They argue that the venture could still hang in balance if Royal Dutch Shell Plc. decides against it but many stakeholders say the possibility was unlikely.
The British company, which trades locally as BG Tanzania, is a major partner in the LNG project, which also involves Statoil Tanzania, Tanzania Petroleum Development Corporation (TPDC), ExxonMobil and Ophir Energy.
“Shell’s looming acquisition of BG will add another sizeable LNG project to the supermajor’s extensive list of large gas assets, and whether Tanzania will figure as strongly in Shell’s corporate investment priorities is an open question,” sectoral intelligence outfitInterfax Global Energy said on February 10.
TPDC has strongly dismissed the unit of Interfax Europe Ltd.’s claim saying the British company’s prediction was baseless and not informed.
According to the Director General,Dr James Mataragio, Shell has BG assets in Tanzania in its plans and they form part of its strategy to cope with the sector’s geopolitics in Asia and the Middle East.
He told Smart Money on Saturday that the acquisition would enable it to better position itself in the Indian Ocean zone, which is one of the major global energy corridors. Dr Mataragio said the new assets would also help the Anglo-Dutch giant to consolidate its current 16 per cent global market share.
About 126.7trn/- takeover is also expected to vault Shell over Chevron Corp. to become the world’s second-biggest non-state oil company. The takeover of BG Group Plc. would as well raise Shell’s market value close to US$175 billion.
“The Interfax story is not true and I disagree with the whole idea of Shell not having interest in the Tanzania assets. What I know they are committed to this project and it is of great benefit to them,” Dr Mataragio said.
“For your information, Tanzania was the last country to consent the BG takeover deal. Senior Shell officials camped here for a month to ensure the takeover gets our support and this is an indication the LNG plant project is important for Shell,” he said in a telephone interview.
Dr Mataragio said he remains upbeat about the sector’s prospects, whose status has been uplifted by last month’s acquisition of the land where the LNG platform will be built.
Sectoral expert Arbogast Oiso said there was no way Shell could ditch the project because the takeover deal requires it to respect all the BG obligations and responsibilities in Tanzania.
Furthermore, he argued, Shell stands to benefit more from the deal and that’s why it is ready to part away with US$58 billion, which translates to128trn/- at the current exchange, money that is enough to finance Tanzania’s budget for almost six years.
“Shell with BG is better than Shell alone because of the quality of assets it is buying,” Ahmed Ben Salem, oil and gas analyst at Oddo & Cie in Paris, told Bloomberg on Thursday last week. “It sets Shell up for a few years because they will have better reserves to develop instead of spending on expensive exploration.”
Shell’s reserves have dropped in three of the last four years, while BG’s have increased in six of the past seven, Bloomberg said. Oil companies are typically valued on the amount of oil and natural gas they hold under the ground and investors seek out those that consistently replenish reserves with new discoveries.
Since 2010 Shell’s reserves have fallen by 563 million barrels while BG has added 796 million.Shell will have to cope with an LNG market that’s also going through a slowdown.
The price of LNG for short-term deliveries to Northeast Asia, where the biggest importers are located, has sunk more than 26 percent in the past year to about US$7.10 per million British thermal units, according to assessments by New York-based World Gas Intelligence
“The completion of the BG transaction, which we are expecting in a matter of weeks, marks the start of a new chapter in Shell, rejuvenating the company, and improving shareholder returns,” Shell chief executive Ben Van Beurden last month.
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