Tanzania oil and gas sector vibrancy dwindles in 2018

Dar es Salaam. Contrary to how things were in the past six years, the oil and gas sector in the country saw very few activities taking place in 2018.

The vibrancy of the sector between 2012 and 2017 could be seen in the discoveries of oil and gas turning Tanzania into a new regional hotspot in hydrocarbon explorations.

A total of 55.08 trillion cubic feet of natural gas for both onshore and deep sea in the Indian Ocean was discovered.

Following the discoveries, offshore equals 10.41 TCF which is used to produce gas for electricity and industrial use while the rest of the gas totalling 47.17 TCF was discovered onshore for a number of uses including the LNG project, which is still being planned including carrying out preliminary investigations (Pre-Feed) to identify areas for the project including negotiations.

In view of the case, the government in collaboration with International Oil Companies (IOCs) started plans for the $30 billion Liquefied Natural gas (LNG).

However, this was after the government identified Lindi Region on the south eastern coast of the country as the best place for the envisioned construction of the plant.

The IOCs in the process of establishing the LNG plant include Shell, Ophir, Pavilion, Statoil now (Equinor) as well as Exon Mobil.

Meanwhile, in 2017, the government came up with new laws for the sector which included the amended petroleum Act, 2015; Oil and Gas Revenue Management Act, 2015; Tanzania Mining Act, 2017 and the Natural Wealth and Resources (permanent sovereignty) Act, 2017 and the natural wealth and resources (Revenue and Renegotiation of Unconscionable terms) act 2017.

However, come 2018, activities in the oil and gas sector slowed down.

Reports showed that Tanzania Petroleum Development Corporation’s (TPDC) acting director general Kapuulya Musomba announced that talks for establishing the LNG commercial framework had hit a snag.

This is because of differences in the negotiation between the government and IOCs which could not agree on the modality for who should do what. This is despite the fact that the negotiations started way back in 2017.

The framework is expected to define and compare alternative commercial and financial arrangements involving government and the private sector in a way that addresses the unique attributes of the project.

In view of the disagreement, President John Magufuli was later quoted as having allowed the ball to start rolling after he gave the go ahead for the government to proceed with talks with Equinor on the Host Government Agreement (HGA).

The HGA is also expected to highlight the IOCs and government responsibilities on the gas production, construction of the plant which when completed, the implementation of the project could then continue.

Following the nod from the Head of State, senior vice president and country manager for Equinor Tanzania, Dr Mette Ottøy, was also quoted as telling The Citizen that they were pleased to learn about the approval by the government to progress with the Commercial negotiations for Block 2.

“This will strengthen the relations between Tanzania and Norway even further,” she said.

She said that Equinor has been keen to see progress on the development of the significant gas resources discovered offshore Tanzania.

Adding that the decision will enable Tanzania to sooner benefit from this valuable resource through faster execution of the negotiations and progress of the LNG project.

Equinor Tanzania has been in Tanzania since 2007 and is the operator for Block 2 working together with partners ExxonMobil and Tanzania Petroleum Development Corporation (TPDC) as the license holder.

Fifteen exploration wells have been drilled in Block 2 with 9 discoveries of estimated gas in place reserves of 23 trillion cubic feet.