A Review of the Nigerian Energy Industry

Tanzania says earliest LNG plant for 2016

NLNG exports27 November 2013, Dar es Salaam – THE earliest time that a Liquefied Natural Gas (LNG) plant can be set up offshore Mtwara is 2016, for production to start around 2020.

If all goes well, various partners including BG, Statoil, Axon, Ophir and Tanzania Petroleum Development Corporation (TPDC) would take part in the multibillion dollar integrated project.

According to the Country Manager for BG Tanzania, Mr Adam Prince, an assessment regarding the site and viability of the project has already been handed over to the government for action. He said in Dar es Salaam yesterday that the integrated project of partners can take about four years to put in place.

“The project we are assessing would involve extracting gas trapped deep below the seabed and transporting it via a pipeline along the ocean floor to an onshore plant.

There, the gas will be made ready for immediate use domestically or for transport in specially-designed ships, as liquefied natural gas, or LNG,” he said. On likely export markets for Tanzania’s gas when production starts, he said the Asian market is going to drive the demand for LNG globally.

“Asia will continue to be a high value market. Tanzania is geographically located towards Asia. East Africa has very good location for LNG exports,” he noted.

He said that the gas policy currently getting final touches is supportive of what they are trying to achieve, giving some good direction on where the industry would go.

On local content development, he said that since 2010, they had a Mtwara Port upgrade project worth 40 million Us dollars , which they realized could not be handled by a single local company and had to break it and award it to majority local companies.

The Mtwara Port upgrade commenced in 2010 with the majority of work, around 70 per cent , awarded to Tanzanian businesses. He said local content is very important, noting that the more the participation there is for local people, the more benefit to the country.

“It is important to maximize local content. Tanzania does not have a supply base to a project like this, that takes time, to train in skills and build capabilities to international standards and transfer skills from international businesses to local businesses,” he said.

Regarding the new model production sharing agreement (PSA) introduced recently after the 4th offshore licensing round, he said they were currently doing scientific studies to help them make a decision whether to bid or not.

The 2013 model issued by the Tanzania Petroleum Development Corporation (TPDC) outlines capital gains tax obligations and a new royalty structure.

It requires firms to make a one off payment (signature bonus) of $2.5 million on signing of the agreement and pay at least 5 million US dollars when production starts. Commenting on this in Dar es salaam, Managing Partner of Kibuuka Law Chambers, Mr Paul Kibuuka said that local firms need to start processes to understand the industry.

He noted that in understanding the industry, how it operates, what is required to be a supplier; they should perform a self assessment to see how suited they are currently, see the gaps they have in their own businesses which will need to be worked on for them to create better chances for them to become suppliers to this new oil and gas industry.

BG Group has a 60 per cent interest in Blocks 1, 3 and 4, with Ophir Energy holding 40 per cent.

– Tanzania Daily News

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