Tanzania Daily News (Dar es Salaam)

Tanzania: Private Sector Demands Role in Gas, Oil Business

THE fourth licensing round for the country's eight oil and gas blocks was launched in Dar es Salaam last Friday.

Seven deep offshore oil and gas blocks in the South Eastern regions of Lindi and Mtwara and one in the North Lake Tanganyika were put on offer for successful bidders. The deep offshore blocks are located in water depths of 2,000 to 3,000 metres.

The Lake Tanganyika North Block is located in water depth of up to 1,500m.

This round was delayed since September 2012 to wait for the new Natural Gas Policy of 2013 which was approved a couple of days before the launch.

But while the international oil and gas companies are vying to invest in the lucrative but expensive gas and oil industry, concerns are rife over local ownership of a stake in the newly discovered wealth. The government is keen to dispel fears among the people that the nation will not gain from the new found wealth.

The message it wants to convey is the government is working in the best interest of the nation and the people in managing the new gas bonanza.

The government says new investments in the blocks will be under new production sharing contracts where the state will take up to 75 per cent.

"The production-sharing formula will either be 35 per cent to investors and 65 per cent to the government or 25 per cent to them and 75 per cent to us," President Jakaya Kikwete said at the launching ceremony.

The majority shares of the state in the new investments will be under the Tanzania Petroleum Development Corporation (TPDC) on behalf of the people.

It is expected that the corporation will later on be restructured to help the country regulate better its vast natural gas discoveries and eventually will be split into two separate bodies - a regulator and a publicly-owned commercial oil company.

The latter will then sell the shares to Tanzanians through an Initial Public Offer (IPO). "We will look at the possibility of selling TPDC's shares in production-sharing agreements through initial public offers (IPOs) in the future to enable more Tanzanians to participate in the oil and gas industry," said Mr Kikwete.

But the local businessmen under the umbrella of the Tanzania Private Sector Foundation (TPSF) are not satisfied with the arrangement. They want to be given special preference in gas and oil investments.

They take as disparaging remarks by the Minister for Energy and Minerals, Prof Sospeter Muhongo that investments in the oil and gas exploration and production were too expensive for local businessmen.

The Chairman of the Chief Executive Officers' Roundtable (CEOrt), Ali Mufuruki said at a meeting last Saturday that the production sharing agreements with the state getting the majority of stake in the new investments were good to ensure that the government does not lose out to the multinational companies when gas production goes commercial.

He, however, said they were not satisfied with the idea of TPDC to represent all the people. "We know the PSAs are very good - but what we are saying is that we cannot leave TPDC only to represent us.

This is a multi-billion shilling industry and we cannot be represented by the TPDC only, we as private sector should get involved," he said.

Commenting, Prof Humphrey Moshi of the University of Dar es Salaam said the new arrangement where the state will retain majority of the stake in the new gas and oil investments was important to ensure Tanzanians participated in the ownership of the discovered wealth.

"It is a very important arrangement that will ensure that the nation owned its new wealth. It will be very important in retention at home of enormous benefits of the big investments in the sector," he told the 'Business Standards' in an interview.

He said instead of complaining local businesses should join to raise capital and compete with other investors for the blocks. "The private sector needs to change. They should not always complain. They need to raise capital and compete," he said.

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