By ADAM IHUCHA--
There would be no ‘preferential treatment’ for
Tanzanian investors in oil and natural gas exploration, the state has declared,
dashing a little hope for local business community.
President Jakaya Kikwete, without mincing the words
said Tanzanian investors interested in oil and gas should stop dreaming of getting
special treatment.
The State and the private sector have since late 2013 been
engaged in a back and forth war of words ever since, with the later demanding a
special treatment in oil and gas blocks allotment.
No sooner than immediately after the state had unveiled
its major plans to auction oil and gas blocks, the private sector, led by the
chairman of the Tanzania Private Sector Foundation (TPSF), Mr Reginald Mengi, launched
a spirited movement, demanding a special arrangement to enable local
entrepreneurs engage in gas exploration.
Tanzania opened up the fourth oil and gas licensing
round last October. The bids will be closed in May.
Addressing a symposium organized by religious leaders on
Tuesday, President Kikwete said favouring individuals or a group of people in
the oil and gas sector will only help to enrich a few.
“If the state let Kikwete & Sons Co. Ltd acquire
gas blocks favourably, it is the Kikwete family that will benefit. Mr Kikwete
might donate to charities or help the disabled and the poor if he wishes to do
so. But our aim is that the government should be the custodian and collect gas
revenue on behalf of all Tanzanians” he said.
According to him, investing in oil and gas is not only
expensive and beyond the means of many Tanzanian investors, but it is also a
risky business.
“But again, it must be understood that the state has never
denied exploration license to any local corporation that applied for it in
accordance to procedures,” the head of the state said, stressing:
“Locals are
free to participate in the oil and gas business but only if they follow the due
process”
Mr. Kikwete also ruled out the possibility of earmarking
special blocks to locals separate from the competition of foreign firms.
“Allotting blocks to locals for exploration has also
its own problems, in addition to the fact that it will be equally expensive and
risky,” he said, adding; “If exploration does not yield results, they will
start saying that the state has deliberately allocated to locals areas that do
not have gas reserves.”
He also took his time to explain how the participation
of the Tanzania Petroleum Development Corporation (TPDC) will benefit the whole
country.
The idea is that TPDC will take between 65 per cent
and 70 per cent of the profits accrued after oil and gas firms have deducted
their operational costs.
TPDC is eventually expected manage its own exploration
and production like Statoil, Petrobras and Petronas firms in Norway, Brazil and
Malaysia, respectively.
“We want to form our own Statoil like the Norwegians
did,” President Kikwete noted.
The state intends, though, to explore how locals would
participate in the oil and gas business at the production stage, most probably
via TPDC, but officials still figure out how this can be done.
But TPDC might either enter into partnership with
local firms or sell shares.
But even then, TPDC and any other firms participating
in the oil and gas business will be subjected to the same laws as foreigners.
“Read my lips,” the President added. “There are no
favours here.”
He also announced that plans are afoot to establish a
sovereign fund. All funds generated from the gas sector will be put in the
fund.
The law will indicate how much should be allocated to
the country’s budget each year and this will help ensure that future
generations benefit from revenue generated from the gas sector, Mr Kikwete
said.
Major recent natural gas finds in
offshore Tanzania have bolstered the country’s profile as one of the World’s
major hydrocarbons producers.
Until September 2013, Tanzania had
discovered 43.1 trillion cubic feet of recoverable natural gas reserves, worth
$500 billion.
Gas deposits are anticipated to boost
domestic growth in the medium-term, as further gas explorations are
planned.
Energy and Minerals Minister, Prof
Sospeter Muhongo, hopes that processing of natural gas into LNG is a lucrative
business that is expected to boost the national economy by 2025 as the global
demand for the commodity will almost double.
Prof. Muhongo says that Tanzania is in
strategic position to market natural gas, given its closer tie with Asia which
anticipated to account for 60 per cent of global demand for LNG come 2025.
Indeed, global demand for LNG, which
stood at 240 million metric tonnes per annum in 2012, is anticipated to hit 440
million metric tonnes per annum by 2025.
More recently, the BG group has
announced that they have sufficient resources for a two-train LNG project in
Tanzania.
“The aim of our appraisal programme now
is to optimise future development plan and place the most economic gas into the
proposed project first to extract the most value across the chain,” reads part
of BG group report.
The company now has a total of 15
trillion cubic feet, thanks to an increase in total recoverable resources for
the Mzia discovery and across Blocks 1, 3 and 4 offshore in southern Tanzania.
Tanzania also plans to boost its
gas-based power capacity by 900 megawatts, taking the country's generation
capability to 2,400 megawatts by 2015-16.
State plans are to generate power to
meet the country's demand. Also will encourage the use of gas in institutions,
household, motor vehicles, and then for export of LNG.
Oil-fired power plants currently
account for 45 percent of Tanzania's power generation costs, followed by
gas-fired power plants at 42 percent and hydropower stations at 13 percent,
according to Tanzania's state-owned power utility, TANESCO.
Tanzania's peak power demand stands at
around 900 megawatts, while its installed capacity is 1,500 megawatts.
To make ample gas available across the
country, the government is planning to build two new pipelines, totaling 1,400
kilometers long, connecting major areas.
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