A Review of the Nigerian Energy Industry

Tanzania: Debate over allocation of oil blocks rages

Oil rigs17 September 2013, Dar es salaam – Tanzania Energy Minerals Minister, Prof Sospeter Muhongo, inspecting construction works on the Mtwara-Dar es Salaam gas pipeline project last month, heard complaints by local labourers over mistreatments on the hands of Chinese supervisors.

At Nyamwage village in Kilwa District, a young man, unhappy with the Chinese, whispered to Prof Muhongo after taking a souvenir photo. “Ok, it’s alright, that’s our own business, we will find time and discuss it,” responded the minister, ordering one of his assistants to take contact details of the young man.

As with many other camps between Somanga Fungu in Kilwa District and Mkuranga’s Vikindu, Chinese workers seemed to outnumber Tanzanians by far at Nyamwage camp, sparking questions from curious journalists to Prof Muhongo and the Project Engineer, Barthazar Mrosso.

“How many Tanzanians have been hired to operate these tractors,” asked Fumbuka Ng’wanakilala from Reuters after Eng. Mrosso had briefed on the 40 tractors at Vikindu. Prof Muhongo and Mrosso confirmed that only the Chinese were operating the tractors. Reason!

“These are specialised tractors with a welding component for the pipeline that most locals cannot operate,” argued Eng. Mrosso, raising eyebrows among journalists on the trip. The Chinese Import Export Bank is financing the 500-kilometre gas pipeline whose construction sparked riots in Mtwara Region earlier this year.

There are rising concerns among locals over foreign domination on the country’s newly found prowess in natural gas reserves. Already, the 19 companies in the oil and gas sub-sector are mostly foreign owned.

Opposition Members of Parliament, private sector and activists are calling for a 10-year suspension of the new blocks’ allocation to avoid a repeat of the mistakes committed in the mining sector.

“A moratorium will not only allow us to manage our new resources effectively, it will also ensure the welfare of future generations,” argues Kigoma North MP on Chadema ticket Zitto Kabwe.

Mr Kabwe, one of several lawmakers who opposed the block allocation last year when Prof Muhongo took over from Sengerema MP William Ngeleja, is equally opposed to the latest decision by the minister to embark on the fourth round of block allocation, against the critics’ demands.

“Let’s avoid a repeat of the mistakes we made in mining where foreign companies are making windfall profits with the country earning peanuts,” says Kabwe.

But, Prof Muhongo, who is credited with renegotiation of several mining development agreements and production sharing agreements in gas, forcing some companies – AngloGold Ashanti, Resolute Resources and Orca Exploration – to pay billions of shillings in corporate taxes to the government, remains defiant.

“We need to stay competitive globally if we are to benefit from this resource because our competitors are making significant development,” argues the geologist, so far regarded by many as a good handler of the ministry’s affairs.

He singles out Mozambique which has over 20 foreign energy companies undertaking exploration, so far discovering over 200 trillion cubic feet of natural gas reserves, beating by far Tanzania’s 43 trillion cubic feet. Prof Muhongo says his ministry is carefully signing new PSAs with foreign companies, but welcomes the locals to participate as well:

“In all the new agreements, unlike the past, we have ensured that TPDC (Tanzania Petroleum Development Corporation) has a stake… we have allocated two blocks to TPDC for future development.”

Tanzania Private Sector Foundation, TPSF, still insists that the minister should suspend the forthcoming allocation of blocks scheduled to start next October through May next year.

“We call upon the government to suspend this latest move to allocate new oil and gas exploration blocks until a policy is ready and the laws are updated,” said TPSF Chairman Reginald Mengi, arguing that under the current legal framework, the locals who have already lost will lose more.

Among other things, the private sector wants the policy and legislation clearly put, with a clause forcing foreign energy companies to reserve some shares for local acquisition. The law in insurance industry already provides for foreign companies to ensure 30 per cent ownership by locals.

Although Minister Muhongo welcomes all interested parties to compete for blocks allocation, the huge investment required to develop such blocks has pushed out many potential local investors.

“Let’s allow these potential Tanzanian investors, albeit small, to participate in the gas economy and leap the benefits in future,” argues Mengi who has chaired the foundation’s local economic empowerment committee for the past five years.

According to TPDC, drilling a single well onshore exploration block requires about 40 million US dollars (over 60bn/-) while the capital for an offshore well exploration triples to 120 million US dollars (over 190bn/-), an amount many Tanzanians can hardly afford.

TPDC records show that so far 19 companies have been allocated blocks to undertake oil and gas exploration in various parts of the country.

The companies, almost all foreign owned, are Pan African Energy, with wells at Songosongo islands; Maurel and Prom with interests at Mnazi Bay; Ndovu Resources/Aminex with blocks at Nyuni, east Songo Songo islands; Petrodel Resources Ltd with blocks as Kimbiji and Afren Plc in Tanga.

Others are BG International with stakes in Indian Ocean deep sea block 1, 3 and 4; Statoil also operating deep sea block-2; Petrobras Tanzania Ltd whose exploration work is at deep sea blocks 5, 6 and 8 in the eastern Indian Ocean.

Dominion Oil and Gas Limited which pairs with Ophir Energy has exploration blocks at deep sea block 7 and Pande East, Beach Petroleum operates on L. Tanganyika, Heritage Oil (TZ) Ltd operates in Lake Rukwa and Kyela basins and Swala Energy trading as Swala Oil and Gas (Tanzania) Limited operates in Kilosa-Kilombero and Pangani basin, Motherland Industries Ltd has exploration work at River Malagarasi basin.

– Tanzania Daily News

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