Tanzania has made substantial gas finds in recent years, but taking advantage of them will require major investment, and the size of the deposits suggests there will be a need to find export markets.

The National Gas Utilisation Master Plan – which was released by the Ministry of Energy in 2016 – demonstrated that more than 40trn of the 47trn cu feet in then-known offshore reserves were deepwater, making them difficult to access.

The cost of extraction suggests a large-scale, export-oriented project, in volumes sufficient to achieve economies of scale in capital expenditures such as building the offshore pipelines and liquefaction plant. The proposed solution is a $20bn-30bn two-train liquefied natural gas (LNG) export facility, involving a consortium of Royal Dutch Shell, Norway’s Statoil, ExxonMobil, UK-based Ophir Energy and Singapore’s Pavilion Energy.

The project – set to be built in Lindi, on the southern coast – would involve unprecedented capital expenditure for East Africa. The Bank of Tanzania has suggested that just starting construction work on the facility would boost GDP growth by two percentage points. Shortly after his election President John Magufuli made clear his wish to expedite the project, and in August 2016 the government announced that it had acquired 2000 ha of land for construction of the LNG plant. Tanzania has also worked to develop relationships with experts in Trinidad and Tobago, which exports large quantities of gas. A delegation recently visited that country to see what could be learned from its national gas company, services providers, academics and other experts.


However, the project is still very much in the early stages, and the process will be lengthy. There is extensive technical work to be done, as well as the resolution of investor-state negotiations on a range of issues, which is necessary to secure commercially competitive fiscal and legal terms. In August 2016 President Magufuli set up a team to negotiate a host government agreement. Øystein Michelsen, country manager at Statoil, told international media in late 2016 that a final investment decision could take at least five years to materialise. However, talks have been ongoing and in March 2017 a draft host government agreement was issued.

Global Outlook

Tanzanian LNG could hit markets in the mid- to late 2020s, which, based on current forecasts, provides an encouraging outlook for potential exports. Surplus global supply is expected to have diminished by this point.

Forecasts generally range from 2020 to 2025 for the point at which supply will not meet demand without new projects, though the current number of proposed projects is more than enough to meet global demand. Global liquefaction capacity in January 2017 totalled 339.7m tonnes per annum, with 114.6m tonnes per annum of additional capacity under construction. However, new proposal activity has lost momentum, given an anticipated supply glut and low oil prices, according to the International Gas Union’s “World LNG Report” published in April 2017.


Nonetheless, the plant will face competition. Tanzania’s southern neighbour, Mozambique, is currently developing a two-train LNG project in conjunction with US-based Anadarko and Italy’s Eni. Operations there are expected to commence in 2022 or 2023, with the resulting exports destined for Asia. Further afield, Australia plans to open six new LNG plants by 2020, also aimed at growing Asian demand, while in the US shale gas capacity is expected to continue rising.

“The Lindi project is a complex technical, commercial and project management challenge, and requires billions of dollars in investment,” Mark Fraser, president and managing director of ExxonMobil E&P Tanzania, told OBG. “However, it is surmountable with good stakeholder alignment and collaboration.”