LNG can boost Tanzania's GDP by over Sh16 trillion a year

 

By The Citizen Reporter

Media/news company

Mwananchi Communication Limmited

Dar es Salaam. A new report has shown that the Liquefied Natural Gas (LNG) project can potentially raise Tanzania’s Gross Domestic Product (GDP) by over $7 billion (Sh16 trillion) per annum and earn the

government $2 billion (Sh4.6 trillion) in revenue.
The staggering figure in GDP contribution was revealed in an independent microeconomic study by Stanbic Bank Tanzania, which is a subsidiary of Standard Bank Group. It comes at a time when the government (on one hand) and Shell and Equinor (on the other) have already signed the preliminary Host Government Agreement (HGA) for the $30 billion LNG project.
According to Energy minister January Makamba, who was present at the report launch in Dar es Salaam yesterday, the government is set to finalise the remaining issues and sign a complete HGA with the investors before the end of this year.
During the signing of the preliminary HGA in June this year, President Samia Suluhu Hassan directed her lieutenants to expedite the process so investors could proceed with project designs and, ultimately, with the final investment decision to start production.
“It is believed that, upon completion, Tanzania LNG will be the largest energy project in Africa’s history in terms of capital investment. It would increase Tanzania’s GDP by $7 billion per annum..,” Stanbic Bank Tanzania said in a statement yesterday. Tanzania’s GDP in 2020 was quoted at $62 billion, according to the World Bank.
The magnitude of the economic impact is correlated with the expected future price of LNG.
“The Bank has therefore modelled for different future price scenarios, starting with $5.50 MMBTU as a baseline and rising to $12.00 MMBTU as an upside case,” the report reads in part, noting that it would result in a GDP increase of between $7 billion to $15 billion per year.
“It represents a transformational economic impact; between 270,000 and 600,000 direct and indirect employment opportunities during the lifespan of the project; between $2 billion to $6 billion in fiscal contributions to the government of Tanzania per year; and between $3 billion to $8 billion per annum in balance of payments contributions,” the statement reads.
In his remarks, Mr Makamba said the report insights were critical in providing an overall understanding of the macroeconomic impact of the project. He also affirmed the government’s commitment to finalizing the project and tapping into the wider opportunities provided by alternative energy sources.
“We will be unapologetic in the extraction and consumption of gas energy that exists in our country,” said Mr Makamba, adding, “In Africa, if we are to extract all gas resources, we will contribute by cutting 3 to 3.5 percent of global gas emissions. Tanzania is building a robust gas economy, and not just limited to liquefied.”
The Stanbic Bank Tanzania chief executive officer Kevin Wingfield said the insights come at a time when Tanzania envisaged becoming an industrialised nation.
“No doubt, through the effective implementation of the LNG project, we can boost industrialisation and promote the country’s economic diversification. Our analysis shows that the project’s impact on the economy could be transformational,” he said.
 For his part, the head of Corporate and Investment Banking at Stanbic Bank, Mr Manzi Rwegasira, said the LNG project would not just lift the economic prospects of the country but it would go a long way in helping Tanzania with its energy transition to cleaner energy sources while simultaneously achieving its goal of industrialisation.
The report, which was developed by the Bank with support and inputs from Conningarth Economists and Tanzania’s Research on Poverty Alleviation (Repoa), is the first independent study that looks at the macroeconomic benefits of the LNG project to Tanzania.