While the majors Total and Eni were waiting for the next Oil and Gas Congress of Tanzania to present their offers for gas exploitation in the country, they were short-circuited by Equinor and Shell.
On Saturday June 11, Tanzania signed its first major gas exploitation agreement with the Norwegian Equinor and the Anglo-Dutch Shell. A framework agreement which should allow the construction of a 30 billion dollar project, the fourth largest gas complex in Africa. The agreement between Tanzania, Shell and Equinor provides for the start of extraction in 2025 and the entry into operation of the Lindi liquefied natural gas (LNG) plant in 2029.
This is undoubtedly a huge concession on the part of the Tanzanian state, amounting to 1 billion cubic meters of reserves in Tanzanian waters. Tanzanian Energy Minister January Makamba said: “This is the biggest natural gas development in the history of our country. This project will significantly change our economy.”
The signing of this agreement takes the two most active majors in East Africa by surprise, the French Total and the Italian Eni. The latter have organized several meetings with the Tanzanian government in recent months. Eni and Total had been invited to the 4th Oil and Gas Congress in Tanzania, which will be held on August 2. However, the signing of the gas agreement with Shell and Equinor puts the two competitors out of the game.
An “agreement in preparation for a long time”?
If, on the one hand, the director of Equinor for Tanzania, Unni Fjaer, assures that “the agreement was in preparation for a long time”, other factors explain these new partnerships on the side of Dar es Salaam.
Following the many scandals surrounding Total's Uganda-Tanzania pipeline, the East African Oil Pipeline (EACOP), Tanzania seems less convinced of the French major's performance. Total was openly negotiating blocks for the Tanzanian gas project, but President Samia Suluhu Hassan had made it clear that competition will be tough. “We have reached a good stage of discussions on the LNG project, but a lot of work still awaits us to talk about it and make it competitive,” said Hassan during his last meeting with Total boss Patrick Pouyanné last February.
Two concerns seem to have deterred Samia Suluhu Hassan from a future partnership with the French oil company. First, Total's pure and simple abandonment of its Cabo Delgado project in Mozambique, located 40 kilometers from the Tanzanian gas fields. Total has not attempted to resume its Mozambican project despite the return to calm in the region. There are therefore doubts about the reliability of the French partner.
For Tanzania, there is no question of giving a monopoly to Total
Second, the outcry from environmental and human rights NGOs over the Lake Albert Tilenga-EACOP twin oil project also showed that Total's poor reputation could be a major obstacle. Since taking office, Samia Suluhu Hassan has tried to maintain acceptable standards in terms of respect for the environment and human rights. So offering a monopoly to Total in the country could generate problems that the Tanzanian president would not want to face in the future.
Read: Uganda-EACOP: Total reassures, but is it credible?
Then, for the Tanzanian government, increasing foreign investors is also a political choice. French Ambassador to Tanzania Nabil Hajlaoui, said his country was “on its way to becoming the leading European investor in Tanzania” at the end of May. However, Tanzania has not only discarded the Chinese monopoly on its international partnerships since Samia Suluhu Hassan took office. Today, France must "do better" than China, India, the United Kingdom, the Emirates and Canada, and three other countries whose investments in Tanzania exceed those of Paris.
Tanzania on the way to becoming one of the major gas producers in Africa
Be that as it may, by signing the agreement with Shell and Equinor, Tanzania is taking the step within a movement to capitalize on the global energy crisis. According to the Emirati think-tank ABiQ, the Tanzanian LNG project is the second largest energy project under construction in Africa. Called Likong-o-Mchinga, the project will also be the fourth largest gas complex in Africa after its completion.
The production capacity should reach 10 million tonnes of LNG per year. Exports will be around 7,5 million tonnes to international markets. Around 10% of the gas that will reach the Lindi plant will be reserved for Tanzania, and will be able to produce 8 terawatts/hour of electricity in particular. With these figures, and the reserves already discovered, production could last more than 30 years. The first Tanzanian megaproject, therefore, which will undoubtedly be a vector for the economic transformation of the country.