Norwegian energy company Equinor is shelving plans for a LNG development in Tanzania, arguing it would not be sufficiently profitable, but could revive the project at a later date, it said on Jan. 29.
The decision will result in a $982 million impairment charge in Equinor’s fourth-quarter results, due next month, writing off all remaining value of the company’s assets in Tanzania.
Equinor made a series of large gas discoveries in the Indian Ocean off southern Tanzania between 2012 and 2015 but struggled to agree on legal, fiscal and commercial terms for development of an LNG project.
The expected cost of developing Equinor’s TLNG project makes it uncompetitive compared with others in Equinor’s portfolio, the company said.
“While progress has been made in recent years on the commercial framework for TLNG, overall project economics have not yet improved sufficiently to justify keeping it on the balance sheet,” Equinor said in a statement.
“Equinor will continue to engage with the government of Tanzania in negotiations on a commercial, fiscal and legal framework that may provide a viable business case for TLNG in the future.”
Operator Equinor has a 65% stake in the project while Exxon holds 35%.
Equinor entered the country in 2007 via a production sharing agreement for the so-called Block 2 with Tanzania Petroleum Development Corp. (TPDC) and over the 2010 to 2017 period invested $2.1 billion, according to the company’s website.
“We still maintain our interest in the discoveries in Block 2, but there are no further exploration plans in Tanzania,” an Equinor spokesman said.
The situation adds to Equinor’s international woes over the past several years, when the company made large writedowns in the United States and elsewhere, mainly due to lower petroleum prices but also reserve revisions and operational issues.
Its international division, excluding operations in the U.S., reported an adjusted operating loss of $479 million for the first nine months of 2019.
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