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Lindi: Tanzania’s Jewel in the Crown

Tanzania’s proposed LNG export plant, to be based in the southern town of Lindi close to the deep-sea offshore blocks where most of Tanzania’s gas discoveries have been made, has the potential to be a game-changer in the history of the country’s energy industry.

After a long delays, a land deal has finally been agreed for the LNG plant which is to be constructed by international heavyweights Statoil, BG Group, ExxonMobil, and Ophir Energy (Pavillion) in partnership with Tanzania’s NOC, the TPDC. So significant is this project that the Tanzanian central bank believes that simply starting work on the plant would add two percentage points to the country’s 7 percent GDP growth rate due to the billions of dollars of international investment it would draw in.

Statoil’s Country Manager for Tanzania, Øystein Michelsen speculates that the project “may be the start of a new era in the Tanzanian gas industry” and that it “will provide significant long term benefits to Tanzania in the form of income, employment, local content, domestic gas, contribution to GDP, and favourable trade balance.” Matthew Allen of Otto Energy, an Australian junior with stakes in two separate frontier projects in Tanzania, concurs with Michelsen’s optimism around Tanzanian LNG; “Having seen the impact that [becoming an LNG producer] has had in my home state of Western Australia, I can attest to the flow-on effects to jobs, employment, education, future careers for young people, and ultimately the ability to improve the infrastructure in the region.”

However, concerns have been raised about the cost of the project (between USD 20 to 30 billion), the volatility of gas prices, and the speculative contention that global demand will eventually outstrip supply for LNG. TPDC Managing Director James Mataragio plays down fears of a gas price slump by asserting that “over the long-term, the oil and gas business is always cyclical” and “that future prices will be good enough for us to not delay in proceeding with the development of our LNG project.” TPDC Director of Downstream Operations Willington Hudson backs this up by taking a long-term view; “You need to look at energy demand for the next 50 years…demand for gas will simply continue to rise.”

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