A Review of the Nigerian Energy Industry

Tanzania oil exploration firms unfazed by price fall

29 December 2014, Dar es Salaam – International oil companies engaged in exploration of oil and natural gas in Tanzania are not likely to reduce their budgets in search of the resources due to political stability and security that the country enjoys, according to economists.

There have been concerns that the companies will reduce their exploration budgets amid falling prices of oil. A barrel of oil is currently selling at US $61 dollars (about 97,600/-) from over US $100 dollars (about 160,000/-) last year.

offshore-oil-rig-Newfoundland-Labrador-Statoil-Canada-Bay-du-Nord-light-sweet-crude-API34-Husky-Energy-Calgary-Norway-EDIWeeklyOn the other hand, local renowned economists told this paper yesterday that Tanzania’s political stability is an advantage that would maintain the oil companies in search of oil and natural gas.

Over a fortnight ago, officials of the state-owned Tanzania Petroleum Development Corporation (TPDC) hinted on a possibility of reviewing the current Model Production Sharing Agreements (MPSAs) to attract more investments due to decreasing prices.

“If the current plunging trend persists, we may have to review the terms of the MPSAs to attract more investments in exploration,” the TPDC Acting Director for Corporate Strategy, Dr Wellington Hudson, said during a seminar held in Bagamoyo.

Dr Hudson explained that the current model, which was drafted in 2013, came at the time of increased productivity of East African basins following discoveries in the deep-offshore in 2010 in Tanzania as well as successes in neighbouring Mozambique, Uganda and Kenya.

According to the expert, the current plunging trend is of concern to exploration activities globally as international oil companies are being reluctant to invest in the area.

However, a senior economist at the University of Dar es Salaam, Dr Haji Semboja, is optimistic that the oil exploration companies would continue to inject money for exploration given Tanzania’s political stability and security.

“There is a relation between the prices of oil in the world market and what oil companies spend on exploration but it should be noted that there are other factors.

“These oil companies consider political stability and security of a country as among factors for investments. They are more comfortable of having the reserves in stable countries,” Dr Semboja told ‘Daily News’.

For his part, Prof Humphrey Moshi, a senior lecturer of economics at the UDSM, was of a view that plunging trend in oil prices is temporary.

“It should also be noted these companies had committed these exploration budgets for a long period of time and thus the decreasing prices this year will not affect their operations as much,” the economist told ‘Daily News’ in a telephone interview.

He added that if one would take a closer look into the declining trend, he may notice some sort of politics amongst the superpowers and OPEC (Organisation of Petroleum Exporting Countries), ‘which has been operating as a cartel.


– Tanzania Daily News

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