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Why final LNG negotiations have yet to be concluded
What you need to know:
- Negotiations on the Host Government Agreement (HGA) for the proposed liquefied natural gas project in Lindi Region were not finalised in February as planned because the government and international energy companies could not agree on a number of issues
Dar es Salaam. Negotiations on the Host Government Agreement (HGA) for the proposed liquefied natural gas project in Lindi Region were not finalised in February as planned because the government and international energy companies could not agree on a number of issues.
A source privy to the matter told The Citizen that the government was considering a request by the companies that the venue for negotiations be shifted from Tanzania to outside the country, among other issues.
The source, who asked not to be identified due to the sensitivity of the matter, said the government was also weighing a proposal by the companies that proceeds from the planned $42 billion project be banked in foreign financial institutions.
“Apart from requesting withholding tax exemptions, the firms are also proposing that foreign insurance companies be involved in the deal.”
The companies, the source added, had also proposed that they be compensated by the government in case natural gas prices drop in the international market in the future.
The new development comes barely a year since the government, on one side, and Shell and Equinor, on the other, concluded talks on a number of HGA areas, including a production-sharing agreement and regulatory framework provisions for the development of an LNG complex to process part of Tanzania’s proven natural gas reserves totalling 57.54 trillion cubic feet.
The legal reviews and quality assurance part of the deal was, however, expected to be finalised later and government officials were quoted saying negotiations would have been wrapped up by the end of February 2024 and the draft HGA submitted to the Attorney General for vetting and onward to the Cabinet for approval.
Contacted for comment, Deputy Prime Minister and Energy minister Doto Biteko said negotiations were still going on.
“We are still negotiating to find common ground,” he said.
Energy permanent secretary Felchesmi Mramba also said negotiations were still in progress.
“When they finalise the negotiations, they will report to us and we will take the matter forward,” he said.
The head of the Government Negotiation Team (GNT) on the matter, who is also the managing director of the Petroleum Upstream Regulatory Authority (Pura), Mr Charles Sangweni, confirmed that the talks were still on.
Meanwhile, Ms Genevieve Kasanga of Equinor Tanzania said Equinor and Shell, on behalf of the Tanzania LNG partners, initiated agreements with the Tanzanian government in May 2023.
However, since then, progress has been slower than expected.
“As the world’s energy system is slowly transitioning from oil and gas, we hope to advance Tanzania’s LNG on time...it’s an attractive project in many respects,” she said.
Ms Kasanga added that President Samia Suluhu Hassan’s recent visit to Norway was a positive development and the companies were encouraged by her public statements during her tour.
“We remain committed to concluding the next step by signing and implementing the agreements soon.
“Today, we regard Tanzania’s LNG as an investable and low-carbon project. If realised, the project has the potential to transform Tanzania’s economy, benefiting the country with revenue, jobs and domestic natural gas. It will also position Tanzania as a key supplier of low-carbon LNG on the global stage,” Ms Kasanga said.
She, however, declined reveal what was delaying the process.
Speaking on Tuesday during a function to swear in the new Energy deputy permanent secretary, President Hassan said some countries had shown interest in working with Tanzania in natural gas projects.
She added that it was important for Tanzania to examine the laws and guidelines meant to facilitate private sector involvement and amend them where necessary.
In June 2022, President Hassan witnessed the signing of the preliminary agreement for the HGA of the LNG project between the government and Shell and Equinor.
President Hassan described the project as strategic and special as it would bring capital into the country and increase government revenue.
“My hope is that national interests will continue to be safeguarded in the next stages of negotiations. It is also important to note that this is give-and-take, so both sides should be flexible so as at to attain the intended goal,” she said.
The Head of State added that although the LNG plan was a national project, it should first benefit the residents of Lindi and Mtwara regions, as well as build Tanzanians’ capacity to participate fully in the project.
“The process of discussion, preparation and implementation of the project must lead to building the capacity of Tanzanians in this sector. Our mission is to ensure that future generations are able to exploit the country’s natural resources prudently and beneficially,” President Hassan said.
