Tanzanian LNG Project Delayed as Government Seeks to Change Terms

Negotiations for the development of Tanzania's $42 billion liquefied natural gas export plant have been delayed by proposed government changes to a financial agreement reached last year, a government spokesperson and two company sources said.

The government and investors announced last May they had completed negotiations on the long-delayed project to unlock Tanzania's vast offshore gas resources.

Equinor and Shell are joint operators while Exxon Mobil, Pavilion Energy, Medco Energi and Tanzania's national oil company TPDC are partners.

The government said at the time that the cabinet would review the agreements the following month, but they have not yet been approved.

Government spokesperson Mobhare Matinyi said Tanzania was still interested in working with the group of investors.

"The proposed amendment to the Host Government Agreement intends to ensure that truly both sides benefit fairly in the whole deal and nothing else," Matinyi said in a statement to Reuters, without providing details about the amendment.

"We hope that our experts and officials will conclude the amendments sooner than later to allow this important project to go ahead."

A source from one of the investors said the amendment was proposed by Energy Minister Doto Biteko after he assumed the post last August. Biteko also serves as deputy prime minister.

The proposal "completely blew the project economics out of the water", said the source, who asked not to be identified. The source added that remarks last month to parliament by Biteko saying the government expected to conclude negotiations in the coming fiscal year were "certainly optimistic".

A second source from another investor agreed with the first source's account. Neither source provided details about the amendment.
An energy ministry spokesperson did not respond to a request for comment.

A Shell spokesperson told Reuters that after initialling the deals with the government, the company "had hoped to see these agreements signed faster, but we remain ready to continue to work with the government on competitive and investable agreements, consistent with what we agreed last year".

A spokesperson for Equinor had no comment. Pavilion and Medico referred Reuters to Shell. Exxon and TPDC did not immediately respond to requests for comment.

(Reuters - Additional reporting by Aaron Ross in Nairobi, Nuzulack Dausen in Dar es Salaam, Emily Chow in Singapore, Fransiska Nangoy in Jankarta; Writing by George Obulutsa; Editing by Aaron Ross and Emelia Sithole-Matarise)