By: The Chanzo initiative

Tanzania’s Deputy Prime Minister and Minister of Energy, Doto Biteko, has said that the delay in signing agreements to kick off the liquefied natural gas (LNG) processing project in the country is due to ongoing negotiations between the government and investors.

The aim, he said, is to secure better contracts that avoid the mistakes made in earlier deals within the extractive sector.

While concluding the budget debate for the Ministry of Minerals, Biteko explained that after the initial negotiations were completed, the draft agreements were reviewed by the Attorney General’s office. The review identified a few areas that needed adjustments to ensure the contracts are stronger and more beneficial for the country.

“This country has a history of entering into contracts that have been widely criticized. We’ve learned a lot through our journey since we began engaging in extractive industries,” said Biteko. “There are several key issues that must be resolved before the agreements can be signed.”

He stressed that it would be unacceptable to Tanzanians if, in such a massive project valued at over US$42 billion local content is not prioritized, if all insurance services are outsourced abroad with no Tanzanian participation, and if domestic use of natural gas remains as low as only 3%.

“It is now the right time to correct the mistakes we made in the past,” Biteko emphasized.

He noted that the government and the investor team are still in discussions to address the remaining challenges, and promised that if the three main outstanding issues are resolved, the contracts could be signed by 2025.

Tanzania is estimated to have about 57 trillion cubic feet of natural gas reserves. In June 2022, the government signed a preliminary agreement with Equinor and Shell that outlines the rights and obligations of all parties involved in the potential investment—marking a progress after the project had stalled for more than seven years.

According to the government the plan is to complete these negotiations and sign the agreements by 2025, with actual investments starting soon after, and full LNG production beginning by 2030.

As part of the TSh 2.3 trillion budget approved for the Ministry of Energy for the 2025/26 financial year, the government has allocated TSh 20 billion from domestic funds. This money will be used to raise public awareness, continue negotiations, hire a lead advisor to assist with Host Government Agreements (HGA) and Production Sharing Agreements (PSA) between the government and investors, and implement Corporate Social Responsibility (CSR) initiatives in collaboration with Equinor and Shell.