The Citizen (Dar es Salaam)

30 January 2012

Tanzania: Gas 'Set to Power Economy'

Photo: Tullow Oil
President John Atta Mills turns on Ghana's first oil flow.

Dar es Salaam — The Tanzanian government must ensure that its citizens are fully involved in the gas and oil exploration, production and processing chain, to enable the country to reap maximum benefits from its huge fuel reserves.

That's the advice that experts are floating, in the light of geological surveys and reports, which indicate that Tanzania is on the verge of discovering huge commercial gas reserves that would generate billions of dollars in Foreign Direct Investments (FDIs).

According to the minister for Finance and Economic Affairs Mustafa Mkulo, the inflow of FDIs into the country would boost government revenue and constitute the largest part of exports.

This, he said, would convert Tanzania into a "gas economy." Strategies to prepare the economy to adapt to such huge investments have started, but experts stress that, local people should be duly tuned and given opportunities to participate fully in the preliminary phases of tapping the valuable resources for them to yield good returns.

They further advise that the gas sector should be linked appropriately to the rest of the economy; cautioning that, otherwise, its benefit to East Africa's second largest economy would either be none or minimal.

Dr John Musyoka of the Arusha-based Training Centre for Development Co-operation says: "There is no point in just letting others do the exploration and development of our natural gas potential or any other natural resource.

" Tanzania and other East African countries need to understand that we need local companies and expertise that can accomplish this with minimum support from outside." Experts say the gas industry development will be a catalyst to the predominantly agriculture economy by stimulating other sectors such as supply services, and thus create job opportunities.

They have advised the government to be cautious from the very outset, to avoid blunders like the shoddy mining contracts that caused huge financial losses and bitterness in the past.

"It is high time we opened up new areas for revenue sources. However, we would like to see the government taking charge as a large player just like South Africa and Norway, whose economies are thriving smoothly on the strength of their natural resources," Dr Razack Lokina, a lecturer at the University of Dar es Salaam, said.

The country has proven natural gas deposits of about 7 trillion cubic feet. It is estimated that Tanzania will confirm around 60 trillion cubic feet of natural gas from the current 7 trillion cf.

Tanzania is expected to receive FDI of around $7 billion from just one company, Ophir Energy, and its partners, British Gas.

Other multinational companies like Petrobras and a Norwegian Statoil are undertaking drilling programmes.

"Discussions on how to position the country to best take advantage of the huge natural gas potential have been initiated," Mr Mkulo pointed out in a letter to IMF boss Christine Lagarde late last year.

To prepare the economy for major gas investments, the government is drafting a natural gas master plan as well as a gas and petroleum revenue management Bill. The Bill will cover the budget treatment of gas revenue.

The tax regime will also be reviewed to ensure adequate cover for the gas sector. This will go hand in hand with development of staff expertise in the Tanzania Revenue Authority (TRA) on tax issues associated with the development and exploitation of gas, Mr Mkulo said.

But experts emphasise that the government's determination to transform the nation into a gas-driven economy must be preceded by institution of a legal framework and building institutional capacity.

"We have to swiftly make sure that we have reliable infrastructure, which includes the upgrading of our roads, railways, ports, airports, water and power...We also need to invest heavily in training as well as develop enough personnel along the reformed legal system," said Dr Bitrina Diyamett, the Executive Director of the Africa Technology Policy Studies (ATPS-Tanzania).

About 3.5 trillion cubic feet of the reserves have already been commercialized with natural gas wells being drilled in Songo Songo and Mnazi Bay gas fields in Lindi and Mtwara regions, respectively.

Even if Tanzania cannot have adequate public and private financial and technological resources to do this alone, Dr Musyoka said, the country, and others in the region, must have regional entities that can help explore, exploit and develop the country's natural resources sector, just like other regions of the world.

"We need to develop a way of bringing our business people and public resources together to have companies indigenous to East Africa doing this business. This is the only way we can guarantee employment and a constant stream of positive benefits to our people from our natural resources now and in the future," he remarked.

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