by Ben Taylor
Natural Gas processing back on track?
The prospect of a liquified natural gas (LNG) project is back on the rails after stalling for years. Negotiations for its actualisation formally kicked off in January after inking of a crucial agreement.
Minister for Energy, Mr January Makamba, said the project would require an investment of a staggering TSh 70 trillion (USD $30bn).
The Minister was speaking after an agreement was signed between the Tanzania Petroleum Development Corporation (TPDC), on behalf of the Tanzania government, and Baker Botts LLP as a transaction advisor to the government. The signing at Gran Melia Hotel followed two days of talks between the UK-based legal firm and senior government officials.
The minister said it was the scale of the project that led the government to conclude that international expertise was needed, and thus to look for external consultants to lead the discussions. The search commenced through an international tender which, he said, was won by Baker Botts (UK) LLP, who will work in partnership with Tanzanian law firm, Apex Attorneys.
“We hope with this agreement, the road is cleared for realisation of the project,” he told journalists.
Tanzania has an estimated 57 trillion cubic feet (tcf) of natural gas reserves, mostly off shore, in Lindi Region. Of this, 43 tcf are recoverable while 23-25 tcf qualify for commercial exploitation.
According to Makamba, discussions between the government and other partners are expected to last until the middle of this year. “Thereafter, an agreement will be signed. This will give a timeframe for the implementation of the project and the like”, he said.
Mr Makamba said the government was keen to see the take-off of the project so that the economy can benefit from the huge gas resources. If completed, the massive project would supply liquified gas for the households and for the export market.
A lead partner with Baker Botts (UK) LLP Hamish McArdo said he was optimistic on the swift conclusion of key issues in the project. He said his London-based firm was experienced in upstream oil and gas projects, especially in legal, technical and commercialisation aspects.
The decision to appoint a foreign firm for this work has attracted some criticism from pundits. They noted that other agreements, including that with Barrick Gold were concluded by Tanzanian legal experts, led by former Constitution and Legal Affairs Minister Palamagamba Kabudi.
In response, Mr Makamba explained that what was being sought was not legal advice but rather a consultant in LNG discussions who had the necessary ability and experience.
“If you look at the terms of reference, there are four types of skills needed. They are financial, commercial, technical and legal. This is the expertise that TPDC was looking for in a process that ended yesterday and which started in 2018,” he said.
“Globally, for discussions like this, countries that have never implemented a project like the LNG always look for additional expertise to advise them in the negotiating process. The country has its own position on what it wants to achieve in the project and then the firm supports this,” he said. He added that Tanzania had regulations that compel a foreign company to strike partnerships deals with a local firm, noting that that was why Baker Botts will work in partnership with Apex Attorneys.
The executive director of HakiRasilimali, which strives for indigenous participation in natural resources projects, Ms Racheal Chagonja, said there was no problem with the firm being offered the job. Nevertheless, she stressed the need for transparency in all processes.
“The experience we have had in negotiating mining contracts since 2017 is that they were shrouded in secrecy. Things need to be different as we now negotiate natural gas deals,” she said.
Kabanga Nickel prospects looking strong
The Kabanga Nickel Project has secured a $100 million investment from the world’s biggest mining company, BHP, of which it has allocated $10 million to acquire the hydromet tech to ensure that finished Class 1 battery grade nickel, copper and cobalt will be produced in the country. This was according to Kabanga Nickel’s Chief Executive Officer, Chris Showalter, in an extensive interview with The Citizen newspaper.
Globally, demand for nickel is projected to rise sharply in coming years, due to its importance to the battery technology used by electric vehicles.
“We are very pleased BHP decided to invest in Kabanga,” he said. “To recap the investment, an initial $40 million will be invested into Kabanga together with $10 million into Lifezone – the technology company owner of the hydromet refining technology to be applied at the project.”
With an additional $50 million planned, BHP’s share in Kabanga Nickel will reach 17.8%, valuing the project at $658 million. This is the first new investment by BHP in Africa in years. “This investment secures access to a world class nickel sulphide resource and is aligned with BHP’s strategy to capture opportunities in future-facing commodities,” said a BHP spokesperson.
Showalter also explained that Kabanga Nickel had been moving fast since taking over the project in January 2021, working with the government to ensure that they have all the right mining and refining licences and the proper environmental permits, and working with the community to agree their needs, to agree resettlement proposals where necessary and to create the right community initiatives to ensure local people also derive benefits from the project.
Showalter talked up the environmental credentials of the nickel they will produce in Tanzania. “Nickel from Kabanga will be refined using hydrometallugy, rather than smelting,” he said, “which reduces emissions by around 80 percent. It will also be refined in Tanzania rather than being shipped around the world, reducing emissions further.”
He said this will increase demand for Tanzanian Nickel, because car and battery makers are under pressure to reduce carbon emissions both in their own operations as well as their supply chains. As a result, “they are likely to prefer our nickel than that produced by dirtier methods in places like Russia.”
Asked when the operation would start to produce, Showalter said that they expect mining to commence in 2025. He added that they will be updating the development plans over the next 12-18 months, which will firm up their timeline.
Renewable Energy Potential
Assessments of the potential for generating electricity from renewable sources – wind and solar – in Tanzania have concluded that the potential is very high.
According to the World Bank, Tanzania has a solar energy potential greater than that of Spain and wind energy potential greater than that of the US State of California. With such great potential for solar and wind energy resources, Tanzania is naturally appropriate for producing solar and wind energy as a feasible alternative source for modern energy supply from the national grid.
The Ministry of Energy (MoE) in collaboration with Tanzania Electric Supply Company Limited (Tanesco) and Rural Energy Agency (REA) under the support from DANIDA and SIDA conducted wind energy resource assessments. Among other areas with potential, the assessment identified that Makambako in Njombe region and Singida have sufficient wind speed for significant grid-scale electricity generation with an average wind speed of 8.9 m/s to 9.9 m/s.
Solar energy resources with high potential are widespread across the country, but particularly in Dodoma, Singida and Shinyanga regions. High solar energy levels are ranging from 2,800 to 3,500 hours of sunshine per year.
Given the rapidly rising cost of fossil fuels, the rapid fall in the cost of renewable energy and the global urgent need to reduce emissions of carbon dioxide, these opportunities are likely to play a major role in Tanzania’s future power generation strategies.