Shelling Out for More

What are the defining features of Tanzania’s natural gas discoveries and Shell’s operations in the country?

Our main activity is our work on Tanzania’s integrated LNG development based on three deep-water offshore blocks where dry gas has been found. Two of the blocks are operated by Shell and one by Statoil, and we will have a joint LNG onshore processing plant in Lindi in southern Tanzania. From here, LNG will be exported, and processed gas will be supplied to the domestic market. Unlike the oil discoveries of Tanzania’s neighbors, such as Uganda and Kenya, which are relatively easy and fast to develop and bring to market, Tanzania’s natural gas find is much more complex and will lead to a much longer-term project. This will require different and careful handling, together with our partner, the government of Tanzania.

Have those complexities impacted the development of these projects?

This project is technically challenging, but for companies such as Shell and Statoil it is our bread and butter. We often talk in our business about “below-the-ground” risks and “above-the-ground” risks. We are excellent at managing below the ground risks: we know how to develop these reservoirs, we know how to run pipelines across the sea bottom, and we know how to build a world class LNG plant. For us, the major challenges so far have been or are related to the above ground risks, notably the legal, fiscal, and regulatory framework.

What are the key priorities you would like to see addressed in this project’s plan?

In order to develop these large offshore volumes, we need economies of scale, and the only thing that provides that is an LNG export project. While the domestic gas market in Tanzania has been growing, with more gas being used for electricity generation and some industrial customers being connected over the years, gas demand is still comparatively small, especially when taking into account the economies of scale needed for developing these expensive offshore deep-water reserves. The contracts of the government call for a share of the gas to be available for the domestic market, which we will comply with, but what we can make available is much more than the current market demand. Moreover, gas-based petrochemical products such as fertilizer, ammonia, and methanol only work economically if they use very low-cost feed gas, and for various reasons, Tanzania’s gas does not fit this bill. This all leads to the necessity of developing the LNG export project.

What efforts are being made in Tanzania to build human resource capacity, and what is Shell’s contribution on this front?

Capacity building is a major focus area for us. Shell supports education in Tanzania at several levels, from supporting secondary schools and vocational training programs, particularly in the south, all the way to supporting academic education through the provision of scholarships and our partnership with the University of Dar es Salaam. We are particularly proud of our long-term support for the Young Scientists Awards Program in partnership with the Irish government.

What is the importance of Tanzania’s role for Shell in the region?

We are good at developing large and highly complex projects such as Tanzania’s integrated LNG project; and are well aware that this is a long game. We know that once this project gets off the ground, further developments will be unlocked, particularly in domestic gas and further exploration. Shell is a much-diversified company and also has a “new energies” arm, which is interested in Tanzania in terms of renewables, since we see considerable potential too on that front. In summary, we want to be here for the long-term and succeed, which means there is work to do in the meantime.