Equinor has taken a write down of the value of its Tanzania LNG project, wiping $982 million off its books.
The company will report the charge in its fourth quarter results, which are due to be reported on February 10.
The Norwegian company said progress had been made on the commercial framework for the Tanzania project but that overall economics “have not yet improved sufficiently to justify keeping it on the balance sheet”.
Tanzania LNG has a breakeven price of “well above” the portfolio average for Equinor, and the plan is “not competitive within this portfolio”.
The Norwegian company said it would continue talks with Tanzania on the commercial, fiscal and legal framework.
The companies and government have been holding talks on a host government agreement (HGA), but progress has been slow.
The Citizen newspaper reported in December that talks on the Tanzania LNG HGA were expected to restart in this month, after a year-long delay.
Finding the balance
Equinor’s projects that are starting up by 2026 have an average breakeven of below $35 per barrel, it said. Projects that have not yet been approved but are expected to start up this decade have an average breakeven of below $40 per barrel.
The company has a 65% stake in Block 2, while ExxonMobil has 35%. State-owned Tanzania Petroleum Development Corp. (TPDC) has an option to take a 10% stake. Equinor has said production from Block 2 might be 7.5 million tonnes per year of LNG.
Equinor has made nine discoveries in Block 2, which hold an estimated 20 trillion cubic feet (566 billion cubic metres) of gas in place.
The discoveries are 100 km offshore in water depths of 2,500 metres. The company has reported the presence of “large underwater canyons” that make the seabed challenging.
A subsea pipeline would run from the discoveries to an onshore site, north of Lindi. While most of the gas would be processed for export, around 10% would go to the local market.
The company has said investments in Tanzania have passed $2 billion. Equinor reported in its 2019 annual report that the licence had expired in 2018 but that talks were ongoing.