Shell, Equinor Urge Tanzania to Reopen LNG Talks

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Royal Dutch Shell and Equinor have urged Tanzania to restart negotiations about an LNG project that would utilize gas from their undeveloped discoveries off the East African country's coast. The move comes amid signs that the country's new President Samia Suluhu Hassan will take a more investor-friendly approach than her late predecessor, John Magufuli. The cost of an LNG development in Tanzania has previously been estimated at around $30 billion. But as the majors slash their capital spending and look to diversify beyond oil and gas, high-cost LNG projects may become a relic of the past. Equinor appeared to confirm that view when it announced in late January that it was putting its Tanzania LNG plans on hold because of high break-even costs and that this would result in a write-down of close to $1 billion (IOD Jan.29'21). However, the swearing in of the new Tanzanian president, who is regarded as more open-minded than Magufuli, appears to have prompted a rethink. "Huge Opportunity" In a joint letter published in the local newspaper, the Citizen, Shell's Tanzania chief Frederik Grootendorst and his counterpart at Equinor, Mette Halvorsen Ottoy, said there was a "huge opportunity for Tanzania to benefit from its rich natural gas resources." The two executives urged the government to grasp that opportunity by resuming stalled negotiations and "pledging to conclude them in a timely manner." Shell and Equinor signed a memorandum of understanding (MOU) earlier this year to join forces on a potential LNG development, which would involve building a liquefaction plant near Tanzania's port of Lindi on the Indian Ocean. "It's crucial for the project that all parties play their part in making competitive improvements, and this MOU is a step in the right direction," the letter said. The two executives said production of LNG in Tanzania could net the country about $4.3 billion per year in revenues, based on current market prices. Since she took over from Magufuli, Hassan has already voiced her support for an LNG development and reportedly instructed her energy ministry to speed up negotiations with the two European companies. "We have been singing the LNG song for a very long time," she said earlier this month, saying that she had tried to advance the issue after she became vice president in 2015. Paul Sampson, London

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