GAS ON THE MIND

Tanzania 2015 | ENERGY | INTERVIEW

TBY talks to Øystein Michelsen, Country Manager of Statoil Tanzania, on the Natural Gas Law, LNG plants, and the company's goals for Tanzania.

Øystein Michelsen
BIOGRAPHY
Øystein Michelsen started his career at the research center of Norsk Hydro in 1981. He was attached to Norsk Hydro’s oil and energy division from 1985, and became head of the operations unit for Norsk Hydro’s oil and gas activities on the Norwegian continental shelf from 2004. When Norsk Hydro’s oil and gas activities were merged with Statoil on October 1, 2007, he was appointed Senior-Vice President for Statoil’s operations in the north cluster. Michelsen obtained his Master’s degree in Applied Physics from the Norwegian Institute of Technology (NTH) in Trondheim.

What aspects would Statoil like to see included in Tanzania's upcoming Natural Gas Law?

We would like to see enough flexibility to enable our project and other projects to progress. We also require laws and regulations that recognize the need for a return on investment. We have made comments on local content policy, gas policy, and the Petroleum Act. Now that the Natural Gas Act is pending, we have the opportunity to contribute, and it is up to the government and law making institutions to draft laws that are suitably attractive to investors. With regard to local content, I feel the impatience of many who would like to see companies staffed by Tanzanians, including upper management. I have been through the whole process back in Norway, and I know it takes time, but it will happen.

As part of the joint venture responsible for Tanzania's future LNG plant, how do you see the export of LNG affecting the overall economy?

There is a huge investment needed to bring the gas onshore. There is a popular misconception that the gas is there. Obtaining it requires a vast investment, which has to be financed. That is why the export of LNG is so important for us in this project in terms of paying for this development to generate a stable and predictable income, which is needed given the enormous up-front payments involved, before you derive any income. There is also the discussion about domestic gas use, which is extremely important politically for Tanzania internally. We completely understand that. Some of the gas will definitely be used domestically, and we are also investigating how this could be done. It is also a matter of establishing customers for this gas. It will take both substantial investment and time. It is important that an eventual gas based industry is profitable and able to pay for the gas, rather than giving away the gas to subsidize a non-sustainable industry. Tanzania, a huge country of 48 million people, will need more of this industry. One project will not transform the economy, thus some people are concerned at the prospect of the resource curse. There is no way that this development should change the whole economic situation for all of Tanzania, but it can make a big difference for people involved, government income, tax income, and the government's ability to actually develop the country in many ways that could make a major difference. It depends on the manner in which off-shore assets in Tanzania are developed. Tanzania, as with Mozambique, is well positioned in relation to other markets, namely those of China, Japan, and India. It could also tap into the South American market.

What milestones does Statoil hope to reach in Tanzania by the end of 2015?

We are working toward having a defined project by concept selection and to actually start up the front-end engineering. You then start significant engineering and field work to establish the basis for the final investment decision which will be about two years later. By the end of 2015 we should be in that phase. It all depends on the technical resource base and the technical solutions; we have still not qualified all solutions for our offshore development, which is a huge challenge in itself. The scheme involves 2,500 meters of water, and is located 100 kilometers off shore. Our ambition is to bring the gas to shore without having any offshore installations, namely via pipelines to shore. We have previously accomplished this in many major projects, but this one is more demanding in terms of depth, in this case, the seabed, which is challenging as a result of the deep valleys and hills. We also need to establish the commercial and regulatory framework.