by Roger Nellist

Statoil’s seventh Tanzanian gas discovery
Statoil and its co-venturer Exxon Mobil have continued their extraor­dinary drilling success by making another – their seventh – natural gas discovery offshore Tanzania. In October, Statoil’s Senior Vice President for Western Hemisphere Exploration, Nick Maden, announced the discovery of an additional 1.2 trillion cubic feet (tcf) of natural gas in-place, through the drilling of their ‘Giligiliani-1’ well, and said that this discovery opens up additional prospects for the partners’ on-going multi-well drilling programme. The Giligiliani-1 discovery is located on the western side of Licence Block 2, which Statoil operates on behalf of Exxon Mobil and the Tanzania Petroleum Development Corporation (TPDC), and brings the total of gas volumes in-place to 21tcf in that Block. (For comparison: 1tcf = 180 million barrels of oil equivalent). Like the earlier wells, Giligiliani-1 lies in very deep water (in depths of about 2,500 metres), which will make the eventual commercialisation of these gas discoveries technically complex and hugely expensive. The consortium’s drilling rig “Discoverer Americas” has now moved to the central part of Block 2 to drill an eighth well on what is termed the ‘Kungamanga’ prospect.

Mnazi Bay gas sales agreement
In September the Tanzanian government signed an agreement with the licensees of the Mnazi Bay and Msimbati gas fields in southern Tanzania for the supply of gas through the long Chinese-built pipeline to Dar (see Tanzania & Extractives article earlier in this issue).

Petroleum contracts: TPDC officials arrested and released
The ongoing controversy over the undisclosed terms in 26 petroleum Production Sharing Agreements (PSAs) negotiated between the govern­ment, TPDC and foreign oil companies came to a dramatic head on 3 November when the chairman of the parliamentary Public Accounts Committee (PAC), Zitto Kabwe MP, had TPDC’s Board Chairman Michael Mwanda and its acting Director James Andilile arrested for failure to deliver to the PAC copies of the PSAs and certain other docu­ments. The two men were apparently arrested in a committee room in the Parliament building in Dar but, after questioning, were later released without charge. The police said legal clarification was needed from the Attorney General before any prosecution of the TPDC officials could proceed. The PAC believes that the PSAs should be scrutinised by Parliament in the interests of transparency and to ensure that the national interest is protected. Tensions arose earlier this year when the Gas Addendum to Statoil’s PSA was leaked publicly and the terms were then criticised (by Kabwe, among others) as being insufficiently favourable to Tanzania. However, like many other countries, the practice in Tanzania is not to disclose negotiated petroleum and mining agreements, which the par­ties agree to keep confidential for business reasons. It is understood that in Tanzania the terms of such agreements are usually negotiated by an inter-Ministerial GOT team and then approved by the Cabinet before signature. TPDC said it was bound by confidentiality provisions and could not hand over copies of the PSAs unless it got permission to do so from the oil companies concerned, and that it was awaiting guidance from the Attorney General and the Ministry of Energy and Minerals. Minister Sospeter Muhongo then confirmed that his Ministry would not submit the PSAs to the PAC, citing ‘technical reasons’. It is understood that the PAC then warned that it still intended to pursue the matter.

Tanzania to become a major rare-earths producer
Australian-listed Peak Resources Ltd is fast tracking the development of its 100%-owned ‘Ngualla’ rare earth metals (REMs) project in Chunya District, 150 kilometres from Mbeya. REMs are high-value raw materi­als used in the electronics industries and in other hi-tech applications. Discovered in 2010, ‘Ngualla’ is one of the largest and highest grade REMs deposits in the world. The company’s 2014 Prefeasibility Study indicates a maiden ore reserve in excess of 20 million tonnes, containing almost 1 million tonnes of rare earth oxides. The large, high grade and low radioactivity nature of the deposit, that can be mined through open pit operations and processed on site over a period of more than 50 years, should result in a low cost, low risk and highly profitable project. The company expects first production in 2017. (See for further details).

Tougher mining taxation terms agreed
It was reported in October that AngloGold Ashanti and Geita Gold Mine were the first companies to sign a new, tougher tax deal for mining companies – which for several years have been thought to be enjoying too generous a fiscal treatment. In 2008 President Kikwete ordered a review of mining company taxation and appointed a presidential committee to advise the government on necessary changes. The new deal reflects the committee’s recommendations and replaces the earlier Mining Development Agreement (MDA). The new terms are tougher for the companies in four respects. First, royalty will now be levied at the rate of 4% of the gross value of mineral production (instead of 3% of net profit), though the rate will be increased to 5% for gemstones. Second, the 15% VAT waiver has been scrapped. Third, the fee that mining companies pay for services they receive in the mining areas – the Service Levy – has been increased, from the previous flat rate of $200,000 to 0.3% of mine turnover. Fourth, the additional capital allowance of 15% that mining companies could claim in their tax computations under pre-2001 MDAs has also been abolished. When signing these new deals, Minister Muhongo said that Tanzanians were right to complain that the country was not profiting as much as it should from mining and that the situation had now changed. He estimated that Geita district in Mwanza region, for example, would now receive $1.8 million annually in Service Levy to fund development needs, up from $200,000 currently. It is understood that company executives expressed themselves “comfortable” with the changes.

Stamico to take over four mines
The Tanzanian government has decided to take over four mining operations which larger mining companies consider to be unprofitable. The mines will be run by the State Mining Company (Stamico) – a state-owned enterprise established in 1972 – through a newly established subsidiary. In an exclusive interview to The Citizen on 1 September, the Deputy Minister for Energy and Minerals, Stephen Masele, named the mines as: Biharamulo Gold mine (formerly owned by African Barrick Gold); Buckreef Gold Mine in Geita Region; Tanzanite One; and Kiwira coal. Masele said that these mines would be beneficial to Stamico and make significant contributions to state coffers. He cited the Biharamulo Gold Mine (formerly known as Tulawaka) – which has about 100,000 ounces of gold left to mine, on which Stamico can make a profit of TSh 7 billion during the next three years but for which a mining giant like ABG finds the operating costs unduly high. Buckreef is now processing an Environmental Impact Assessment and mining license, whilst Tanzanite One and Kiwira coal are both still operational (the latter with expansion plans).

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