Dar es Salaam —
Fresh uncertainty has surfaced with regard to foreign investment in the
envisaged liquefied natural gas (LNG) plant project in Lindi Region.
However, reliable sources within the government maintain that plans for the...
project's implementation are on course.
Construction of the plant was expected to start in 2022, according to the ministry of Energy.
A September
briefing by the Natural Resources Governance Institute (NRGI) said the
government should not rush into a deal that would not benefit Tanzania.
According to the
briefing, an economic model of the project suggests a long-term LNG
price of $11 per metric million British thermal unit (mmBtu) is needed
for investors to earn the returns they usually require from LNG
projects.
Current forecasts by the IMF and World Bank are $7-8 per mmBtu.
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The briefing by
analysts Thomas Scurfield and David Manley of NRGI said the chances of
investment will shrink further if - during the ongoing negotiations of
the project's regulatory terms - the government increases taxes, and
requires companies to share a greater portion of the gas with Tanzania's
home market.
"Government
officials could wait and hope that conditions improve, but this would
delay the point at which the country would start generating benefits
from the project," said the briefing.
"If officials want
to accelerate development - and without harming long-term gains for the
country - they could adopt a more progressive tax regime, avoid raising
the share of gas to be sold in the home market, and establish a legal
framework that both company managers and future generations of
Tanzanians will trust."
The briefing also
said that the new laws passed in 2017 provide for contracts to be
frequently renegotiated, prohibit international arbitration to resolve
disputes.
However, the
briefing noted that the forecasts are not always correct, and companies
might find more efficient ways to develop the gas, so we do not rule out
investment altogether.
Responding to the
briefing, Tanzania Petroleum Development Corporation (TPDC) director
general James Mataragio told The Citizen that companies have their own
price range - and that the project would not be affected adversely if
there were a drop.
"Gas prices are always changing, and the construction of an LNG plant does not consider the changing of prices," he said.
Equinor Press
spokesperson Erik Haaland told The Citizen that an LNG development is a
large project that requires huge upfront investments.
"We don't want to speculate on the outcome of pending discussions," he said in an email response.
Mr Haaland said to
ensure that all parties benefit from such a project, stable and
predictable framework conditions for the more than 30-year lifetime of
the plant is essential.
"We trust that the government of Tanzania has a long-term view on this major industrial investment."
Mr Haaland said
that, through the Host Government Agreement negotiations with the
Tanzania government, Equinor assumed that key terms for the project
would be agreed.
He noted that the
Block 2 operator, Equinor and its partner ExxonMobil, have been in
dialogue with the Government Negotiation team (GNT) with the purpose of
creating a common understanding for developing the Tanzania LNG project.
Negotiation of
regulatory terms for the project centres on the existing production
sharing agreements (PSAs) for the offshore exploration blocks and a
planned host government agreement (HGA) for the LNG plant.
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