Energy & Mining

Converting Hot Air

Lindi Gas Plant

First on the list is an onshore, two-train LNG export terminal that is penned for Likong’o village in the southern Tanzanian town of Lindi, which is located close to large […]

First on the list is an onshore, two-train LNG export terminal that is penned for Likong’o village in the southern Tanzanian town of Lindi, which is located close to large offshore gas finds. The USD30 billion project will consist of a purification and liquefaction plant and will also require the construction of about 200km of gas pipes to transport the gas inland from the country’s offshore wells to the plant.

The state-run Tanzania Petroleum Development Corporation (TPDC) is in charge of the construction of the plant, which is being undertaken in collaboration with a consortium of oil companies including Royal Dutch Shell, Statoil, Exxon Mobil, and UK-based independent Ophir Energy. The timeframe for the completion of the entire project is 40 months.

The Exim Bank of China is also involved in gas infrastructure, completing a gas pipeline between the southern region of Mtwara to Dar es Salaam. The China Petroleum Technology and Development Corporation was responsible for the project and also constructed a processing plant at Madimba in Mtwara region. The then president, Jakaya Kikwete, said at the inauguration of the pipeline, “The inauguration of this gas project puts Tanzania in the list of countries that produces natural gas,“ acting as an economic catalyst for the country that aims to attain middle income status by 2025.

Since then, progress seems to have been slow at Lindi, with question marks hanging over a TPDC-held title deed for 2,071ha in Lindi on which to build the facilities. Government delays in finalizing issues relating to acquisition of the site and wrangling over a legal framework for the hydrocarbon industry, despite the passing of a Petroleum Act in 2015, frustrated Magufuli, the bulldozing reformist new president, who made public statements telling those involved to “sort out all the remaining issues so investors can start construction work immediately.“

A further 17,000ha has also been acquired around the site for the proposed LNG terminal, which has been set aside to be an industrial park to cater for value adding industries that can take advantage of the access to LNG.
The export terminal is set to be completed by 2020, but many analysts foresee delays, requiring a huge amount of investment in a country in need of the highly skilled and experienced personnel to oversee such a development. Some fear that the enthusiasm for LNG in Tanzania and the promise of an economic boom arising from East African gas looks to be many years away, even if the development costs are relatively low. Some predict it could take at least a decade to see the monetary benefits of the natural resource discovery. This may be problematic for President Magufuli, who won the presidential election on the back of pledges to hasten development of the gas industry. President Magufuli promised to end power shortages and exploit Tanzania’s natural gas discoveries to potentially become a gas exporter and his ambition is to raise generating capacity to 10,000MW and bring electricity to half the population by 2025.

Most of Tanzania’s gas reserves are located in deep-sea offshore blocks south of the country, in March 2013 Statoil announced its discovery of LNG in Block 2. However, Tanzania found in February an onshore gas field of 2.17 trillion cubic feet (tcf) near Dar es Salaam. With that last discovery, the East African nation’s total estimated natural gas reserves to more than 57tcf, putting it 22nd in the world rankings between Egypt and Libya.

Once completed, there is a ready and willing market for gas. Today, it serves more than 30 industries in Dar es Salaam and is responsible for approximately 70% of the country’s total power generation. It has been estimated that the development of the LNG project would create over 10,000 new direct jobs and thousands more indirectly. The Petroleum Bill, passed in July, ushered in a royalty regime in which energy companies pay 12.5% for onshore production and 7.5% for offshore.

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