Jamidu Katima – Chairman, Energy and Water Utilities Regulatory Authority (EWURA), Tanzania
Jamidu Katima, Chairman of EWURA, Tanzania’s mid- and downstream energy regulator, discusses the organization’s restructured role in the light of new legislation, the importance of promoting local content, and the country’s openness and readiness for foreign investment.
Prof. Katima, could you please begin by introducing yourself and the scope of your role at EWURA to our international audience?
I am a Chemical and Processing Engineering expert at the University of Dar es Salaam. I am the Board Chairman of EWURA responsible for presiding over the Board of Directors which is the highest decision-making organ of EWURA. The Authority regulates four sectors; namely electricity, natural gas, petroleum, and water. Until my appointment, I was the chairman of the EWURA Consumers’ Consultative Council (EWURA CCC), where I worked since its inception in 2005 to protect the interests of consumers in EWURA regulated services.
What is EWURA’s mandate as Tanzania’s midstream and downstream regulator?
In 1999, the Government restructured the way it was handling economic business. In 2001, the Parliament enacted the Energy and Water Utilities Regulatory Authority Act (Cap 414). In 2003, the Government revised the National Energy Policy that introduced an independent regulatory regime. In August 2006, EWURA was fully established. The Natural Gas Industry is classified into three segments: (a) Upstream (exploration and development); (b) Midstream (processing and liquefaction); and (c) Downstream (storage, transportation and distribution). EWURA regulates midstream and downstream petroleum activities by performing technical, economic and safety regulatory functions.
Under the Petroleum Act, 2015 EWURA has the following mandate:
(i) to issue, renew, suspend or cancel construction approvals and operational licences;
(ii) to establish standards for goods and services in the natural gas industry;
(iii) to regulate rates and charges, monitor and evaluate performance of gas activities including levels of investment, cost of services and availability of gas supply;
(iv) to facilitate the resolution of complaints and disputes;
(v) to initiate and conduct investigations relating to technical, economic and safety issues in the delivery of service to consumers; and
(vi) to give any necessary directions to any person granted a licence or approval under this Act.
EWURA is also mandated to promote, among other things:
(i) least-cost investment and security of supply for the benefit of customers;
(ii) appropriate standards of quality, reliability and affordability of petroleum;
(iii) health and safety in the working environment of persons employed in the petroleum industry;
(iv) the use of local goods and services produced and provided in Tanzania;
(v) maximum participation of Tanzanians in every part of the petroleum value chain; and
(vi) competition in petroleum activities in areas open for investments.
EWURA was restructured in the Tanzania Petroleum Act 2015 to promote “the maximum participation of Tanzanians in every part of the petroleum value chain.” Can you explain what changes were made to EWURA’s functions, the effects these changes have had, and the importance of local content?
EWURA was not restructured; however, the Petroleum Act 2015 repealed the Petroleum Act 2008. In the old Act there were no provisions relating to local content requirements. These requirements have now been provided for under the new Petroleum Act. Under this new Act, EWURA’s functions have increased as evidenced in section 30(2)(vi) which provides that EWURA shall promote the use of local goods and services produced and provided in Tanzania. Section 30 (2)(vii) further stipulates that EWURA shall promote maximum participation of Tanzanians in every part of the petroleum value chain. The requirement for local content by investors is provided in detail under sections 219, 220 and 221 of the Petroleum Act 2015.
Section 258(2)(b)(xv) of the Petroleum Act 2015 gives the Minister for Energy and Minerals the obligation to make regulations providing for local content principles including the requirement for technology transfer of knowledge and skills to Tanzanians, these regulations set the base for what the Tanzanian Oil and Gas local content requirements will be in Tanzania. At the moment the Minister has developed draft comprehensive regulations on local content requirements and expectations. As an implementation to the specifics of these regulations EWURA will, going forward, ensure that any subsidiary legislation drafted by EWURA takes into account the requirements of the local content regulations, all principal legislation previously issued by EWURA will be reviewed to take into account these requirements. Applicants for licences will need to meet certain requirements with regard to shareholding structures and number of Tanzanians hired before any license is issued. Once licences are granted the licensee is further expected to meet requirements in respect of local goods and services, the regulations specifically provide what is expected of each licensee in terms of local content. In the Regulations, EWURA is required to ensure that local content objectives are met by undertaking the following controls:
(i) develop a baseline data/information to identify the current capacity and capabilities for Tanzanians to be employed and own companies to become suppliers;
(ii) develop needs assessment of the required capacities to deploy the Tanzanian experts in petroleum industry; and
(iii) identify the areas in which there is no capacity and capabilities and it will not be sustainable for Tanzania to have such a category in place.
The most important objective of local content is to develop and support manufacturing of local goods and provision of local services. Local Content Principles as provided by the Regulations require firms to use local companies for the procurement of goods and services and multinational oil companies to domicile economic activities in the countries of extraction. Physical and human capital development are also central to local content as they stress that it is not trade but the accumulation of physical and human capital that is fundamental for economic growth. The following are the objectives of local content as provided in the Regulations:
(i) to promote the maximization of value-addition and job creation through the use of local expertise, goods and services, businesses and financing in the petroleum industry value chain and their retention in the country;
(ii) to develop local capacities in the petroleum industry value chain through education, skills transfer and expertise development, transfer of technology and know-how and active research and development programmes;
(iii) to achieve the minimum local employment level and in-country spend for the provision of the goods and services in the petroleum industry value chain as specified in the First Schedule;
(iv) to increase the capability and international competitiveness of domestic businesses;
(v) to create petroleum and related supportive industries that will sustain economic development;
(vi) to achieve and maintain a degree of control for Tanzanians over development initiatives for local stakeholders; and
(vii) to provide a robust and transparent monitoring and reporting system to ensure delivery of local content policy objectives.
How open is Tanzania to inward investment and what is being done to attract more foreign investors to the country? Is infrastructure and construction a particular area of focus?
Pursuant to section 7(1)(c) of EWURA Act, EWURA is obliged to ensure the availability of high quality regulated services in the country. In order to achieve this, EWURA is required to device means to attract investments, particularly private sector participation in electricity, natural gas, petroleum and water and sanitation sub-sectors. Thus, EWURA established a number of regulatory tools that not only provide a conducive environment to investmentbut also enhance predictability in its decisions. These are:
(ii) License templates;
(iv) Tariff Methodologies;
(v) Quality of Service Standards;
(vi) Technical Standards (in consultation with Tanzania Bureau of Standards); and
(vii) Facilitation of making Regulations in collaboration with the Ministry of Energy and Minerals.
It is evident that investors need transparency and predictability of regulatory decisions. In order to shorten the negotiation period EWURA has developed Power Purchase Agreements Framework and Standard Power Purchase Agreements for small power plants up to 10MW for different power sources. EWURA has assisted the Ministry of Energy and Minerals to develop Competitive Bidding framework for the large power plants. It is our anticipation that this will significantly reduce the time used for negotiations between our power utility and the would-be suppliers.
Due to its transparency and predictability, EWURA has received a number of awards/recognitions from around the world. These included:
(i) On 8th June 2015 EWURA received Energy Regulator of the Year Award for Excellence 2015 – recognition for exceptional clarity in its objectives creating an environment that meet the needs of investors and consumers.
(ii) In 2011 EWURA ranked one of the exemplary regulators in Africa (Governance & Substance) in a study funded by European Union.
(iii) In 2009 and 2010, EWURA featured high in two Peer Reviews by the University of Cape Town for Electricity amongst regulators from Uganda, Kenya, Zambia, Namibia and Ghana.
Tanzania aspires to be a middle income country by 2025. To achieve this, considerable investment is required in infrastructure. That being the case, infrastructural sectors including energy generation and distribution; road construction; railways; ICT, to mention a few, are necessary. More investments are required in these areas.
What direction do you see the Tanzanian oil and gas industry taking in the future?
The future of the oil and gas industry in Tanzania is bright. So far Tanzania has discovered 57.25 Tcf of natural gas in the recent past, which is the testimony to the fact. A number of exploration activities are ongoing with the potential to hit oil in certain blocks. With this amount of discovered natural gas the Government and International Oil Companies which recently have discovered the natural gas are currently negotiating to start the construction of Liquefied Natural Gas plant to facilitate the export of natural gas by 2025. More investors are expected to enter the sector with a potential to discover more hydrocarbons. We have also companies wishing to invest in other petrochemical industries such as fertiliser. To that end, more jobs will be created and also the Government will earn more revenues in terms of taxes and royalties.
Any other comments you wish to share with our readers?
EWURA’s achievements in both Regulatory Governance and Regulatory Substance have attracted attention from other regulatory bodies in Africa. Due to this, EWURA has hosted delegations from Government and Regulators from Lesotho, Swaziland, Namibia, Zimbabwe, Malawi, Zambia, Kenya, Uganda, Rwanda, and Burundi. Their interest was to learn from Tanzania on both Regulatory Governance and Regulatory Substance. In the course of sharing our experiences, EWURA also learns from them in areas that need improvement.