National Natural Gas Policy
Against the background of huge natural gas discoveries since 2010, the Minister of Energy and Minerals, Prof. Muhongo, announced in October 2013 a National Natural Gas Policy. This has been formulated over the last two years through what the Minister described as “a thoroughly consultative process which we did transparently and involved road shows across 12 regions of the country”. The international oil and gas industry, development partners and other stakeholders were also engaged in the process.
The policy provides guidance to ensure that the benefits to Tanzania from the development of natural gas are maximized and contribute to the accelerated growth and socio-economic transformation of the country, including an improved quality of life for Tanzanians. It lays out a comprehensive framework to guide the development of the gas industry in the country, in the expectation that gas will contribute significantly to the goal of Tanzania becoming a middle-income country by 2025.
The policy document runs to 34 pages and has also been published in Kiswahili. It covers the legal, fiscal and institutional frameworks for development of the gas sector and addresses major issues such as: the provision and security of gas infrastructure; domestic gas utilisation, gas exports and gas pricing; management of the gas revenues; meeting the needs of local communities; capacity building and investor responsibilities; environment and safety; links with other strategic sectors; transparency; and regional and international co-operation. The concluding chapter highlights the roles of the many stakeholders in the Tanzanian gas industry.
Also in October, President Kikwete launched the much-delayed Fourth Petroleum Licensing Round – inviting the oil and gas industry to apply for seven offshore deep-water blocks and for Lake Tanganyika North (which is onshore). Investors must bid by May 2014.
It is understood that two further license blocks have been reserved for the government, and the Tanzania Petroleum Development Corporation (TPDC) is seeking partners in a separate process. Successful bidders will negotiate Production Sharing Agreements (PSAs) with government and the TPDC. Negotiations proceed on the basis of the Petroleum Law and the Model PSA (recently revamped to provide for tougher terms for investors). The Ministry of Energy and Minerals expects the PSAs to be concluded by September 2014 – which some commentators think is too optimistic.
Lack of Tanzanian commercial involvement in the petroleum sector
Commercial involvement of Tanzanians in the natural resource sector remains a highly sensitive issue. President Kikwete stressed that the new Gas Policy (see above) will ensure that the future of the lucrative but capital-intensive industry will be in the hands of locals. He stated that under the Fourth Licensing Round Tanzania’s national interest is “more than safeguarded with TPDC as our representative”, adding that the PSAs with foreign oil and gas companies will not repeat the mistakes made in some mining sector agreements.
However, whilst acknowledging that the PSAs are good, the chairman of the Chief Executive Officers Round Table, Ali Mufuruki, called for the Tanzanian private sector to be more involved commercially in the potentially lucrative gas subsector – and that TPDC alone should not be left to represent Tanzania in such a big business. He criticised Muhungo’s Ministry for undermining the local private sector – and pointed to the need to learn lessons from successful petroleum economies like Norway and Malaysia.
There had been calls from the Tanzania Private Sector Foundation, NGOs and the opposition party Chadema for the current licensing round to be postponed and for exploration blocks to be reserved for Tanzanians.