TANZANIA: The Signing of Initial LNG Framework Agreement will Open African Gas Markets
Tanzania has made history with the signing of the initial Host Government Agreement (HGA) for the country’s $30 billion liquefied natural gas (LNG) project. The agreement, which defines the fiscal, legal and commercial terms for the onshore components of the project, kickstarts negotiations for the development that will see Tanzania unlock its over 57 trillion cubic feet of gas reserves. The African Energy Chamber (AEC) commends this achievement, recognizing it as a significant step towards establishing a strong African gas market on the back of large-scale LNG projects.
In the presence of H.E. Samia Suluhu Hassan, President of the Republic of Tanzania, the government – represented by H.E. January Makamba, Minister of Energy, Tanzania – and a consortium comprising global energy majors Shell, ExxonMobil, Equinor and Ophir Energy signed the framework agreement, kicking off negotiations for the $30 billion LNG project. With a final investment decision (FID) expected by 2025, the HGA will see the commencement of Front-End Engineering and Design for the project, which, following FID, would see development officially start.
“Although Tanzania has several strategic projects such as the Julius Nyerere Hydropower Station and the Standard Gauge Railway…. LNG is very unique as it brings both capital and revenue,” stated President Hassan at the signing ceremony, adding that, “When completed, the project will change the country’s economic outlook, unlock the economic growth and capture benefits from LNG exporting to the global market. Therefore, I long to see phase two of the negotiations being timely wrapped up so that we pave the way for the projects’ implementation as planned later in 2025.”
Following the discovery of sizeable offshore gas reserves in 2010 and the consortium proposing an onshore liquefaction project in 2014, progress has been slow regarding project takeoff. Now, with the inauguration of H.E. President Hassan, who has placed the project as a top priority, efforts to fast-track development have already been seen. With the signing of the HGA, the government expects project operations to commence by 2029-2030, positioning the country as a global LNG exporter and highly competitive African gas economy.
“The signing of the $30 billion initial LNG HGA by H.E. Samia Suluhu Hassan is a big win not only for Tanzania but for Africa at large. The Chamber both welcomes this historic development and encourages other African countries rich with natural gas to follow suite. The signing represents the same push but with a reformist mindset President and should be commended. When we open up Africa and create enabling environments for investment, capital will flow in, and this deal is an example of that. At African Energy Week (AEW) 2022, we expect further discussions on this as well as regarding other projects. This deal will open up African gas markets,” states NJ Ayuk, Executive Chairman of the AEC.
The signing of the HGA comes a few months before the second edition of the continent’s premier event for the oil and gas sector, AEW 2022, takes place. Representing the official platform for the discussion on Africa gas and upcoming LNG projects, African energy ministers, international oil company heads and investors from the regional and global energy space will convene in Cape Town to discuss the future of the African energy sector. Tanzania’s $30 billion project represents one of the biggest in Africa and will be featured alongside other large-scale developments including Senegal and Mauritania’s Greater Tortue Ahmeyim project, Mozambique’s multi-LNG developments and Equatorial Guinea’s Gas Mega Hub. In addition to discussions, the event serves as the official platform where deals will be signed that will transform the African energy landscape. As stakeholders celebrate this achievements ushered in by the new Tanzanian government, other African players can look forward to agreements such as this being signed at AEW later on this year.