3 February 2013

Tanzania: Dar Firms to Benefit From Global Gas Contracts

TANZANIA'S increased attractiveness to international investors and multinationals has sparked a scramble for the country's top corporate lawyers by the world's leading legal advisory firms hunting for new revenues in frontier markets.

This comes as the government has recently raised its estimate of recoverable natural gas reserves to 33 trillion cubic feet (tcf) from 28.74 tcf following recent big discoveries offshore.

"These discoveries are an indication that Tanzania is now becoming one of the natural gas hubs and a new frontier in oil and gas exploration in the east Africa region and the world at large," says Deputy Energy and Minerals Minister George Simbachawene.

Such a dispensation, many agree, would call for local legal minds to understand the intricancies of such global contracts. Recently, five Tanzanian lawyers were among those ranked as the world's top in the legal profession by the 2013 Chambers Global Guide.

The guide ranks the world's leading law firms and attorneys based on client feedback and peer input. "The lawyers have been listed and recommended as leaders in their field, in the Chambers Global 2013".

Chambers is unique among legal directories in that the rankings are based on the conclusions of independent researchers from London. They review material submitted by law firms, interview clients and consult public filings on transactions that the firms have worked on.

The guide is respected by lawyers because it is not "pay-to-play" -- that is, the rankings are not based on whether the firms have paid to advertise in the directory. According to the guide, Tanzania's Ms Fatma Karume was recommended in General Business Law:

Dispute Resolution, while Mr Gasper Nyika in General Business Law: Dispute Resolution and Mr Protase Ishengoma in General Business Law. Others are Mr Sadock Magai in General Business Law and Samah Salah in General Business Law: Dispute Resolution.

Reacting to the news, the IMMA new Managing Partner, Mr Lawrence Masha, who recently took over from Mr Protase Ishengoma, said it was a confirmation that Tanzanian lawyers were up to the standards of handling international cases.

IMMA, which is part of Juris East Africa, has a partnership with DLA Piper, a Global Law firm. This comes against the backdrop of Tanzania's increased attractiveness to international investors and multinationals having sparked a scramble for the country's top corporate lawyers by the world's firms hunting for new revenues in frontier markets.

About 10 of the top 16 global law firms have inked partnership deals with the region's top corporate law firms, according to the International Financial Review 1000 (IFRL1000), a research firm that ranks global legal houses.

The research indicates that 12 international firms are active, aiming for an edge in bidding for international legal tenders in projects located in eastern Africa. The rising interest in the region is linked to the recent trooping to the region of foreign investors chasing multi-billion shilling infrastructure deals, legal work for multinationals with regional operations and natural resource projects, especially oil and gas exploration deals.

These activities are generating millions of shillings in legal fees, making it critical for top international firms to have a local footprint. Mr Ishengoma said the region is considered as the last frontier and this has seen many multinationals come to do business in different African countries.

"The big boys in the gas business have come into Tanzania and this calls for increased capacity in the legal handling of such international deals including project finance, infrastructure among others," he said. In recent months, the region has been a centre of oil and gas exploration after several big discoveries including Tanzania's success to reach 33m tcf of gas so far," he said.

Mr Ishengoma has been the Managing Partner for the firm for over a decade, and said his handing over to the new Managing Partner was to make younger people breath in fresh ideas into the institution. For now, he would strengthen the department that handles the extractive sector.

Last year, investors' eyes, both local and foreign, locked on Mtwara region and off its coast with excitement and purpose. The region, hitherto considered among the poorest in the country, came to limelight following the recent massive discovery of natural gas reserves.

According to the Mtwara Regional Commissioner, Mr Joseph Simbakalia, the recent discoveries and rich potential for oil and gas have put the region on the verge of becoming the new and future growth pole of the country's economy. He said several billions of shillings were expected to flow into Mtwara for investment in the development of associated materials supply, engineering services and logistics support services.

"An indicative cumulative cash flow from the projects shows that investments will exceed US$ 1 billion after two years and top US$ 9 billion within the first ten years," he said. Similar views were expressed by the CEO Roundtable of Tanzania that the discoveries of vast deposits of natural gas has the potential to lift the country from the category of least developed countries to a modern and prosperous, gas fuelled economy.

Foreign investors showed increased interest in Mtwara Freeport Zone ahead of gas and oil exploration activities. Already, the Export Processing Zones Authority (EPZA) and the Tanzania Ports Authority (TPA) have invited bids for leasing plots of between 6,200 square metres and 15,900 square metres area earmarked for oil and gas firms supply base.

EPZA research and planning manager James Maziku described the response to the invitation so far as positive. "Many companies have shown interest to invest in the (Mtwara Freeport) zone -- it's an indication that investors are eager to operate in the area," he said, noting that the respective authorities will meet soon to evaluate applications.

The Special Economic Zone Act 2006 and the EAC Customs Union (Freeport Operations Regulations) stipulate that companies seeking to undertake operations that provide services to oil exploration and gas extraction companies, should be limited to warehousing and storage, as well as labelling, packaging and repacking; sorting, grading, cleaning and mixing; breaking bulky; simple assembly and grouping of packages.

Gas-rich but underdeveloped Mtwara region has earmarked about 110 hectares for the Free Port Zone, with the first phase of the EPZA/ TPA joint project on 10 hectares scheduled to operate as an oil and gas supply base. The current investment in oil and gas exploration in Mtwara region has exceeded 300 million US dollars (about Tsh450bn/-).

By September, the government had raised its estimate of recoverable natural gas reserves to 33 trillion cubic feet (tcf) from 28.74 tcf following fresh and big offshore discoveries. The World Bank's Jacques Morisset in fact came to opine that these proved and potential reserves could be a game changer for Tanzania.

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