Shell and Exxon Mobil have agreed on a deal with the government of Tanzania for the development of a liquefied natural gas (LNG) export terminal, Equinor’s manager in the East African country said on Friday.
The agreement is a milestone for the long-delayed project to unlock Tanzania’s vast but remote offshore gas resources, which the companies involved have said is expected to cost tens of billions of dollars.
Friday’s deal includes the key elements of a host government and production-sharing agreement and is subject to legal reviews and quality assurance before an expected signing in the coming weeks.
“It paves the way for the series of milestones that need to follow to realise this fantastic LNG opportunity for the country and the world,” Equinor country manager Unni Fjaer said in a statement.
A final investment decision for the Tanzania LNG project is still believed to be some years away.
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The next steps towards realising the project involve a period of detailed engineering design work, Shell’s Tanzania Chair Jared Kuehl said in a separate statement posted on Linkedin.
Equinor and Shell are joint operators of the development while Exxon, Pavilion Energy, Medco Energi, and Tanzania’s national oil company TPDC are partners in the project.
Last June, the parties involved signed a framework agreement aimed at bringing closer the start of the project’s construction.
Tanzania said in 2014 that the project could cost $30 billion to develop, but analysts have said cost inflation in recent years could add billions more to the investment.
Shell operates Tanzania’s Block 1 and Block 4, which hold 16 trillion cubic feet in estimated recoverable gas.
Norwegian oil and gas producer Equinor operates Block 2, in which ExxonMobil holds a stake and is estimated to hold more than 20 trillion cubic feet of gas.
