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.
Recommended Reading
EQT Sees Clear Path to $5B in Potential Divestments
2024-04-24 - EQT Corp. executives said that an April deal with Equinor has been a catalyst for talks with potential buyers.
Matador Hoards Dry Powder for Potential M&A, Adds Delaware Acreage
2024-04-24 - Delaware-focused E&P Matador Resources is growing oil production, expanding midstream capacity, keeping debt low and hunting for M&A opportunities.
TotalEnergies, Vanguard Renewables Form RNG JV in US
2024-04-24 - Total Energies and Vanguard Renewable’s equally owned joint venture initially aims to advance 10 RNG projects into construction during the next 12 months.
Ithaca Energy to Buy Eni's UK Assets in $938MM North Sea Deal
2024-04-23 - Eni, one of Italy's biggest energy companies, will transfer its U.K. business in exchange for 38.5% of Ithaca's share capital, while the existing Ithaca Energy shareholders will own the remaining 61.5% of the combined group.
EIG’s MidOcean Closes Purchase of 20% Stake in Peru LNG
2024-04-23 - MidOcean Energy’s deal for SK Earthon’s Peru LNG follows a March deal to purchase Tokyo Gas’ LNG interests in Australia.