Tanzania’s $42bn LNG project enters final legal stage ahead of approvals

Tanzania’s government-estimated $42bn liquefied natural gas (LNG) project has entered the final stage of legal negotiations, with the remaining process expected to be completed during the 2026/27 financial year ending in June 2027, Tanzania Petroleum Development Corporation (TPDC) Managing Director Mussa Makame said.

Speaking to reporters in Dodoma on September 21, Makame said most commercial, fiscal and revenue-sharing negotiations had been completed, leaving legal teams in Arusha to finalise the Host Government Agreements and legislation governing implementation.

“The project was for a long time at the stage of completing negotiations, but I would like to say that in the financial year that has ended, we completed a large part of the negotiations,” Makame said, as quoted by The Chanzo.

He said the completed talks covered the project’s commercial structure, scale, taxation and revenue-sharing arrangements.

“The gas has already been discovered,” Makame said. “One thing that remains is the laws that will govern the implementation of this project. As we speak, the legal negotiation teams are meeting in Arusha. We expect that this will be completed in the coming months.”

Deputy Energy Minister Judith Kapinga separately said Tanzania could pass new legislation governing LNG investments by the end of 2026, Reuters reported, providing another timetable for the legal framework needed before the project can advance.

Once the current legal work is completed, the agreements and related framework must still pass through government review, ratification and the required parliamentary process before they can be executed. The participating companies would then move towards a final investment decision; the project has not yet reached FID or construction.

The government is also preparing a local-content strategy intended to increase Tanzanian participation in employment, procurement, skills development and other economic opportunities linked to the project. The Prime Minister’s Office has formed a team to develop the strategy.

The project’s strategic appeal has increased since the US-Israeli war with Iran disrupted energy flows through the Strait of Hormuz, restricting LNG exports from Gulf producers including Qatar and the United Arab Emirates. Equinor said in August that the disruption had made the Tanzanian project more attractive as Asian buyers sought alternative sources.

Tanzania signed a framework agreement with Equinor (OSE: EQNR; NYSE: EQNR) and Shell (LSE/NYSE: SHEL) in June 2022 setting out the rights and obligations of the parties involved in the planned LNG investment, which has been under development for more than a decade.

Execution risk nevertheless remains significant. Reuters reported in September that Equinor’s planned expansion of its LNG supply portfolio to 10mn-15mn tonnes a year in the early 2030s excludes Tanzania, where the project has been delayed by negotiations with the government. Tanzania has also missed previous targets for finalising project terms, including October 2025 and June 2026, IntelliNews reported.

The project would draw on Tanzania’s large offshore gas resources. Equinor says Block 2 contains more than 20 trillion cubic feet of gas in place, while reporting has put planned LNG export capacity at up to about 15mn tonnes a year.

TPDC is working with Shell, ExxonMobil (NYSE: XOM), Equinor, Indonesian oil and gas producer Medco Energi (IDX: MEDC) and Pavilion Energy on offshore Blocks 1, 2 and 4. Medco holds a 20% interest in Blocks 1 and 4, while Pavilion’s 20% interest in the same blocks was excluded from Shell’s 2024 agreement to acquire Pavilion Energy from Singapore’s Temasek.

The development will include offshore gas production and facilities to process gas for domestic use and export.