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Tanzania Makes Progress With A Potential $30 Billion LNG Project

The government of Tanzania has completed talks with supermajors Shell and Equinor for the potential construction of a $30-billion LNG export facility which will use the country’s huge offshore natural gas resources.  

Discussions are completed and now the experts are about to begin drafting contracts, the energy ministry of Tanzania said on Twitter.

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’s Energy Minister January Makamba said. 

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 so far, but the progress with the talks gives hope to Tanzania and the majors that they could start monetizing the huge offshore gas resources in the late 2020s or early 2030s.

Tanzania’s government is looking to reach a final investment decision for the LNG facility in 2025.

Africa could become the key to helping Europe with gas supply now that Russia is no longer a wanted source of energy for the West, analysts and industry executives say.

At the end of last year, Italy’s Eni announced the first shipment of LNG produced from the Coral gas field in the ultra-deep waters of the Rovuma Basin offshore Mozambique, Tanzania’s neighbor to the south.

Meanwhile, Shell, the world’s largest LNG trader, issued last month a bullish outlook on the LNG market through 2040. LNG could become a core energy supply for Europe to meet energy security needs, while China could increasingly provide more flexibility to the global LNG market, the supermajor said.

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By Tsvetana Paraskova for Oilprice.com

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