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Seizing the Moment in Tanzania

In Tanzania, new oil and gas legislation, a proactive president fighting against corruption, big gas discoveries, and a potentially game-changing LNG export plant mean that opportunities abound.

“Despite this being a very new industry for us, we are making definite headway in building up Tanzania’s domestic oil and gas capacity and capabilities.”

James Mataragio, TPDC

These days, at least, no one can accuse Tanzania of dithering when it comes to normalizing its nascent oil and gas industry. Last year, the country rolled out a welter of energy policy reform notably enacting three pieces of new legislation: The 2015 Petroleum Act (setting the rules of the game for E&P firms), The Tanzania Extractive Industries Act (ensuring transparency and accountability), and the Oil and Gas Revenues Management Act, 2015 (detailing the fiscal terms). This in itself went a long way towards aligning the sector with international norms. “Despite this being a very new industry for us, we are making definite headway in building up Tanzania’s domestic oil and gas capacity and capabilities,” attests James Mataragio, managing director of the Tanzania Petroleum Development Corporation (TPDC), the country’s state-owned national oil company. What’s more, many of the initial gaps and irregularities in the regulatory framework have now been ironed out. “The TPDC was until very recently, also doubling up as the country’s oil and gas regulator, but the 2015 legislation removes this conflict of mandate and has established an independent state regulator for the upstream part of the value chain called PURA,” he elaborates.

Meanwhile, many credit newly elected President John Magufuli for delivering a clear policy vision for the industry and pragmatic, no-nonsense approach to unblocking bottlenecks that have formerly stymied its development. “Magufuli, nicknamed the bulldozer, is known to be a technocrat and someone with a lot of prior experience in public infrastructure… he is going to be a very results-oriented president and already we can identify a new sense of urgency applied to the energy sector,” reflects Robert Besseling, principal advisor in Africa country risk at IHS.

Already some quick wins have been realized on Magufuli’s brief watch. In a move that signalled a push to expedite LNG development and exports, Tanzania on January 29 announced it had finalized a 2,071.705 hectares land acquisition for the site of a planned two-train LNG plant at Lindi. The news was significant because the facility forms the centrepiece of foreign investors’ gas export intentions and the consortium seeking to build the complex – comprising BG Shell Group, Statoil, ExxonMobil and Ophir – had been withholding final investment decision (FID) due to uncertainty over the land’s ownership. The surprise announcement that Tanzania had beaten out Kenya in a race to carry land-locked Uganda’s oil to international markets via a 1,410-kilometre heated pipeline from Hoima to Tanzania’s deep water port at Tanga represented yet another eye-catching success and cemented the country’s credentials as one of the lead protagonists of East Africa’s oil and gas revolution.

What seems to have particularly delighted the investor community has been the new administration’s clear efforts to streamline bureaucracy, root out corruption and open the country up for international business. “President Magufuli’s measures against corruption have been magnificent and his personal input to maximise the efficiency of all government institutions have been roundly welcomed by international oil companies operating in Tanzania,” asserts Jim Baban, managing director of Heritage Oil, an early entrant that targets plays that have been overlooked and which is aspiring to become the first junior E&P outfit to discover oil in the country.

On eradicating corruption, Magufuli has himself been especially strident. “The way to treat a boil is to squeeze it out, and I have made it my responsibility to do that… I know squeezing out a boil hurts, but unfortunately there are no two ways about it,” affirms the president. On welcoming in investment to the energy sector, the government has also been making all the right noises. “The Government of Tanzania Government is thoroughly committed to working with the private sector, current and new investors, to grow the country together and very much welcomes the participation of European investors in our energy market,” assures Elli Pallangyo, Assistant Director in the Ministry of Trade, Industry and Investments.

Already steps are afoot to streamline foreign interactions with the local market, shorten timeframes and facilitate inward flows of capital. “We are actually right now busy setting up a system where each potential investor is able to meet all the relevant institutions – namely the national oil company, upstream regulator, downstream regulator and state electricity company, TANESCO – at a single joint meeting for speedy decisions… I personally consider that one month is quite enough time to decide whether or not a project is worthy pursuing,” declares Energy Minister, Sospeter Muhongo. “Steadily we are removing all the impediments that have been holding up the production and development of our national gas resource like permitting and land right issues…we are doing all we can to make it easy for foreign entities to reach final investment decision (FID) on energy infrastructure projects,” concurs Secretary of State, January Makamba.

At the same time, many E&P companies have duly noticed an improvement in relations with the state apparatus. “We enjoy an excellent relationship with the TPDC and MEM (Ministry of Energy and Minerals) and receive valuable support and understanding from both on a regular basis… The stance of these state actors is actually greatly appreciated by many of the IOCs operating in out here,” discloses Heritage Oil’s Baban.

Matthew Allan, CEO of Australian junior explorer Otto Energy, which is highly active in the Kilosa-Kilombero and Pangani frontier exploration areas, very much agrees. “We’ve found the TPDC and regulatory apparatus, to be surprisingly open and approachable to the point where they have actively worked with operating companies to accelerate exploration activity in the region… The TPDC, in particular, has recognised the need to be flexible in working with operators to ensure that the best industry practices are being followed in order to deliver the best chance of success in unlocking new discoveries,” he assesses.

Click here to download the ‘Tanzania Inside Oil & Gas’ report 2016

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