A newly released report by the Natural Resource Governance Institute (NRGI), indicates that the recent downturn in the oil and gas markets threaten the potential investment in Tanzania’s gas sector.
The East African cited the analysis titled, ‘Uncertain Potential: Managing Tanzania’s Gas Revenues‘, that has been compiled by the New York-based institution.
Media highlighted that two months prior to the release of the study, President John Magufuli’s administration had obligated all existing upstream investors to renegotiate the terms of their contracts and concessions, further slowing down the country’s gas production ambitions.
“Investment in this sector is still very uncertain. We estimate the minimum long-term LNG price at which companies will be willing to go ahead with the project to be $14 per one million British Thermal Units (mmBtu).
“Comparing this price with forecasts of long-term liquefied natural gas (LNG) prices in East Asia of $8 and the average real price over the past 15 years of $11, our estimate suggests that under the current conditions and expectations, the Tanzanian project is not likely to go ahead,” the report read.
LNG plant project
Media underlined that the country was expected to commence the construction of a LNG plant earlier this year, with a completion target of 2024.
In April, the government signed a draft agreement with a consortium including ExxonMobil, Statoil, Ophir, Shell and the state-owned Tanzania Petroleum Development Corporation, to build the $30 billion LNG plant project in Lindi.
Tanzania is reported to have 57 trillion cubic feet (tcf) of largely undeveloped and proven natural gas reserves, from which it expects to reap close to $5 billion annually in gas exports revenue through the proposed LNG plant.
A greater proportion of the gas will is said will be allocated to the domestic power, cement and fertiliser industries.
According to the NRGI, if the Lindi gas project does go ahead, the revenues generated will be modest and unlikely to transform the economy. Read more…
“Given the inherent unpredictability of prices, we use the average price over the past 15 years as a reference point. At this price, we estimate that government revenues would average $2.3 billion a year over the period of gas production, equivalent to only $20 per person or 1.2% of GDP a year,” the report says.
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