$42 Billion LNG Project Poised to Reshape Tanzania’s Economy

Tanzania is on the verge of a historic economic transformation as plans advance for a $42 billion liquefied natural gas (LNG) project, the largest single investment in the country’s history. The scale of the project, almost half of Tanzania’s current GDP, estimated at $89 billion, positions it as a potential game-changer for growth, exports, and fiscal revenues.

A Shift in Economic Scale

If finalised, the LNG development would immediately lift Tanzania into the ranks of Africa’s major energy exporters. The investment is being pursued in partnership with international energy giants, including Equinor and Shell, and is expected to anchor Tanzania’s role in global energy markets.

The size of the project is staggering. Capital spending alone is equivalent to nearly 49 per cent of annual GDP, a level rarely seen in frontier economies. During the multi-year construction phase, the project would trigger a surge in foreign direct investment inflows, increased demand for services, transport, and housing, and thousands of construction-related jobs.

Exports and Public Finances

Once operational, the LNG terminal would generate billions of dollars in annual export earnings, reversing Tanzania’s dependence on imported fuels and positioning it as a net energy exporter. With robust contracts, these flows could sustain current account surpluses and provide a reliable stream of fiscal revenues through taxes, royalties, and state participation.

Minerals and Energy experts note that the fiscal impact could be profound. Revenue inflows would provide the government with new resources for infrastructure, education, healthcare, and debt reduction, provided they are managed through transparent, rules-based fiscal institutions.

Jobs and Industrial Linkages

The project is expected to create thousands of temporary jobs during construction but only hundreds of permanent operational roles, reflecting LNG’s capital-intensive nature. The real long-term opportunity lies in industrial linkages. An abundant gas supply can power downstream industries such as fertiliser plants, petrochemicals, and manufacturing hubs, turning Tanzania into a more competitive industrial base.

Risks and Cautions

The potential is enormous, but so are the risks.

• Dutch disease. Large foreign inflows could appreciate the shilling, undermining agriculture and manufacturing competitiveness.
• Price volatility. LNG revenues depend heavily on global gas markets, which are prone to sharp swings.
• Governance. Poor revenue management or rent-seeking could erode the economic benefits.
• Debt exposure. A project of this magnitude requires complex financing. If risks are transferred to government balance sheets, fiscal stress could mount.

Lessons from Mozambique’s LNG sector highlight both the upside of rapid growth and the downside of delays, cost overruns, and governance challenges.

The Policy Imperative

For Tanzania to turn the LNG project into lasting prosperity, five imperatives are clear:

1. Negotiate fair commercial terms to secure long-term fiscal benefits without excessive liabilities.
2. Establish transparent fiscal rules and a sovereign wealth fund to manage revenues sustainably.
3. Prioritize local content by enforcing supplier development and skills training programs.
4. Invest in diversification, channeling LNG revenues into infrastructure, industry, and human capital.
5. Stabilize for volatility, building financial buffers to manage commodity price cycles.

The Outlook

If managed well, the LNG project could add several percentage points to annual GDP growth, transform Tanzania into a major African energy exporter, and provide the fiscal space for decades of investment in development.

But without strong institutions and discipline, the country risks repeating the resource curse seen elsewhere. The opportunity is historic — Tanzania must now prove it can turn gas into growth.