Tanzania is pursuing a $42 billion liquefied natural gas project as it seeks to turn its vast offshore gas reserves into a source of industrial investment, export earnings and long-term economic growth.

The negotiations, which Finance Minister Khamis Mussa Omar says are nearing completion, sit at the centre of a wider effort to attract international capital into energy and critical minerals while strengthening the country’s domestic financing capacity.

The stakes extend beyond gas exports. Tanzania is funding about two-thirds of its 62.3 trillion Tanzanian shilling ($23.7 billion) budget through domestic revenue, as foreign aid dwindles. The government is looking to investment-generating projects and deeper capital markets to help sustain development spending.

Gas reserves anchor Tanzania’s investment strategy

Led by Equinor and Shell, the proposed LNG development is expected to unlock 47.13 trillion cubic feet of natural gas reserves. ExxonMobil, Pavilion Energy, Medco Energi and state-owned Tanzania Petroleum Development Corporation are also partners.

Officials had expected the agreement to be signed before June. “It’s almost there,” Omar said, signalling progress on a project that has been under development for years.

Most of the gas is expected to be exported, although some production will supply the domestic market. The balance between export revenue and local consumption will be important to determining how the development supports Tanzania’s broader industrial ambitions.

The project also strengthens the country’s regional energy role as neighbouring Uganda prepares to begin its first oil exports through Tanzania’s port of Tanga in early 2027.

Critical minerals add to the investment pipeline

Tanzania is pursuing agreements on two critical minerals projects, Omar said, without disclosing their details. He added that US investors were particularly interested in energy and critical minerals.

The parallel negotiations broaden the government’s investment ambitions beyond a single resource project. However, the agreements remain pending, and their financial value and implementation timelines have not been disclosed.

Tanzania also wants to nearly double electricity generation capacity to 8,000 megawatts by 2030. It aims to raise the share of energy from sources it classifies as clean — including hydropower, solar, wind and natural gas — to around 75%.

Delivering those targets will require capital for energy infrastructure alongside the investment needed to develop the country’s natural resources.

Domestic revenue takes on a bigger role

The government’s financing challenge is becoming more pronounced as official development assistance, which once accounted for 40% of the budget, falls to what Omar described as a “very, very negligible” share.

Tanzania has widened foreign investor access to its domestic bond market, launched a sovereign yield curve and introduced reforms intended to encourage corporate debt issuance. It has yet to decide whether to issue an international bond.

Greater foreign participation in domestic debt markets carries risks, however. Omar said the central bank was studying the experiences of other African countries as the government evaluates how far to open the market to international investors.

Tanzania is also considering a new International Monetary Fund lending programme, with a decision expected by June. Its previous $1.7 billion programme, comprising an Extended Credit Facility and a climate-focused Resilience and Sustainability Facility, ended in July.

The challenge for Tanzania is to convert its investment pipeline into operating projects and sustainable revenue while broadening the sources of capital available to finance its development.