Tanzania says the cost of developing its liquefied natural gas (LNG) project is $42 billion after the recent technical analysis, as the country eyes next month to sign the host government agreement and embark on the front-end engineering design of what will become the largest energy project in eastern and southern Africa.
Initially, the project located offshore, had been estimated to cost about $30 billion, but some recent industry reports have quoted it at $40 billion.
“There is a lot of analysis ongoing. The recent technical analysis shows that offshore drilling and piping will push the project to $42 billion,” Tanzania’s Permanent Secretary in the Ministry of Energy Felchesmi Jossen Mramba told The EastAfrican.
He was speaking in Kampala, on the side-lines of the 10th East African Petroleum Conference and Exhibition where Tanzania pitched a further 26 exploration areas both onshore and offshore, which will be up for grabs by year-end, in the country’s first licensing round since 2013, to find more hydrocarbons.
Tanzania targets 2028 for the final investment decision that will make it the region’s LNG giant, when it develops its 57.54 trillion cubic feet of gas so far discovered, with international oil companies Shell Plc and Norway’s Equinor ASA as the lead partners and the participating interest from the Tanzania Petroleum Development Corporation (TPDC).
Full steam ahead
In March, Energy Minister January Makamba said they had concluded negotiation on the project, and proceeding to draft contracts, which included a Host Government Agreement (HGA) and another on joining of Blocks 1, 2, and 4. Shell operates Blocks 1 and 4, while Norwegian firm Equinor operates Block 2.
Shigela Malosha, the director of contracting and licensing at the Petroleum Upstream Regulatory Authority explains that after signing the HGA, the project will embark on the pre-front end engineering design (FEED) feasibility studies which will take two years. This will lead to the FEED, expected to take another three years.
Malosha cautions that final investment decision for the project is envisaged in 2028 and not 2025 as previously projected, with construction expected to last three and-a-half to five years – depending on the technology used.
“Uganda and Kenya have each signed a memorandum of understanding with Tanzania to buy its LNG, with the requisite infrastructure to transport the product in early planning phase,” Mr Mramba told the EAPCE delegates.
Kenya Cabinet Secretary for Energy Davis Chirchir argues the regional plan for energy should provide locked-in agreements that enable countries to ride on the strength of the neighbours’ clean energy projects like Tanzania’s natural gas, Uganda’s hydropower and Kenya’s geothermal resources.
Tanzania has a planned 810 km of natural gas network planned for construction. The country has 2,000 households already connected to natural gas infrastructure, while 62 percent of its 1100MW electricity installed capacity is generated from natural gas from onshore sources developed at Songo Songo and Mnazi Bay power projects.
Of its 57.54 trillion cubic feet of natural gas reserves, only 650 million standard cubic feet per day is being produced.
Source: The East African