Why Bunge team does not want Tanzania to renew Songas deals

Dar es Salaam. The special parliamentary committee formed by Speaker of Parliament Job Ndugai in January to investigate the natural gas subsector has advised the government not to renew the power production and gas drilling contracts with Songas when they expire in 2024.

Reading the committee’s findings yesterday in Dodoma, committee chairman Dunstan Kitandula (Mkinga-CCM) said the contracts with Songas were lopsided and have resulted in losses to both the government, Tanesco and the Tanzania Petroleum Development Corporation, amounting to hundreds of billions of shillings.

Mr Kitandula, who is also the chairman of the Parliamentary Committee of Energy and Minerals, advised the government to review how the Songas project was established and its nature so as to ascertain government’s investments in it and whether the same government benefited from its investments in the project.

“Negotiations should then be initiated to ensure Tanesco and TPDC’s rightful shares are allocated in the Songas project,” Mr Kitandula noted adding that the Songas contracts should also be renegotiated.

Mr Kitandula said from its investigation the special committee has reasons to believe that Songas has already returned investments costs and now it is “eating” profits.

The contracts signed between Songas and the government allow for the two to part ways if Songas has returned the costs of its investments by 2024. Mr Kitandula said the committee is of the view that Tanesco and TPDC’s shares in Songas are not enough considering the fact that the two gave for free its key assets, including the four power production plants that Tanesco gave for free and all the Songosongo gas wells that TPDC gave. These assets were not valued even as TPDC was given 28 per cent shares and Tanesco 9.5 per cent.

Mr Kitandula also said it has found that Tanesco carries all costs associated with Songas power production investment that include capacity charge, energy charge, operational costs of Songas, Songosongo gas processing plants, and the Songosongo-Dar pipeline.

“Tanesco pays transport costs and taxes of Songas turbines spare parts from overseas (Sh3.23 billion). Importation charges of spare parts were Sh3.15 billion and Sh69.2 as transportation costs, Mr Kitandula noted.

He added that the power production agreement allows Songas to shut the turbines to force Tanesco to pay its debts which has denied Tanesco Sh27.98 billion revenue (Sh10.17 billion as profits) in only two months.

“Since 2004 to January 2018 the debt Sh116 billion (Sh135 billion as direct charges and interest rates as Sh51 billion).”