* Rejects proposals for offshore LNG terminals
* Country debating how much gas to be sold to foreigners
* Next license sale on Oct. 25
By Fumbuka Ng'wanakilala
DAR ES SALAAM, Oct 11 (Reuters) - Tanzania, which is sitting on natural gas reserves estimated at double Europe's annual demand, wants the country's future liquefied natural gas (LNG) terminals to be built onshore to benefit the domestic economy, its energy minister said.
Tanzania and its southern neighbour, Mozambique, are locked in a race to be first to export gas from Africa's eastern seaboard after huge discoveries offshore recently that could transform their struggling economies.
Both face hurdles. Tanzania has yet to finalise its natural gas policy, while debate rumbles on over how much gas should be sold to foreign investors and how much left for domestic consumption in a country historically dogged by power outages.
Britain's BG Group and Ophir Energy have been at the forefront of exploration in Tanzania, while energy majors Exxon Mobil and Statoil have also found gas. BG and Statoil said in March they planned to build a $10 billion LNG terminal.
"No LNG plant will be built offshore. We have rejected those proposals," Sospeter Muhongo, Tanzania's energy and minerals minister, told Reuters on Friday in an interview.
Muhongo said Statoil and BG were expected to submit proposals for a plant soon.
Natural gas is the fastest-growing fossil fuel and the region's proximity to Asia's major LNG consumers makes its reserves attractive to energy majors.
"Tanzanians have been farming since independence, but remain poor. We want the gas economy to benefit all Tanzanians," the minister said.
Like Mozambique, Tanzania needs to overcome challenges before exports commence, including passing legislation to encourage and safeguard investors, securing new investment for costly infrastructure and allaying corruption fears.
Tanzania, which is drafting a new gas policy, plans to hold its next oil and gas licensing round on Oct. 25. It will offer seven deepwater offshore blocks and one onshore.
"The gas policy will be taken for cabinet approval soon," Muhongo said. Once that is done, a bill will be put to parliament.
He declined to put forward a timeframe for the first LNG exports out of Tanzania, East Africa's second-biggest economy.
"These are technical issues. The companies will conduct their own studies to pick locations for LNG plants onshore and decide when they will start construction and ultimately gas exports."
Given their different political and regulatory environments, energy consultancy Wood Mackenzie expects Mozambique to export its first LNG cargo by 2019, while Tanzania will have to wait until 2021.
The Tanzanian government will be keen to show gas windfalls will benefit the whole nation after violent protests in the south earlier this year by residents opposing the construction of a gas pipeline until they get a bigger share of benefits.
The southern Mtwara region, where the demonstrations took place, is one area earmarked by the government as a potential site for LNG plants. The government has accused opponents of fomenting trouble and has promised transparency.
"There is no chance for corruption, favouritism or propaganda in the ongoing gas development," Muhongo said. (Editing by Richard Lough and Dale Hudson)