TANZANIA TOPS GAS LEAGUE WITH SH 7.5 TRILLION: REPORT

A new report ranks Tanzania highly in terms of attracting investment in the gas sector in Africa even as Doubting Thomases continue to hold out.

The news has delighted the Tanzania Petroleum Development Corporation (TPDC), which says international oil and gas companies (IOCs) operating here have invested $4.7 billion (about Sh7.52 trillion) in the sector so far.

The amount is over a third of the $12.7 billion foreign direct investment (FDI) that Tanzania attracted last year.

According to British market intelligence firm Business Monitor International (BMI), Tanzania has even overtaken South Africa in attracting oil and gas investments. TPDC attributes this to an increasingly competitive investment climate—which some analysts consider over-generous. “Tanzania, Angola and Mozambique are currently the most appealing African countries for oil and gas investments,” the report notes. The countries have a more appealing environment for investment than South Africa.”

The BMI Oil and Gas Insight report has it that South Africa has lost out in the league because oil and gas companies are holding back investments in reaction to the amended petroleum law.

Linking the development to the recently-leaked production sharing agreement (PSA) between Tanzania and Statoil, a sectoral expert said investors are avoiding South Africa because it has fixed the loopholes for revenue leakages. Speaking on condition of anonymity, he said the ranking was a positive development for the country but warned of limited benefits if the right policies and regulations are not in place.

Lawmaker Zitto Kabwe, who has been vocal on the hyped prospects, says Tanzania deserves the high ranking owing to its abundant gas resources but goes on to urge caution on the anticipated benefits and competitiveness of the industry.

He told The Citizen on Saturday: “All laws must be enacted to create certainty. Currently, the sector isn’t predictable. More so, contracts must be open. The recent leak of the Statoil contract is a sign that the sector will suffer political pressure in the near future.”

Analysis of the leaked Statoil report shows that if the PSA is fully implemented, the government could lose revenue amounting to $400 million (Sh672 billion) to $1 billion (Sh1.68 trillion) yearly. TPDC dismisses the claims and argues that they are unfounded and politically motivated since the 2007 contract signed with Statoil adequately catered for the national interest. “The estimated investment that has been made by International Oil and Gas Companies (IOCs) operating in Tanzania is estimated to be $3.2 billion in offshore areas and $ 1.5 billion in onshore areas,” TPDC Managing Director Yona Killagane said this week.

According to him, the Government is developing appropriate policies and legal frameworks to guide future exploration and exploitation of the resources. The exercise has been participatory, he added, and involved all stakeholders

“There is, therefore, no uncertainty in the policies,” he said. “It is not true that the policies have been putting off investors.” Tanzania’s competitive edge includes stability and tranquility, he added.

Tanzania has made significant offshore gas discoveries in the past two years, with an estimated reserve of 50.5 tcf, which is equivalent to about 9.6 billion of barrels of oil. According to Mr Killagane, the value before taking away the costs of discovery, development and marketing at the price of $100 per barrel is about $960 billion (about Sh1,536 trillion).

Since the gas has been discovered in deep waters and about 100 kilometres from the shore, it will take at least seven years before it is available for major projects. The reserves available are enough to undertake multi-billion shilling projects such as an LNG project, he added.

TPDC says the gas will also be used to generate power for domestic use and manufacturing of fertiliser and also as alternative source of energy in industries. The priority will be domestic projects to create jobs, however.

“At full production, annual revenue collections by the government (could) reach between $3 billion and $6 billion in the two different project simulations,” says the IMF in its latest country report.

A local content law must be quickly enacted to enable Tanzanians participate in the value chain of the industry, Mr Kabwe argues.

In a recent sectoral policy brief, Mr Norbert Kahyoza says: “A gas economy can, with the right policies and strategies, deliver significant human development. But this requires strategic domestic participation.”