BG Group to Slow Tanzania LNG Plans on Lack of Infrastructure

BG Group Plc, a U.K. energy explorer with operations from Chile to Australia, will slow a natural-gas project in Tanzania because of a lack of infrastructure and government capacity to handle large investments.

The company won’t use its drilling rig in Tanzania beyond June, Malcolm Brown, director of exploration, said today on a conference call. It will take more time building a “consensus” for the project, Chief Executive Officer Chris Finlayson said.

BG, together with partner Ophir Energy Plc, has found about 10 trillion cubic feet of gas resources off Tanzania, which it says is enough to warrant development of a liquefied natural gas export terminal. LNG plans may proceed more slowly than first proposed as the East African nation isn’t prepared for such investments, according to the Reading, England-based company.

“The challenge that exists is we’re working in a country which has got a very undeveloped infrastructure and a very undeveloped civic capacity to absorb major investments,” Finlayson said on the call. “We do not want to get ourselves into another African country suffering from a resource curse.”

Resource curse describes an economic trap where dependence on mineral exports hurts other industries by boosting the currency and drawing workers from agriculture and business, making the country reliant on imports.

Tanzania last year ordered a review of production-sharing contracts with energy companies as it sought to reap more gains from its natural resources. Some politicians even called for a moratorium on offshore licensing to allow for the creation of industry legislation. The nation has postponed a bidding round pending the adoption of a gas policy by lawmakers.

The nation, holder of the largest gas resources in East Africa after Mozambique, said last July it planned to ask BG and Statoil ASA to study developing an LNG export project. BG and its partners are analyzing exploration data before deciding “what to do next,” Brown said today.

“We want to make sure we do this really well,” Finlayson said. “It takes more time to get it sorted out, but in the end you end up with the project which will stay and that’s what we’re trying to achieve.”

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