DODOMA — Tanzania’s proposed US$42 billion liquefied natural gas (LNG) project is approaching a critical stage in negotiations, with final legal agreements and government approvals still needed before investors can make a final decision on construction.
Finance Minister Khamis Mussa Omar said on October 13 that agreements for the project were nearing completion, with the government expecting to finalise arrangements in the coming months. The development, led by Norway’s Equinor and the UK’s Shell, is expected to unlock an estimated 47.13 trillion cubic feet of natural gas reserves.
Other partners include ExxonMobil, Pavilion Energy, Medco Energi and the state-owned Tanzania Petroleum Development Corporation (TPDC). The project is planned for the Lindi region, where offshore gas resources would be processed into LNG for international markets.
Although commercial and fiscal negotiations have progressed, completing the remaining legal framework is essential. The outstanding arrangements must establish the terms governing the relationship between the government and investors, including the project’s implementation and regulatory requirements.
The government and investors signed a framework Host Government Agreement in 2022, but the project has faced years of negotiations over commercial terms, taxation and revenue-sharing arrangements. Earlier expectations that the agreement would be signed before June 2026 were not met.
The next major milestone is therefore not simply the announcement of an agreement, but completion of the necessary legal processes and a final investment decision by the project partners. Until that decision is made, construction should not be treated as confirmed.
For Tanzania, the project’s potential economic impact extends beyond natural gas exports. Development could create opportunities for engineering firms, construction contractors, transport providers, equipment suppliers and other businesses capable of serving a large-scale energy project.
However, the extent of local participation will depend on procurement arrangements, the availability of qualified domestic suppliers and the skills required during construction and operations. Clear requirements for local participation could help Tanzanian businesses compete for contracts rather than leave most opportunities to international suppliers.
The project is also expected to allocate part of its LNG production to the domestic market, although the precise scale and commercial arrangements will be important in determining its contribution to local energy supply.
The development comes as Tanzania seeks to expand its energy capacity and attract investment to support industrialisation. The government has separately set a target of increasing electricity generation capacity to 8,000 megawatts by 2030.
For the LNG project to move from negotiations to implementation, attention will now turn to the completion of legal agreements, government approvals, financing arrangements and the investors’ final commitment. These steps will determine when construction can begin and when the country may start realising the project’s wider economic benefits.
