Norwegian energy giant Equinor has decided to write down the value of its Tanzania LNG project on the company’s balance sheet by $982 million.
Equinor noted the write-down will be reflected in adjusted earnings for EPI division in the fourth quarter 2020 results to be reported on 10 February 2021.
While progress has been made in recent years on the commercial framework for Tanzania LNG, overall project economics have not yet improved sufficiently to justify keeping it on the balance sheet.
The project has an anticipated breakeven price well above the portfolio average for Equinor and is, at this time, not competitive within this portfolio, the company said in its statement.
Equinor said it 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 Tanzania LNG in the future.
The company noted it maintains an attractive portfolio of project development opportunities in oil and gas as well as renewables.
This portfolio requires strict prioritization, ensuring capital is allocated towards projects yielding the most competitive returns. Equinor’s oil and gas projects with expected start-up by 2026 have an average breakeven below $35/bbl based on today’s estimates.
Similar for non-sanctioned oil and gas projects with expected start-up within this decade, the average breakeven is below $40/bbl.
Equinor has been present in Tanzania since 2007 when the company signed a production sharing agreement (PSA) with the Tanzania Petroleum Development Corporation (TPDC).
Equinor is the operator with a 6 per cent participating interest, along with ExxonMobil’s working interest of 35 per cent. TPDC has the right to participate with a 10 per cent interest.
Equinor made nine gas discoveries in Block 2 offshore Tanzania with estimated volumes of 20 Tcf of gas in place.