreement had effectively stopped before 2019 under former President John Magufuli, as private infrastructure projects stalled and the government clamped down on opposition leaders and the media. 

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