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Tanzania’s LNG project: A USD 42bn guest in a world going green?
On the Swahili coast, where commerce has long shaped the rhythm of life in Lindi and Mtwara, word has spread that an important visitor is drawing closer. His name is “Bwana” Foreign Direct Investment (“FDI”), an honoured “mgeni” we have been preparing for. He is known for bringing jobs, capital and new possibilities wherever he settles. But he never arrives without expectations. He comes because something of value is being offered.
In our case, that value is natural gas, lying quietly beneath our waters, waiting to be transformed into economic opportunity through Liquefied Natural Gas (“LNG”). Natural gas can take different forms depending on how it is processed and used. For Tanzania, LNG is the key vehicle for monetising offshore gas at scale and linking our resources to global energy markets.
Tanzania is fortunate to sit on an estimated 57 trillion cubic feet of recoverable offshore gas, a resource capable of supporting our development ambitions for generations. At the centre of this opportunity is the planned LNG facility at Likong’o near Lindi. Designed to export about 10 million metric tons of LNG each year, the investment required is valued at roughly USD 42 billion. This will be the largest single investment in our history with the potential to reshape not only the energy sector but the wider economy.
The expected benefits are substantial. Construction alone could create around 6,000 direct jobs and more than 140,000 indirect ones. For the government, the fiscal upside is equally significant, with taxes, royalties and profit sharing expected to generate between USD 2 and 4 billion annually and lift GDP by an estimated 2% each year. Additionally, through the Tanzania Petroleum Development Corporation (“TPDC”)’s free carry interest we would not merely be hosting Bwana FDI but would share directly in the long term value created from this national asset.
Yet as we prepare for this long-awaited guest, we do so in a global environment that is anything but straightforward. The world is in the midst of a green transition, with countries tightening emissions targets and introducing mechanisms such as the EU’s Carbon Border Adjustment Mechanism (“CBAM”). At the same time, global energy geopolitics are shifting. President Trump’s return to the White House may have brought a clear reversal of U.S. net zero commitments and a renewed push for fossil fuel dominance. The US’ withdrawal from the Paris Agreement and rollback of environmental regulations has reintroduced both uncertainty and opportunity for LNG producers.
Beyond climate policy, evolving dynamics within Organization of the Petroleum Exporting Countries (“OPEC”) and changing petrodollar relationships are reshaping global energy markets. These shifts may support LNG demand in the near term, but they also intensify competition among new and existing projects. In this environment, LNG retains a strong position, but its long term relevance depends heavily on when projects reach market.
In light of the above, our LNG negotiations appear to be entering their final stretch with mid-2026 emerging as the tentative milestone. At this stage, momentum matters. Prolonged delays risk pushing the project into a less favourable global energy and investment landscape particularly with the reliability issue that the Iran war has exposed. The world still needs credible transition fuels, but rising competition including a faster move to green energy sources means that timing is everything.
Welcoming Bwana FDI requires more than ceremonial readiness; it calls for rigorous fiscal and legal planning. Large scale LNG projects bring complex cross border tax and regulatory considerations, from transfer pricing and permanent establishment risks to cost recovery audits and the treatment of imported engineering, procurement and construction (“EPC”) equipment. These issues might be addressed in the Host Government Agreement (“HGA”) although its role is to define fiscal terms, stability clauses, risk sharing arrangements, dispute resolution mechanisms, and obligations around local content and environmental protection. But the HGA is only the first step; the project must still pass through critical stages such as Front End Engineering Design (“FEED”), and the Final Investment Decision (“FID”) before a final decision will made on the project viability.
Additionally, tax incentives must be carefully designed to ensure that ‘Bwana FDI’ is welcomed without unduly straining domestic revenue. Recent legislative changes demonstrate the intent to create a more attractive fiscal environment. For instance, the Finance Act 2025[1] introduced VAT exemptions on items such as LPG tanks and cylinders for cooking, aimed at reducing costs and encouraging the use of clean cooking energy in Tanzania. Further clarity was also provided in relation to the exemption for the supply of piped natural gas for conversion into CNG for motor vehicle. This amendment sought to resolve the challenges previously faced by taxpayers who were unable to fully benefit from the exemption due to the restrictive reading of the VAT law. At the same time, in order to balance promotion of cleaner energy adoption with the safeguarding revenue streams, excise duty on natural gas was increased. This adjustment was intended to enhance fiscal sustainability and reflect prevailing economic realities, including inflationary pressures.
Experiences from other African LNG projects offer valuable lessons. Mozambique underscores the importance of security and stability, while Nigeria highlights how local content and skills transfer can leave a legacy. Success is not just about landing the investment, but it is about what we retain long after construction ends.
Crucially, the LNG project aligns with Tanzania Development Vision 2050[2] which calls for a diversified, competitive economy and the elimination of extreme poverty. LNG revenues can support social services, expand higher education access, and accelerate formal employment, while responsible gas monetisation supports environmental integrity and climate resilience. It should be noted that Tanzania also holds a competitive advantage: our gas has relatively low CO₂ content. If renewable energy is integrated into LNG operations, the project could rank among the lower carbon LNG developments globally, a compelling proposition as buyers increasingly scrutinise emissions footprints.
In the end, this project is not just about infrastructure or revenue. It is about ambition, lifting citizens, diversifying the economy, and positioning us for decades to come. Like any family preparing for an honoured guest, we must sweep the compound, polish our best utensils and ensure that when Bwana FDI steps through the door, he finds a home ready to host him well. If we do, he will not just visit - he will leave a legacy.
In a world going green, our window may be brief. But brief windows, when wisely opened, can let in a great deal of light!
[1] Tax Alert - Highlights of the Finance Act, 2025
[2] Tanzania Development Vision 2050
