Despite governance shortfalls and a number of crises, President Filipe Nyusi’s government has reassured investors with its support for transformational LNG schemes, leading towards final investment decisions and financial close in the months to come. This is a major success for an African gas industry where smaller projects seem to be making more impact than the majority of big-ticket schemes. Mozambique’s progress reassured CbI Meetings’ 2-3 May Africa Investment Exchange: Gas event in London that the African industry can deliver world-scale projects. There was further scope for optimism with forecasts from Shell and other stakeholders that global demand is rising again. On 13 May, Cedigaz estimated global gas consumption to have increased by 4.7% in 2018, to 3,850bcm. Shell sees this growth continuing in the next decade, as gas balances power grids where renewables could play a determining role.

This outlook significantly improves prospects for other export-oriented LNG schemes, especially if they serve the growth markets of Asia. Tanzania’s potential has been discussed for a decade, but whereas Nyusi’s government has adopted a proactive and positive approach to major international investments, President John Magufuli continues to approach investors in the spirit of confrontation (AE 368/21). A banker involved in the Mozambique financing says this makes Tanzania “effectively uninvestable and not bankable”.

Magufuli embodies a Tanzanian mistrust of foreign investment deeply rooted since founding president Julius Nyerere’s experiment in socialist/collectivist national development (AE 350/1). The 2017 natural resources sovereignty legislation, which gives the government more control over private companies’ activities and resources, was “passed without any discernible consultation with stakeholders, banned international arbitration, removed fiscal sustainability and required all banking was done within Tanzania”, according to a prominent local businessman. Commercial disputes have stacked up. Symbion Power has sought international arbitration due to what it says is Tanzania’s breach of its bilateral investment agreement with the UK (AE 386/5).

Despite the evidence of successful commercial developments like the Songo Songo field, which supplies gas to power generation and industrial users in Dar es Salaam, a National Assembly committee inquiry concluded that Tanzania had not sufficiently benefited from its gas. To the industry’s alarm, it urged the government to renegotiate all gas sector agreements. Companies have since heard nothing, leaving investment decisions in stasis.

The Magufuli approach is perplexing to operators. After supplying the local market since 2004, Songo Songo operator Pan African Energy is waiting on a decision from the attorney-general over its right to distribute gas to third parties; this ruling was demanded after Tanzania Petroleum Development Corporation (TPDC) objected to the practice, even though it was PAE’s longstanding partner in a project that supplies more than 40 customers in Dar es Salaam. TPDC, meanwhile, is beset by financial problems – not least resulting from the cost of paying for its Chinese-built gas pipeline from the south – and needs to sell more gas. To achieve this, the state company needs its upstream partners to keep investing, which requires having adequate commercial arrangements in place downstream.

In this difficult environment there is no progress on promised development of major offshore discoveries. Policy instability prevails and many appointees to positions in key parastatals have little or no relevant experience. It is thus unlikely that Tanzania will follow its southern neighbour with a major LNG export scheme any time soon, whatever the uptick in the global market. Further stand-offs may follow if operators decide not to renew their gas supply contracts. Magufuli could be expected to react violently to any crisis that threatens to turn the lights off, potentially shifting the electric and political power dynamic.