Future of Oil & Gas in Tanzania is Bright - EWURA Chairman
Posted on :Thursday , 23rd June 2016
"The future of the oil and gas industry in Tanzania is bright." This was said recently by Prof Jamidu Katima, Chairman of the Energy and Water Utilities Regulatory Authority (EWURA). Our Correspondent SAIDI MKABAKULI adeptly analyses the role of a regulator in natural gas activities that include processing, transportation, storage and distribution of natural gas in Mainland Tanzania.
WHEN delivering a keynote address at the Second Oil and Gas Conference 2013, on "Planning for Oil and Gas Industry for Rapid Socio-economic Development" the former Executive Secretary of the President's Office, Planning Commission, who is currently Minister for Finance and Planning, Dr Philip Mpango said regulating of production as well as well as revenue flows from oil and gas is absolutely critical to enable Tanzania to establish or confirm independently the volume of natural gas reserves that the country has.
Dr Mpango said the potential size of the natural gas resources in Tanzania and its expected multiple uses require a robust regulatory authority for regulating midstream and downstream natural gas activities that include processing, transportation, storage and distribution of natural gas in Mainland Tanzania.
According to the Minister for Finance and Planning, the concept of robust regulatory is crucial for not only regulating infrastructures but also building the country's capacity for prospecting, writing and negotiation of contracts.
"This is absolutely critical to enable Tanzania to establish or confirm independently the volume of natural gas reserves that the country has and track and regulate production as well as revenue flows. Such information is needed not only for prudent contractual negotiation with foreign investors to ensure fair deals but also for proper planning of oil and gas extraction," Dr Mpango recounted.
He went on saying that regulatory activity will require building up a pool of experts with specialized technical skills and outstanding knowledge in taxation of petroleum products; writing good contracts /negotiation of production sharing agreements and joint ventures; selecting, appraising and monitoring projects; environmental impact assessment (EIA), as well as pricing of oil and gas (geologists, accountants/auditors, economists, environmental experts etc.).
Dr Mpango's remarks were evidently considering the fact that for the past 60 years since 1952, Tanzania has been exploring for oil and gas. According to available data, the first natural gas discovery was made in 1974 on the Songo Songo Island (Lindi Region) followed by a second discovery at the Mnazi Bay (Mtwara Region) in 1982. The Songo Songo natural gas was commercialised in 2004 and that of Mnazi Bay in 2006.
The commercialisation of the two discoveries propelled further exploration both on-and off-shore. "Indeed Tanzania does have a tremendous gas wealth at its disposal with 2.3 trillion cubic feet of proven gas reserves (Index mundi, 2013) and an estimated total of 42.7 trillion cubic feet of on-and offshore reserves (Ministry of Energy & Minerals, 2013; Reuters, 2013).
A recent study by Oxford Policy Management (OPM, 2013) estimated that Government revenues through taxes and returns to the planned national gas company will yield an impressive revenue potential of US$1-2 billion a year, equivalent to 2-3% of GDP," Dr Mpango confirmed in the Second Oil and Gas Conference 2013.
In Tanzania, the role of regulating Natural Gas is bestowed on the Energy and Water Utilities Regulatory Authority (EWURA) which was established as an autonomous multi-sectoral regulatory authority established by the EWURA Act Cap 414 of the laws of Tanzania.
EWURA performs a line of functions from licensing, tariff review, monitoring performance and standards with regards to quality, safety, health and environment. It is also responsible for promoting effective competition and economic efficiency, protecting the interests of consumers and promoting the availability of regulated services to all consumers including low income, rural and disadvantaged consumers in the regulated sectors.
The status of exploration, which according to the available data activities are currently taking place onshore and shallow waters, deep offshore and inland rift basins. Up to December 2012, there were 26 Production Sharing Agreements signed with 18 oil exploration companies. Over 110,000 km of 2D seismic data have been acquired onshore, shelf, offshore as well as from inland rift basins.
As of February, 2013 total of 21,632 square kilometres of 3D seismic data have been acquired from the deep sea. A total of 67 wells for both exploration and development have been drilled between 1952 and 2013, of which 53 wells are in onshore basins and 14 in the offshore basins.
Having a mission to regulate the Energy and Water Services in a Transparent, Effective and Efficient Manner that Promotes Investments and Enhances the Socio Economic Welfare of the Tanzanian Society, EWURA complies with what was addressed by Dr Mpango at the Second Oil and Gas Conference 2013.
The Authority is responsible for regulating these midstream and downstream natural gas activities that include processing, transportation, storage and distribution of natural gas in Mainland Tanzania.
The regulated infrastructures include processing plants, transmission and distribution pipelines, and storage facilities. According to EWURA to date four service providers are actively carrying out midstream and downstream natural gas activities.
These are The Tanzania Petroleum Development Corporation (TPDC), Songas Limited, Pan African Energy Tanzania Limited (PAT) and Maurel & Prom (M&P). Other service providers that are still exploring in offshore and onshore are Ophir Energy plc, BG Group plc (BG), Statoil, ExxonMobil, and Aminex. Moreover, according to EWURA' Chairman, Prof Jamidu Katima 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," Prof Katima underlines. Prof Katima adds that so far Tanzania has discovered natural gas reserves amounting to 57.25 trillion standard cubic feet (Tcf) of natural gas recently, which is a 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 (LNG) plant to facilitate the export of natural gas by 2025," he reveals.
EWURA uses a number of instruments to regulate the sector. However, over all these years, petroleum exploration and production has been guided by the Petroleum (Exploration and Production) Act of 1980 using the National Energy Policy of 2003 which cater for upstream activities.
Nevertheless, on October, 2013 the Natural Gas Policy was formulated to rectify the shortcomings in the above mentioned documents and provide guidance to the increasing mid-and down-stream activities in the natural gas industry in Tanzania.
The Policy provides guidelines for the development of the natural gas industry to ensure optimal benefits to Tanzanians and the national economy in the short, medium and long term. Maximisation of the benefits will be attained through the optimisation of the value chain which consists of mid-and down-stream activities.
The formulation of this Policy was aligned with the National Development Vision 2025, the National Energy Policy of 2003, the Five Year Development Plan (2011/12-2015/16) and the Second National Strategy for Growth and Reduction of Poverty 2010/11 -2014/15 (NSGRP/MKUKUTA II), and other sectoral and cross-sectoral policies.
Moreover, recognising that Natural Gas is a National resources for the benefit of the present and future generation of Tanzania, this Policy has the five pillars which include optimization of benefits to the Government and the people of Tanzania through strategic participation, interventions and equitable benefit sharing; development and strengthening of institutional framework and human capacity to ensure an efficient and sustainable natural gas industry and ensuring a transparent and accountable system is in place towards natural gas revenue management and development of the natural gas industry.
Others include ensuring adequate disaster management systems to prevent adverse impact and protect people's health, safety and environment; and promotion and facilitation of the integration of natural gas industry and other economic sectors in the country in order to accelerate broad based growth and socio-economic transformation.
As it marks its 10th year anniversary, EWURA should underpin Tanzania's Natural Gas Policy to ensure we avoid the resource curse as Dr Mpango indicated in his remarks "Much as hydrocarbons and mineral wealth is intrinsically a blessing, it can easily become a curse.
There are examples of such resources being managed well (efficiently, fairly and openly) and thereby contributing to remarkable improvements in wellbeing, as in Botswana. But there are also examples of where these resources have fuelled civil wars, as in Sierra Leone or the Democratic Republic of Congo (DRC), or led to widespread corruption and poverty as in Nigeria.
Extracting non-renewable sources is, by definition, not a sustainable source of growth over the long-term, and it creates few jobs.
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