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Progress Stalls On Shell-Equinor $42-Billion LNG Project in Tanzania

Shell and Equinor are still expecting the signing of all agreements which would allow them to start developing a planned $42-billion LNG export project in Tanzania, the international majors have told Bloomberg.

The LNG project for connecting offshore natural gas discoveries offshore Tanzania with an export terminal on its coast has been nearly a decade in the making.  

After buying BG Group in 2016, Shell became the operator of two offshore blocks in Tanzania, Block 1 and Block 4, together with its partners Medco Energi (Ophir Energy) and Pavilion Energy. A total of 16 trillion cubic feet (Tcf) of natural gas have been discovered in the blocks.

Equinor, for its part, started exploration drilling activities in Block 2 offshore Tanzania in 2011 and has made nine discoveries with estimated volumes of more than 20 Tcf of gas in place.

Regulatory hurdles have weighed on the LNG plans, but progress was made in early 2023 and the majors felt they could start monetizing the huge offshore gas resources in the late 2020s or early 2030s.

Discussions with Shell and Equinor were completed and the experts were about to begin drafting contracts, the energy ministry of Tanzania said in March last year.

One contract is being drafted for the Host Government Agreement, and another is for blocks 1, 2, and 4, which will provide natural gas for the LNG project, Tanzania said at the time.

However, since May 2023, “progress has indeed been slower than we expected,” Equinor spokesperson Ola Morten Aanestad told Bloomberg this week.

“As the world’s energy system is slowly transitioning from oil and gas, we hope to advance Tanzania LNG – an attractive project in many respects – on time.” A spokesperson for Shell told Bloomberg that “We had hoped to see these agreements signed faster, but we remain ready to continue to work with the government on competitive and investable agreements, consistent with what we agreed last year.”  

Tanzania’s Energy Minister Doto Biteko, told Bloomberg the host government agreement “is still under negotiation,” declining to discuss details.

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By Charles Kennedy for Oilprice.com

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