Tanzania signs gas deal with France's Maurel & Prom and partners

By Fumbuka Ng'wanakilala

DAR ES SALAAM (Reuters) - Tanzania has signed an agreement with French oil producer Maurel et Prom and Wentworth Resources for the supply of gas aimed at doubling the country's power generation capacity to 3,000 megawatts by 2016.

Oslo Stock Exchange and London AIM-listed Wentworth Resources said in a statement on Monday initial gas delivery was expected to begin between Jan. 22 and April 22 next year.

The natural gas will be supplied to a 532-km government-owned pipeline from the south of the country to the commercial capital Dar es Salaam.

"The signing of the Mnazi Bay gas supply agreement is a significant advancement in the development of the gas industry and lays the foundation for the future domestic gas development in Tanzania," Bob McBean, Wentworth Resources's executive chairman, said in a statement.

Maurel et Prom is the operator of the Mnazi Bay licence with a 48.06 percent production interest, while Wentworth owns a 31.94 production stake.

State-run Tanzania Petroleum Development Corporation (TPDC) retains the remaining 20 percent production interest in the licence.

Under the agreement, the Mnazi Bay partners will deliver to the government's pipeline up to a maximum of 80 million cubic feet per day (mmcf/d) of natural gas during the first eight months, with an option to increase over time to a maximum 130 mmcf/d of gas for up to a 17-year supply period.

The gas price is set at $3 per million metric British thermal unit (mmbtu) escalating with the United States CPI Industrial index, according to details of the gas deal released by Wentworth.

The pricing formula is based on a take-or-pay basis, which contractually binds Tanzania to purchase a fixed minimum quantity of natural gas even if it does not need it during the duration of the contract, one analyst said.

The deal is still subject to final regulatory approval.

Tanzania has 46.5 trillion cubic feet (tcf) of proven natural gas reserves, and expects exploration off its southern coast will result in more finds.

(Editing by George Obulutsa and Mark Potter)