UK: Licensing Round And Gas Policy Progress

Last Updated: 17 June 2013
Article by Peter Kasanda, Paul Jones and Lucy Minde

May has been a busy month in Tanzania's energy sector with the gas industry once again dominating headlines. The circulation of a revised gas policy, announcement of a fresh licensing round and delivery of government's energy budget for the coming year has kept commentators busy while troubles in Mtwara have once again raised security concerns.

Further draft gas policy released

The Ministry of Energy and Minerals this month released the third draft of Tanzania's Natural Gas Policy prior to the presentation of its budget for the coming year. The release of the latest draft policy was preceded by a workshop organised for members of parliament to brief them on the contents of the revised document.

Attached to this briefing is a summary of the contents of the draft which, while largely similar to the initial version, contains certain key changes including more extensive references to the role of a National Oil and Gas Company though it is unclear how this will interact with the incumbent TPDC.

International investors will need to seek further clarity on the likely structure of the National Oil and Gas Company, the aggregator and the government's proposals for investment in and ownership of natural gas infrastructure. Further details on pricing structures and domestic market supply obligations will also be anticipated and should become clearer once drafts of the Natural Gas Bill (which will become the Natural Gas Act) and Utilization Master Plan are available. MEM expects to publish the policy in June this year.

4th Tanzania offshore licensing round

The government through the Tanzania Petroleum Development Corporation announced the dates for a fourth deep offshore licensing round earlier this month. The licensing round will officially be launched in Dar es Salaam on 25 October and will remain open until 15 May 2014. A total of seven deep offshore blocks together with the North Lake Tanganyika block (which had previously been reported to have been awarded to Total) will be auctioned as part of the round. TPDC announced that it will reserve a further two blocks over which it will pursue an alternative exploration strategy in conjunction with competitively sourced partners.

This licensing round was cancelled last year pending the publication of a government policy on oil and gas exploration though the latest draft of the Natural Gas Policy makes very clear that upstream activities (including licensing issues) will be guided by a separate policy document.

MEM budget approved

The 2013/2014 budget for the Ministry of Energy and Minerals was approved on 25 May 2013 after its presentation was adjourned following the outbreak of riots in Mtwara.

Some highlights of the 1.102 trillion Tanzanian Shilling budget include:

  • 90% of the proposed budget will be allocated to development projects, largely with the aim of generating a reliable domestic electricity supply
  • Funds have been set aside for the construction of two power generation plants in Dar es Salaam with a combined capacity of 390 MW
  • USD 800 billion Tanzanian Shillings (approximately USD 500 million) set aside for the restructuring of Tanesco (the specifics of which will be announced at a later date).

Mtwara riots

Rioting broke out in the southern Town of Mtwara on 22 May soon after the Minister of Energy and Minerals, Hon. Prof. Sospeter Muhongo, announced in his proposed 2013/2014 budget speech that the government would continue with its plans to construct a gas pipeline from Mtwara to Dar es Salaam. Flyers had reportedly been distributed in the town prior to the presentation of the budget calling on the residents of Mtwara to pay close attention to the Minister's comments on the pipeline construction and encouraging a general strike in protest.

There have been conflicting reports of the number of people who died in the riots with most publications reporting three including that of a pregnant woman. The riots also resulted in widespread destruction to property. The police have been accused of carrying out some of the destruction and looting.

The government has issued statements condemning the riots and promised to arrest those it believes to be responsible for incitement. Parliament has also appointed a select committee to investigate the riots.

The Prime Minister has since visited Mtwara's affected areas and attended a ground breaking ceremony on the proposed site of a USD 500 million cement factory set to produce 3 million metric tomes of cement annually and to create 1,000 jobs. In an effort to demonstrate the government's proposed development plans for the region, the Prime Minister announced a number of projects earmarked for future construction.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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