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Tanzania Drafts $30B LNG Export Project Deal

Tanzania’s government has prepared a draft agreement with international oil companies willing to take part in a $30-billion LNG export project, and has sent the draft for ministerial review, local media reported on Wednesday, citing a senior official at the Ministry of Energy and Minerals.

The document—submitted to Energy and Minerals Minister Sospeter Muhongo—is a “draft document” seeking to establish a host government agreement, the first step to laying the terms for the foreign companies in building and running the project, James Mdole, Acting Permanent Secretary at the ministry, told Tanzania Daily News.

State-run Tanzania Petroleum Development Corporation (TPDC) is partnering with ExxonMobil, Statoil, Ophir, and Shell in developing an LNG project that would allow the country to export gas from its offshore resources.

We must beat Mozambique to secure markets in Japan and South Korea,” Minister Muhongo has said recently.

If Mozambique brings its LNG exports online faster than Tanzania, the export terminal planned to be built in Tanzania’s Lindi region could be worthless, according to the minister.

“Buyers would need to sign long-term contracts and this has a direct effect to the nation in case our competitor also targets the Asian market,” Muhongo said, as quoted by Tanzania Daily News.

Statoil and ExxonMobil have made significant gas discoveries in Tanzania over the past few years. These discoveries have proven a combined in-place volume of around 22 trillion cubic feet, Statoil says.

BG Group, now part of Royal Dutch Shell, in partnership with Ophir Energy and Pavilion Energy, has found 16 to 17 trillion cubic feet of gross recoverable gas resources.

Related: Oil Prices Edge Lower As Imports Keep Inventories Buoyed

Progress on the LNG project has stalled due to legal and regulatory uncertainty, obstacles in acquiring the land, and low LNG prices.

As of January 2017, Tanzania was hoping to reach an agreement with international oil companies in 2018.

“Discussions for a host government agreement started in September 2016 and we expect the negotiations to last for about one and a half years,” Kapuulya Musomba, acting managing director of TPDC, said in an interview with Reuters.

By Tsvetana Paraskova for Oilprice.com

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