Equinor, Shell (SHEL.L) and Exxon Mobil have agreed a deal with the government of Tanzania for the development of a liquefied natural gas (LNG) export terminal in the East African country, the two sides said on Friday.
The agreement is a milestone for the long-delayed project to unlock Tanzania’s vast but remote offshore gas resources, which the companies involved have said is expected to cost tens of billions of dollars.
Friday’s deal includes the main elements of a host government agreement to provide a regulatory framework and a production sharing agreement, and is subject to legal reviews and quality assurance before an expected signing in the coming weeks, Norway’s Equinor said.
“It paves the way for the series of milestones that need to follow to realise this fantastic LNG opportunity for the country and the world,” Equinor’s Tanzania country manager Unni Fjaer said in a statement.
The deal also involves land use and security, Tanzania’s chief negotiator Charles Sangweni said.
“We are happy it is a big step towards the implementation of the project although we have a lot to do. If everything goes well as planned, I am confident that the final investment decision will be reached in 2025,” Sangweni told Reuters.
The next steps involve a period of detailed engineering design work, Shell’s Tanzania Chair Jared Kuehl said in a separate statement posted on Linkedin.
Equinor and Shell are joint operators of the development while Exxon, Pavilion Energy, Medco Energi and Tanzania’s national oil company TPDC are partners.
Tanzania said in 2014 that the project could cost $30 billion to develop, but analysts have said cost inflation in recent years could add billions more to the investment.
Shell operates Tanzania’s Block 1 and Block 4, which hold 16 trillion cubic feet in estimated recoverable gas.
Norwegian oil and gas producer Equinor operates Block 2, in which ExxonMobil (XOM.N) holds a stake and which is estimated to hold more than 20 trillion cubic feet of gas.