Plans
to build Tanzania's giant liquefied natural gas plant are now hanging
in the balance as neighbours Mozambique steal a march in the race to
become the region�s first gas exporter
Tanzania Petroleum Development Corporation (TPDC) director general Dr James Mataragio
MOZAMBIQUE’s commissioning of an Italian company to start building a planned liquefied natural gas (LNG) plant in that country has put neighbors Tanzania at a considerable disadvantage in the race to construct the first gas exporting facility in this part of Africa.
The Mozambican government this week granted its approval to the
Italian energy firm Eni to go ahead with the project, with Eni - which
aims to sell the gas produced by the plant to British oil company BP -
expected to make its final investment decision (FID) later this year.
In contrast, Tanzania was initially expected to make a final
investment decision regarding its own planned LNG plant this year, but
this has been delayed for at least another four years due to red tape
and regulatory uncertainties.
The two neighbouring countries have been striving to be first to
export gas from East Africa, with returns on their respective
investments expected to foot the hefty upfront costs depending on how
much gas the plants can produce and how fast they can find reliable
buyers in an increasingly competitive market.
Liquefied natural gas prices are around a quarter of what they were
two years ago with waves of new supply overcoming demand growth and
depressing the international market. The United States is expected to
also start exporting the gas shortly, saturating the market even more.
As the LNG prices have continued to plummet alongside oil prices,
many companies have been prompted to delay investment funding decisions
until the landscape starts looking brighter again business-wise.
According to Eni chief executive officer Claudio Descalzi, the
Mozambique approval was a historical milestone for the development of
the company's initial 2010 discovery of 85 trillion cubic feet (tcf) of
gas in Mozambique’s Rovuma Basin.
"It is a fundamental step to progress toward the final investment
decision of our project which envisages the installation of the first
newly built LNG facility in Africa and one of the first in the world,"
Descalzi said.
The gas discoveries by Eni and the US-based Anadarko Petroleum
company in the Rovuma Basin were estimated collectively to be at least 3
times bigger than Tanzania's deposits, with industry analysts saying
they had the potential to transform Mozambique into a key global
supplier of the gas.
Eni's plans include drilling six subsea wells and installing a
floating LNG facility with a capacity of around 3.4 million tonnes per
year. The Italian company said it was moving ahead in Mozambique despite
the added challenge of using a relatively untested technology to ship
the gas.
In the meantime, Tanzania’s final investment decision on its own
LNG plant project is now not expected to be made before 2020, with its
first phase construction estimated to be completed by 2024, according to
Tanzania Petroleum Development Corporation (TPDC) director general Dr
James Mataragio.
“There are several stages to go through before the FID is made
after acquiring the land for the site and compensating the affected
villagers,” Dr Mataragio told The Guardian's Smart Money business
pullout last week.
“There will be 18 months for negotiations for the host government
agreement (HGA), which is a contract for fiscal issues such as how much
the government will be getting from the processing of the gas,” he
added.
The land controversy has been the major stumbling block in the
development of the LNG plant in Tanzania with some quarters in the
sector saying the government indecision had much to do with election
politics.
According to the project blueprint, the plant will be located at
Machenga Bay in Lindi region, which is close to large offshore gas
finds, and will be used to export the fuel mostly to lucrative Asian
markets.
The country this week raised its own estimate of recoverable
natural gas reserves to 57 tcf following new onshore discovery deposits
near the city of Dar es Salaam. But there are concerns that the
developments in Mozambique may hamper the country further in trying to
develop its own huge LNG potential.
According to industry experts, oil prices - which influence the
price of gas - will have to be around $80 or above per barrel for this
planned LNG terminal to be economically viable and make commercial
sense.
SOURCE:
THE GUARDIAN
