Africa Oil & Gas: Tanzania to finalise land acquisition for LNG project

Offshore part of the Tanzania LNG project

Offshore part of the Tanzania LNG project

Tanzania plans to spend 12 billion shillings ($6 million) in the next fiscal year to buy land for the planned construction of a liquefied natural gas (LNG) terminal, raising hopes it is speeding up progress of the long-delayed project. The two-train onshore LNG export terminal, which the government says could cost up to $30 billion, has run into delays mainly due to complex land acquisition procedures and an uncertain legal and regulatory framework.

Along with neighbouring Mozambique, Tanzania is in a race with Russia, Australia, the United States and Canada to build LNG export plants, aiming to exploit a gap in global supply that is expected to open up by 2020.

‘The government has set aside 12 billion shillings in 2015/16 for assessment and compensation of 450 people … where the (LNG) terminal will be built,’ the government’s planning commission said in a report seen by Reuters on Saturday. The 2015/2016 fiscal year starts on July 1, 2015.

The terminal would be built in the small southern town of Lindi, located close to an offshore deep-sea region where huge natural gas discoveries have been made.

Tanzania is estimated to have more than 53.2 trillion cubic feet (tcf) of gas reserves off its southern coast, but its energy sector has long been dogged by allegations of graft and other problems. Tanzania’s parliament last year accused senior government officials of fraudulently authorising the transfer of at least $122 million of public funds to a private energy company. Three cabinet officials, including the energy minister, lost their jobs.Analysts said the graft accusations, coupled with delays in passing new gas legislation, are holding back the development of the sector.

British gas company BG Group, together with partners Statoil, Exxon Mobil and Ophir Energy, plans to build an LNG export terminal, expected to start operating in the early 2020s, but a final investment decision is only set for 2016. Royal Dutch Shell agreed to buy BG Group last month for $70 billion in the first large oil merger in more than a decade, giving the Anglo-Dutch company access to BG’s multi-billion dollar projects in Tanzania.

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