Tanzania LNG Project Set for Step Forward

By MarEx 2013-11-25 14:41:00

Tanzania's hopes of becoming a major gas exporter are set for a boost on Monday when oil companies and government officials meet to review a proposed site for a gas liquefaction plant, according to two energy sources.

According to one source in Tanzania, BG Group, Ophir Energy, Statoil and Exxon Mobil have submitted proposals to locate a gas plant in the southern region of Lindi. A second source confirmed that a meeting in Dar es Salaam would review the proposal. Both have close knowledge of the project.

Tanzania and its east African coastal neighbour Mozambique have joined Russia, Australia and Canada in the race to exploit a gap in global supply for liquefied natural gas (LNG) that is expected to open up by 2020.

Australia is already set to be a big exporter by then. But since the arrival of the United States in the race with its supplies of shale gas, project planners elsewhere have begun to hesitate.

No new LNG project has won a final investment decision (FID) anywhere in the world outside the United States for almost two years, making the choice of the site and Monday's meeting an important set of signals of confidence in Tanzania's project, even though the FID for it is not due until 2016.

The government is expected to make a decision on the site by the end of the year.

"BG Group and other oil majors have submitted a proposal to the ministry of energy and minerals for the construction of a joint LNG terminal in Lindi region, which is expected to cost around $15 billion," the Tanzanian energy source told Reuters.

Lindi is the second most southerly region in coastal Tanzania after Mtwara, which borders Mozambique. Its main coastal town, also called Lindi, has a population of 860,000 and lies about some 450 km (280 miles) south of the commercial capital, Dar es Salaam.


The choice of Lindi for the plant could cause some controversy in Mtwara, which has been the supply base for offshore exploration.

Earlier this year violent protests took place as Mtwaran residents opposed the construction of another project - a pipeline that will carry gas north to the capital. The residents want a bigger share of the benefits from the industry.

A spokesman for BG, operator of three offshore blocks with its partner Ophir, declined to comment on the proposed location or to offer other details, although the company said last month it had offered site proposals for the government's consideration.

A senior Tanzanian energy ministry official had no immediate comment on the issue.

Statoil, which operates a single neighbouring block with partner Exxon, said earlier this year it was moving ahead with a site proposal. On Nov. 1, it moved high-profile executive Oeystein Michelsen from his job as head of development and production in Norway into the role of Tanzania country manager.

BG Group has said the proposed plant would have several LNG processing units, known as trains, with total capacity of 10 million tonnes a year and 2020 expected to be the earliest date for starting production.

BG Group has said it has gross resources in its interests - covering Blocks 1, 3 and 4 - of about 13 trillion cubic feet of gas. Statoil has said its field may contain a similar amount or possibly more.

Copyright Reuters 2013.