Tap Turner

The government of Tanzania hopes that its gas reserves will provide a substantial boost to the nation’s economy. Current estimates put the country’s stock at between 43 trillion cubic feet (tcf) and 51 tcf; however, the Ministry of Energy and Minerals believes that this could rise to over 200 tcf by the end of 2015 as more blocks are explored. Blocks 1 through 8 have already been tendered, with numerous international companies involved. BG and Ophir currently hold Blocks 1, 3, and 4; Statoil and ExxonMobil have Block 2; Petrobras and Shell are in Blocks 6 and 8; and Block 7 is with Dominion Petroleum. There are then a further 15 blocks spread among a number of smaller companies. Blocks 9, 10, 11, and 12 lie closer to Zanzibar and have experienced a number of delays and setbacks. In 2003, Shell began negotiations for a production-sharing agreement (PSA) for the four blocks; however, discussions often came to a standstill over how the profits would be shared between the governments of Zanzibar and mainland Tanzania. Zanzibar believed that any profits should go solely to the semi-autonomous region, while Tanzania believed it had a right to a share of any profits made. Shell’s application remained in progress for a decade until August 2013, when it finally signed a Memorandum of Understanding (MoU) with Zanzibar; however, executives from Shell stated that due to the ongoing nature of the negotiations the details would remain undisclosed for the time being.

At present, there are 17 international oil companies conducting exploration in Tanzania, with a total investment of over $680 million spread over 2013 and 2014. The World Bank has estimated that a total investment of between $20 billion and $40 billion will be needed to fully develop all of the country’s potential reserves. In an effort to continue with the country’s exploration plans, the government recently closed bidding for seven new offshore blocks and one in Lake Tanganyika North. The licensing for the Fourth Deep Offshore and North Lake Tanganyika, totalling just over 30,000 square kilometers in total, officially closed on May 15, 2014, and the government and relevant authorities have been deliberating over five bids from as many companies. Many international companies were involved in the bidding process with Gazprom (Block 4/3B), Mubadala (Block 4/2A), Statoil and ExxonMobil (Block 4/3A), Ras Al Khaimah Gas (Lake Tanganyika North), and China National Offshore Oil Corporation (Block 4/3A) currently under consideration. When the successful bids have been decided, the winning companies will be invited to take part in a PSA with the government and Tanzania Petroleum Development Corporation (TPDC). Industry experts believe that there is a high chance of successfully discovering economically viable resources in these blocks, meaning competition is high.

While companies are hard at work exploring Tanzania’s territory, the government has also been looking at the best way for the country’s reserves to benefit all. The Ministry of Energy and Minerals believes that the gas sector could provide the government with between $2 billion and $2.5 billion in revenues per year over a period of 30 years once commercial production commences. The Natural Gas Policy will be the first of its kind for Tanzania, and it is hoped to implement some much needed regulations for the sector allowing the government and the country to benefit from its resources. A draft was released in October 2012, but faced strong criticism from international oil companies (IOCs). A later draft release moved to appease many of the sectors concerns; however, it still faced some criticism in the way it left a number of major points unsaid, while also listing out numerous objectives leading to many regulatory grey areas. However, while the regulations still need some tweaking, IOCs and international investors are pleased with the progress the government and the sector is making.