Festive season only reason for delay in LNG talks, says Makamba

Dar es Salaam. The Minister for Energy, January Makamba, has explained the delay in concluding talks on the planned liquefied natural gas (LNG) plant, citing Christmas as the only major reason.

The talks between the government’s negotiation team and the multinationals Shell and Equinor and their partners were revived last year after stalling for some time.

The two sides have agreed on key issues, leading to the signing of initial Host Government Agreement (HGA), and were expected to conclude the discussions this month before moving on to other stages.

However, discussions for the project planned in Lindi Region have been pushed back to February, as the prospective investors were still finalising the draft agreement.

Mr Makamba told The Citizen that there is nothing to worry about the $30 billion project as the investors were only busy with Christmas and New Year celebrations before resuming the talks.

“We would have finished drafting the agreement but our partners are now taking leave during Christmas,” said Mr Makamba, adding that the drafting will resume in the first week of January.

Some of the issues in the draft agreement include consensus in some key definitions and the language to be used in the agreement, to avoid misunderstanding during the implementation stage.

Commenting on the talks in general, Mr Makamba said the negotiations have been complex and have taken more time.

“I was in Arusha for four days, and we were meeting from 7:00 in the morning to close to midnight,” he said.

In June this year, President Samia Suluhu Hassan witnessed the signing of the initial HGA, and directed the team to complete discussions on the remaining areas before the end of this month.

During the signing, the government’s negotiating team, Shell Tanzania vice president Jared Kuchel and Equinor vice president Unni Skordtad Fjoer, promised to conclude the discussions within the scheduled time frame.

The investing companies are optimistic about the project’s execution after the discussions conclude.

“From Equinor’s side, we are encouraged by the progress we have seen in the talks between the LNG investors and the government. While we are still working on finalising the agreement to progress our LNG project in Tanzania, we have now agreed on the key items and have entered the drafting stage,” reads a statement.

The government is currently using a collective bargaining system with investors. To date, the government in partnership with oil and gas companies have discovered a total of 57.54 trillion cubic feet (TCF) of natural gas in various blocks. This includes 10.41 TCF from onshore wells and 47.13 TCF discovered offshore.

Natural gas is currently used mainly for electricity generation, industrial and domestic activities as well as powering vehicles.

About 60 percent of the electricity consumed in Tanzania is generated using natural gas, with the rest coming from other sources such as hydropower plants, oil, solar and biomass.

The planned LNG plant in Lindi Region will facilitate the export of the natural gas to the world market as European countries look for sources that can be long-term replacements for energy supplies from Russia.

The accords to be signed after the current negotiations, include the final Host Government Agreement, which spells out terms of the project, the project law and the benefit-sharing agreement. A final investment decision could be reached in 2025, allowing exports to start before 2030.