7 July 2014

Tanzania: TPDC Dismisses Claims of Losing Out in Contract

TANZANIA Petroleum Development Corporation (TPDC) has dismissed as unfounded claims that the country risks losing a whopping one billion US dollars (over 1.6trn/-) annually under the Production Sharing Agreement (PSA) with StatOil and ExxonMobil.

Kigoma North legislator, Mr Zitto Kabwe, had posted on social media networks what he terms as leaked PSA between TPDC and StatOil, saying the country stands to lose huge amount of money under the deal.

But, the government will earn 61 per cent of revenues from natural gas while StatOil and its partner ExxonMobil will share the remaining 39 per cent under the model PSA on exploration and production of natural gas, according to TPDC Managing Director, Mr Yona Kilagane.

Mr Kilagane and TPDC's Board Chairman, Mr Michael Mwanda, explained to 'Daily News' in separate interviews that such contracts are open for public scrutiny.

"As a parliamentarian, Mr Zitto knows laid procedures for obtaining such documents. It is not proper to claim the PSA was leaked and yet in reality it can be obtained by anyone.

"It is unfortunate that this issue has taken a political dimension where people look at one side of the deal and ignore available data," Mr Mwanda told 'Daily News' in a telephone interview.

According to Mr Kilagane, StatOil and ExxonMobil are still exploring for oil and natural gas in nine deep-sea wells in which they have so far spent one billion US dollars.

"They are now drilling at Binzari-1 which is 100 kilometres offshore. All production sharing agreements for oil and natural gas are available for anyone who is interested," Mr Kilagane remarked.

For his part, Mr Mwanda expressed concerns that though the deal puts national interests ahead of investors some politicians are using it for 'political mileage' through distortion of facts.

The TPDC's executives explained further existing PSAs were purely meant for exploration of oil but the government decided to include an addendum to enable the country earns its share if the companies involved in exploration of oil strike natural gas instead.

"This is due to the fact that if we discover oil today, its production and prices are well known in the world market. However, prices for natural gas depend on how much has been discovered and available infrastructure to transport the resource.

"In all PSAs worldwide, there are sections (addendum) which spells out how the respective country would benefit from gas that would be discovered.

We decided to do the same as it was apparent we would strike natural gas before oil," Mr Kilagane explained.

In his postings, Mr Zitto admitted however that the "leaked document" is not the PSA per se, but an addendum to the original PSA for Block 2 to take account of the fact that the discoveries are of natural gas, not oil.

Proven gas discovery in Tanzania currently stands at 50.5 trillion cubic feet (tcf) which is equivalent to 9.6 million barrels of oil.

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