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Tanzania to resume oil, gas negotiations after a yearlong stall

The Tanzania Petroleum Development Corporation (TPDC) is optimistic that Host Government Agreement (HGA) negotiations between the government and International Oil and Gas Companies (IOCs) on the Liquefied natural gas (LNG) are set to resume in January 2021.

This is after they stalled for about a year following the government’s decision to review Production Sharing Agreements (PSAs), which according to reports, Tanzania is seeking to scrap sections on the contract that seem tilted against it.

The government and project developers were initially expected to have concluded the negotiations September 2019, a key decision that could pave the way to the final investment decision to be made.

However, when contacted TPDC Communications manager Marie Msellemu told The Citizen that they were currently finalizing compensation for the land in Lindi for the LNG site including relocation.

“We accumulated interest for two years that we hope to finalize payment by end of this December,” she said. Though she declined to mention the amount.

Explaining further, she said once the payment was completed they would resume negotiations. This is while they would be awaiting final decision of the PSAs.

“We expect to finalize HGA negotiations on the East African Crude oil Pipeline (EACOP) this December and start negotiations on LNG in January, 2021.

The HGA negotiations have been on and off, after they initially stopped in 2017 due to technicalities and resumed in 2018 only to stall again.

Also read: Tanzania secures grant to finance power interconnection project with Zambia

Initially in 2017, they stopped because the IOCs could not agree on modalities together and therefore negotiations had to be stopped until it was agreed that they undertake it separately.

However, the negotiations resumed in April, 2018 but encountered a hitch after the PSA’s were taken to Attorney General (AG) for review.

Earlier, TPDC had been optimistic that the negotiations would be completed by September 2019 and they would move to another level known as the Preparation for Front End Engineering Design (pre-FEED).

They had explained that the HGA key terms negotiations were running on schedule and hoped to wrap up as planned and that the next stage would be the pre-FEED (Preparation for Front End Engineering Design).

According to TPDC the pre- FEED is actually the design of the project including all matters that would be involved in the construction of the LNG project.

Meanwhile, partners in the project include Shell Tanzania together with its partners Ophir Energy and Pavilion Energy. Others include Equinor, Block 2 operator together with partner ExxonMobil.

While Tanzania’s LNG project is being delayed, its southern neighbour, Mozambique, is progressing with development.

Total Oil reached a US$20B Final Investment Decision in 2019 and was working out to deliver LNG in 2024.

Total’s project is one of several projects being developed in the country’s northernmost province of Cabo Delgado after one of the biggest gas finds in a decade off its coast. Together, the projects are worth some US$60B.

Rival Exxon Mobil delayed the final investment decision on its nearby Rovuma LNG gas project due to the coronavirus pandemic, and Mozambique expects the decision next year.

With 150 trillion cubic feet (TCF) of liquefied natural gas (LNG) reserves, equivalent to 24 billion barrels of oil, Mozambique is positioning itself as the world’s next big global energy player.

With about 57.7tcf of natural gas reserves, Tanzania also offers endless opportunities for investors in the oil and natural gas sectors.

Source: The Citizen

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