Tanzania has given its first licence to a natural gas project in 13 years as it looks to fast-track development of significant resources in the sector, amid concerns that the slow pace by authorities in sanctioning new investments may be blocking progress.

Oman-based ARA Petroleum Llc was on September 10 formally commissioned on the Ntorya gas field in southern Tanzania, which is believed to hold an estimated 1.6 trillion cubic feet of gas.  

It is expected to start production within a year under a $180 billion agreement with the State-run Tanzania Petroleum Development Corporation.

This made ARA the first multinational gas investor to secure a licence since 2011, and the fourth overall, as negotiations with a slew of other investors for similar gas extraction projects have remained bogged down by delays in reaching agreement.

Other foreign investors currently under licence to operate gas development projects in Tanzania are Pan African Energy of Mauritius and France's Maurel Et Prom in Songosongo and Mnazi Bay in Lindi and Mtwara respectively, and Ndovu Resources Ltd, also in Songosongo island, off the Indian Ocean coastline.

Ndovu Resources Ltd was the first operator of the onshore Ntorya project under a previous agreement with TPDC, before selling half its shares to ARA in 2020. It is a subsidiary of UK-based Aminex Plc, which has now teamed up with ARA as a silent partner in the project, holding a 21.25 percent stake.

TPDC has a 15 percent participating interest, which gives it a supervisory role on behalf of the government, while ARA -- the majority shareholder at 63.75 -- will be in charge of day-to-day project activities over the 25-year duration of the new licence.

According to TPDC officials, the revised Ntorya project deal is an outcome of President Samia Suluhu Hassan's visit to Muscat in June 2022.

Read: Tanzania President Samia Hassan banks on historic ties to woo investors in Oman

TPDC Project manager Patrick Kabwe told The EastAfrican that after the official licence handover by Energy minister Doto Biteko, who is also Deputy Prime Minister, the immediate focus is to complete installation of temporary pre-processing and production facilities "with the aim of starting production by mid-2025."

The basic project cost of $180 billion will cover the construction of all production facilities and drilling of at least five production wells, while TPDC will incur separate costs to set up a raw gas pipeline from the Ntorya site to a processing plant at Madimba about 34 kilometres away.

"The investors have committed to improving the one existing well which was drilled in 2012, when the project was under Ndovu Resources, and also expect to add another well by late 2025," Mr Kabwe explained.

Thorny issue

He said project revenues would be distributed as per the agreement between ARA and the government on royalties, profit shares, taxes and levies, whereas TPDC would be compensated for its own expenditure through tariffs to be imposed on the pipeline use and processing at the Madimba plant.

He, however, declined to disclose the expected pipeline cost, saying TPDC was treating this as "confidential" for the time being pending a tendering process to determine the builders.

Tanzanian authorities have been subjected to much pressure, especially from external parties, over their perceived reluctance to endorse similar projects such as a much-touted liquified natural gas scheme in Lindi that has remained in limbo for a decade, leading to a spike in its expected cost from $30 billion initially to $42 billion by latest estimates.

Asked about this thorny issue, Mr Kabwe said such stalemates were part and parcel of deal negotiations related to the oil and gas industry.

"The reality is that each licence application is treated separately and there are concrete reasons as to why some take longer than others to be granted," he said. "They could be technical reasons or failure to agree on project costs, revenue distributions and prevailing global prices, which is all normal in this industry and has happened in many parts of the world."

"The relevant parties who have been negotiating with the government may have more to say on the subject," he added.

The Ntorya project, once it is operational, is envisaged to produce 60 million cubic feet of gas per day, potentially increasing to 140 million cubic feet within three years.

Authorities see it as a potential game-changer for Tanzania’s transition to the use of sustainable energy for powering vehicles, households and industries.

According to official estimates, Tanzania currently has a total of 57.54 trillion cubic feet of natural gas, which accounts for 40 percent of its total electricity supply, with the remainder drawn from other sources such as hydro and solar power.