Tanzania’s ambitious Liquefied Natural Gas (LNG) project has witnessed a substantial cost increase, soaring to $42 billion, surpassing initial estimates. This makes it the largest energy undertaking in eastern and southern Africa. Spearheaded by lead partners Shell and Equinor, the project aims to tap into Tanzania’s abundant gas reserves of 57.54 trillion cubic feet by 2028, positioning the nation as a regional LNG powerhouse. Despite the escalated costs and extended timeline, neighboring countries like Uganda and Kenya have already committed to purchasing Tanzania’s LNG, showcasing the potential for regional energy cooperation and the utilization of clean energy resources.
The Tanzanian government has been diligently preparing to sign the host government agreement, marking a significant milestone for what is set to become the most colossal energy project in eastern and southern Africa. The current estimate for developing the LNG project stands at $42 billion, following the latest technical analysis, superseding the initial projected cost of $30 billion. Industry sources, however, suggest the figure could reach $40 billion, highlighting the magnitude of the project.
Felchesmi Jossen Mramb, Tanzania’s Permanent Secretary in the Ministry of Energy, confirmed the ongoing analytical work, stating, “There is a lot of analysis ongoing. The recent technical analysis shows that offshore drilling and piping will push the project to $42 billion.”
During a recent event, held on the sidelines of the 10th East African Petroleum Conference and Exhibition in Kampala, Tanzania pitched an additional 26 exploration areas for hydrocarbon resources. These areas, both onshore and offshore, will be open for exploration by the end of the year, marking the nation’s first licensing round since 2013. This move exemplifies Tanzania’s determination to discover more hydrocarbons and further boost its energy sector.
Tanzania intends to capitalize on its vast gas reserves of 57.54 trillion cubic feet, with participation from the Tanzania Petroleum Development Corporation (TPDC) and international oil companies Shell and Equinor as the project’s lead partners. This concerted effort positions Tanzania as the dominant LNG producer in the region.
In March, Energy Minister January Makamba announced that negotiations for the project had concluded, and contracts, including a Host Government Agreement (HGA) and one regarding the linking of Blocks 1, 2, and 4, were underway. Shell operates Blocks 1 and 4, while Block 2 is managed by the Norwegian company Equinor.
Once the HGA is signed, the project will progress to the pre-front end engineering design (FEED) feasibility studies, which are expected to span two years, according to Shigela Malosha, the director of contracting and licensing at the Petroleum Upstream Regulatory Authority. Subsequently, the FEED stage will commence, lasting an additional three years. However, Mr. Malosha cautions that the final investment decision for the project is now anticipated in 2028 instead of the previously projected 2025. Construction is estimated to take three and a half to five years, depending on the technology employed.
Tanzania’s neighboring countries, Uganda and Kenya, have already signed memoranda of understanding with Tanzania to secure the purchase of its LNG. Early planning is underway to develop the necessary infrastructure for the transportation of LNG. This signifies a notable step toward regional energy cooperation and underscores the potential for each country to leverage their clean energy resources.