LNG Facility in Tanzania

=LNG= LNG or Liquefied Natural Gas, is a clear, colourless, non-toxic liquid, produced by cooling natural gas to -260° Fahrenheit (-160ºC), at which point it becomes liquid. This process occurs to allow for more efficient transport of natural gas, either by truck or by sea.

LNG takes up 600 times less space than natural gas in its gaseous form. Converting natural gas into LNG can make stranded natural gas deposits more economically viable, as constructing pipelines can be expensive. In addition, LNG will not explode in an unconfined environment, so in the unlikely event of an LNG spill, the natural gas has little chance of igniting an explosion. Other benefits of LNG include the fact that the liquification process removes oxygen, carbon dioxide, sulphur and water from the natural gas, resulting in LNG which is almost pure methane. Once it reaches its destination, LNG is stored in its liquid form until it is warmed back to natural gas via the process of regasification.

=Overview LNG facility Tanzania= Tanzania’s natural gas deposits have attracted the attention of a number of major energy companies such as Statoil, BG, Ophir Energy, ExxonMobil and  Pavillion Energy which are collaborating with the Tanzania government over constructing an LNG plant. As announced by Statoil the LNG plant will start-up at the earliest in 2021 or 2022 and investments could be from $20 billion to $30 billion. The plant will receive and treat reservoir gas from the fields in blocks 1, 2, 3 and 4.

=Location= The Government of Tanzania favours an onshore liquefied natural gas plant, as opposed to an offshore plant currently being planned by investors in neighbouring Mozambique. However, the government has not announced where the plant will be constructed, despite the oil and gas companies submitting a proposal for the location in mid-2013. According to Mark Todd, BGs External Communications Manger, BG and Statoil had sent a joint proposal on the suitable site for the plant and are awaiting feedback from the Tanzania government. Statoil and BG prefer the LNG plant to be located at Likong’o-Mchinga in the southern town of Lindi. However, the decision to build the plant in Lindi might foment resentments among people in Mtwara as the government had promised Mtwara residents in June 2013 that the plant would be built in their area to foster economic growth. According to some sources, the LNG decision is shrouded in secrecy because of concerns people would begin buying up land around the site to sell on to the developers at an inflated price. =LNG Market= In all likelihood, Asia will be the main market for LNG from Tanzania. Geographically, Tanzania is ideally placed to supply LNG to the Asian market that heavily relies on LNG imports. Asia’s fast growing economies will be the main drivers of growth in global gas demand in the next decade, according to global management firm McKinsey. Forecasts from the US Energy Information Administration (EIA) suggest that demand in Asian countries that are not part of the OECD will grow by 4.5 percent between 2010 and 2035. The countries, which include China, India and Indonesia, would see demand rise from 350 billion cubic metres per year in 2012 to 870 billion cubic metres per year in 2030, accounting for more than a third of gas demand in that period.



Competition
However, Tanzania faces competition from Mozambique to be the first to export gas from East Africa. Tanzania will also have to compete with Qatar and Australia, the current biggest LNG exporters. According to analysts, LNG from Tanzania will be cheaper than LNG from Australia, but such an advantage might be annihilated if Tanzania is unable to develop its potential before a glut of other new supplies depresses prices. Furthermore, a paper for Columbia University’s Center on Global Energy Policy found that US natural gas exports would dim East Africa’s prospects in the global LNG market. The US witnesses a strong growth in natural gas output due to the fracking revolution.

=Policy challenges= The ongoing uncertainty about the Tanzania constitution is likely to delay the LNG project. Without clarity on new regulations for the natural gas sector, international companies are likely to delay final investment decisions, according to different analysts. Critics state that the current uncertainty is forcing interest groups to take a stand on all the most divisive political issues concerning the country’s hydrocarbon resources at once. In this climate, introducing new terms to govern the natural gas sector will be politically difficult, hence making the enactment of a new bill unlikely in 2014. However, in August 2015, President Kikwete ascended the three bills into laws: the Oil and Gas Revenues Management Act 2015, the Petroleum Act 2015 and the Tanzania Extractive Industries (Transparency and Accountability) Act 2015.

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