Tanzanian LNG project delayed as government seeks to change terms, sources say

By Ron Bousso

LONDON, May 6 (Reuters) - Negotiations for the development of Tanzania's $42 billion liquefied natural gas export plant have been delayed by proposed government changes to a financial agreement reached last year, two sources from companies involved in the project said.

The government and investors announced last May they had completed negotiations on the long-delayed project to unlock Tanzania's vast offshore gas resources.

Equinor and Shell are joint operators while Exxon Mobil, Pavilion Energy, Medco Energi and Tanzania's national oil company TPDC are partners.

The government said at the time that the cabinet would review the agreements the following month. After months without an update, Energy Minister Doto Biteko told parliament last month that the attorney general and other government institutions had provided feedback on the deals and negotiations were expected to conclude during the 2024/25 fiscal year.

A source from one of the investors said the delay related to changes that Biteko proposed to the host government agreement after he became energy minister last August. Biteko also serves as deputy prime minister.

The source, who asked not to be identified, said Biteko and his team came back to investors with a "rather interesting amendment to the HGA which completely blew the project economics out of the water".

The source did not provide details about the amendment, but said that progressing on the project would be "definitely not quick" and that Biteko's talk of completing negotiations in the coming fiscal year was "certainly optimistic".

A second source from another investor agreed with the first source's account.

Tanzanian government spokesperson Mobhare Matinyi and an energy ministry spokesperson did not immediately respond to requests for comment.

A Shell spokesperson told Reuters that after initialling the deals with the government, the company "had hoped to see these agreements signed faster, but we remain ready to continue to work with the government on competitive and investable agreements, consistent with what we agreed last year".

A spokesperson for Equinor had no comment. Pavilion and Medico referred Reuters to Shell. Exxon and TPDC did not immediately respond to requests for comment.

(Additional reporting by Aaron Ross in Nairobi, Nuzulack Dausen in Dar es Salaam, Emily Chow in Singapore, Fransiska Nangoy in Jankarta; Writing by George Obulutsa; Editing by Aaron Ross and Emelia Sithole-Matarise)