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The future of LNG in Tanzania: A bright outlook?
What you need to know:
- The LNG project will provide Tanzania with a secure and reliable source of energy. This will help to reduce the country’s reliance on imported fuel and make it less vulnerable to energy price shocks. Tanzania currently imports over 90% of its fuel needs which makes the country vulnerable to energy price shocks and disruptions to the global fuel supply.
Tanzania is poised to become a major player in the global liquefied natural gas (LNG) market in the coming years. As of October 2023, the country has an estimated 57.5 trillion cubic feet of natural gas reserves, the 10th largest in the world majority of which is offshore, in the deep waters of the Indian Ocean.
The Tanzanian government has ambitious plans to develop its LNG sector. In July 2023, it signed a Host Government Agreement (HGA) with Shell and Equinor for the development of a multi-billion-dollar LNG project which is set to be the largest energy project in Southern and Eastern Africa. The project is expected to produce 15 million metric tons of LNG per year, with a large proportion targeting the export market and a percentage set aside to fulfil local demand.
The development of Tanzania’s LNG sector is expected to have a significant impact on the country’s economy with a capex spend recently estimated to be over $40 Billion. The project is expected to create over 13,000 jobs during construction, and over 5,000 permanent jobs during operation. It is also expected to generate billions of dollars in revenue for the government.
In addition to the economic benefits, the development of Tanzania’s LNG sector will also help to reduce the country’s reliance on imported fuel as its primary energy source. Tanzania currently relies on imports for its fuel needs; the LNG project will provide the country with a secure and reliable source of energy and will help to reduce its greenhouse gas emissions.
The country banks on the resources, the government support, and the international partners to develop a successful LNG sector. The development of this sector will have a significant positive impact on the country’s economy, its energy security, and its environment.
Some specific benefits that Tanzania can expect to reap from the development of its LNG sector include:
Economic growth
Together with the expected contribution of billions of dollars to Tanzania’s GDP and thousands of jobs, this project also has the potential to have a significant positive impact on forex liquidity in the country. The attracted foreign investment, increased export revenue, job creation and increased tax revenue will all ultimately increase the supply of foreign currency and improve liquidity.
The economic benefits of the LNG project are likely to be felt throughout the Tanzanian economy. The construction of the LNG plant will require a wide range of goods and services, which will boost demand for local businesses. The operation of the LNG plant will also create permanent jobs in a variety of industries, including engineering, operations, and maintenance.
In addition to the direct economic benefits, the LNG project is also expected to have a number of indirect benefits including improved infrastructure - roads, ports, and power grids. The project will also attract foreign investment and help to develop Tanzania’s financial sector.
Improved energy security
The LNG project will provide Tanzania with a secure and reliable source of energy. This will help to reduce the country’s reliance on imported fuel and make it less vulnerable to energy price shocks. Tanzania currently imports over 90% of its fuel needs which makes the country vulnerable to energy price shocks and disruptions to the global fuel supply.
The project will also help to reduce Tanzania’s carbon footprint and make the country more energy independent.
Environmental benefits
LNG is a cleaner-burning fuel than oil or coal. The development of Tanzania’s LNG sector will help to reduce the country’s greenhouse gas emissions and improve air quality.
This project will also help to protect Tanzania’s environment in other ways; For example, the project will require the development of a new pipeline network to transport natural gas from the offshore fields to the LNG plant. This pipeline network will be designed to minimize its impact on the environment.
There are some challenges that Tanzania will need to overcome in order to develop its LNG sector successfully. One challenge is the high cost of developing LNG infrastructure and availability of funding especially with competition from investment in renewables. Another challenge is the need to attract and retain skilled workers. However, the Tanzanian government has in numerous occasions affirmed its commitment to develop the LNG sector and has been working to address these challenges.
Overall, the development of this sector can have a significant positive impact on the country’s economy, its energy security, and its environment. Tanzania is potentially positioned to become a major player in the global LNG market in the coming years and the future of LNG in Tanzania can be bright if the challenges are addressed timely and appropriately.
