Tanzania: Tanzania Petroleum Act 2015

Last Updated: 9 November 2015
Article by Peter Kasanda and Kumara Mallikaaratchi

Highlighted in this month's energy briefing is the new Petroleum Act 2015 (PA 2015) related to upstream, midstream and downstream petroleum activities.

This briefing does not include a detailed analysis of the fiscal provisions of PA 2015. Our tax team will provide a further briefing on tax aspects in due course.


The energy sector in Tanzania has historically had two key items of legislation, namely:

  1. The Petroleum Exploration and Production Act 1980 (PEPA)
  2. The Petroleum Act 2008 (PA 2008)

PEPA dealt with upstream petroleum matters, specifically as they relate to 'petroleum' including oil and gas. PA 2008 dealt with downstream petroleum matters.

The Government of Tanzania (GoT) has long intended to update both items of legislation. There was also recognition of a lack of legislation regulating anticipated midstream activities.

The market has been eagerly anticipating the publication of a 'Gas Act' which would regulate midstream activities. Rather than publish a stand-alone Gas Act, GoT has opted to amalgamate updates to PEPA, PA 2008 and the introduction of a Gas Act into one item of new legislation contained in PA 2015.

We include at the schedule to this briefing a table of key changes between PEPA and PA 2015 and PA 2008 and PA 2015.


We prepared an energy briefing in July 2015 focused on The Petroleum Act 2015 Bill Supplement (the Bill) which was placed on the Parliament of Tanzania website on 19th June 2015. That energy briefing was prepared at a time when the Bill was still being debated by Parliament and our comments were subject to further revision of the Bill.

PA 2015 has now been assented to by the President of Tanzania, although the commencement date has to yet be determined. There have been several important changes to the legislation between the Bill and PA 2015. The aim of this briefing is to highlight the important changes made and to provide an overview of the legislation as it now stands.

What are the key changes between the Bill and PA 2015?

Clarification on administration of petroleum activities in Tanzania Mainland and Tanzania Zanzibar

Part I of the Preliminary Provisions of PA 2015 has been amended to provide certain important clarifications related to the administration of petroleum activities in Tanzania Mainland and Tanzania Zanzibar including:

  1. Where upstream, midstream and downstream operations are undertaken in Tanzania Mainland, then such operations shall be governed by the institutions established under PA 2015
  2. Where upstream, midstream and downstream operations are undertaken in Tanzania Zanzibar, then such operations shall be governed by the institutions in accordance with the laws of Tanzania Zanzibar
  3. The Governments of The United Republic and the Revolutionary Government of Zanzibar may enter into arrangements to undertake joint petroleum operations in specific areas or overlapping blocks
  4. Revenues derived from petroleum activities undertaken in Tanzania Mainland shall be for the account and use of the Government of The United Republic of Tanzania
  5. Revenues derived from petroleum activities undertaken in Tanzania Zanzibar shall be for the account and use of the Government of Revolutionary Zanzibar
  6. The Governments of The United Republic and the Revolutionary Government of Zanzibar shall have discretion to enter into arrangements regarding the financial administration of resources which are different to those mentioned above

The definition of 'Minister' has also been clarified to mean the Minister for petroleum affairs in Mainland Tanzania and now also the Minister for petroleum affairs in Tanzania Zanzibar. An equivalent change to the definition of 'Government' now includes the Governments for both regions.

A clear distinction is therefore being made between the administration of activities in the two regions. It should be noted that responsibility for petroleum affairs is still a 'Union' matter under the current constitution, meaning that the Government of the United Republic has the responsibility for such matters in both regions. It should also be noted however, that the proposed new constitution envisages that Tanzania Zanzibar will achieve autonomy for petroleum affairs in that region should the proposed new constitution pass in a forthcoming referendum.

Given that the new proposed constitution is not yet in place, a question arises as to the manner in which the above provisions have been put in place. Do they cut across an existing constitutional framework?

Role of the Minister in signing agreements

Section 5(c) of PA 2015 has been clarified to confirm that the Minister shall 'enter into petroleum agreements on behalf of the Government'. This right to enter into agreements was already present at section 48 of the Bill but having taken advice from the Petroleum Upstream Regulatory Authority (PURA) and on the authorisation of the Cabinet. The distinction between section 14 of PEPA and section 47 of PA 2015 is still relevant. See additional comments below.

Participating interest of the NOC on projects

Under section 8 of the Bill, the Tanzania Petroleum Development Corporation (TPDC) was mandated as the official National Oil Company (NOC).

Furthermore, the NOC was required to maintain a participating interest of no less than 25% on projects. PA 2015 has revised the drafting stating that the NOC shall indeed maintain a 25% participating interest 'unless the National Oil Company decides otherwise'.

The change may stem from private sector participants concern that legislation is interfering with the commercial dynamics of projects from the outset by setting this threshold. It is yet to be seen what comfort providing discretion to the NOC in respect of the 25% will provide.

Changes to term and application period for development licences

Under the Bill, a holder of an exploration licence in respect of blocks which constitute a location was able, within three (3) years for crude oil and two (2) years for natural gas, to apply for a development licence. This timing has now switched around so that the two (2) year limit applies to crude oil whereas the three (3) year limit applies to natural gas.

Furthermore, and of significance, the initial term of a development licence under the Bill was for a period of twenty (20) years followed by a renewal of fifteen (15) years. This meant that the renewal term had been shortened by five (5) years from the twenty (20) year period under PEPA. The longer PEPA timeframes have now been reinstated.

Fiscal terms

As mentioned above, this update does not include a detailed appraisal of the fiscal terms. Our tax team will provide a comprehensive update in due course. It is nevertheless worth briefly noting some important changes between the Bill and PA 2015.

A new section 117(3) of PA 2015 makes it clear that where the licence holder and the contractor undertake an integrated project, all costs incurred by the parties for the construction and operation of the midstream facilities including processing, liquefaction, storage and loading facilities shall not form part of recoverable costs under the relevant production sharing agreements. This closes the door on any potential argument that the build for such facilities may be an accrued and recoverable cost under the upstream regime.

Furthermore, a new section 117(4) confirms that the prudent cost and fair return on investment under sub-section (3) shall be determined by PURA and recovered through 'mechanisms to be stipulated in regulations made by the Minister'.

Rights of the aggregator

Under the Bill, the NOC had a role as aggregator with exclusive rights to purchase, collect and sell natural gas from producers. From the perspective of International Oil Companies (IoCs) this is clearly not an ideal position as it appeared that the NOC might need to be factored into their corporate structure in terms of exported LNG. The position has now been updated in PA 2015 which reiterates the NOCs role but makes clear that the 'exclusive right of the aggregator shall not extend to natural gas that is preserved for export purposes in the form of Liquefied Natural Gas'.

Extended licensing role for PURA

Under the Bill, the Energy and Water Utilities Regulatory Authority (EWURA) was the institution to which contractors submitted documents in advance of licencing for liquefaction, shipping and re-gasification of LNG. This position has been changed to PURA making such assessments rather than EWURA.


Oil and gas bureau

Section 7 of PA 2015 establishes an Oil and Gas Bureau within the Office of the President in order to advise the Cabinet on strategic matters relating to the oil and gas economy. The market is likely to be encouraged by this move in the hope that specialists in the field of oil and gas will be able to guide GoT institutions on the commercial aspects of their interaction with the private sector.

National oil company

PEPA was occasionally silent on the role of TPDC who in practice were involved in fairly extensive activities. For example, TPDC would essentially hold a licence on behalf of IoCs and had an integral role at all levels and interface with GoT.

PA 2015 is more explicit about the role of TPDC and sets out several functions at section 9 of PA 2015. Of note, the NOC will participate in petroleum reconnaissance and the development of projects. This is a more involved role than previously undertaken and impacts from project inception onwards. Furthermore, the NOC will 'aggregate natural gas, own and operate major gas infrastructure on its own or through its subsidiaries'.

Section 8(3) of PA 2015 states that the NOC may form a number of subsidiaries to carry out specific petroleum operations or related activities. We are therefore likely to see several NOC project companies on specific projects.

In summary, the NOC is designed to deal with GoT commercial participation on projects.

Petroleum upstream regulatory authority

Section 11 of PA 2015 establishes a Petroleum Upstream Regulatory Authority. PURA will be a body corporate with its own legal personality. It has several functions, however of note, it will advise the Minister of Energy and Minerals (the Minister) on negotiations of production sharing agreements (PSA) and other contracts with IoCs. PURA will also be responsible for implementing local content in the petroleum sector. PURA will be responsible for processing, granting, renewing, suspending and cancelling exploration, development and production licences. In the nature of a regulator, PURA will also be responsible for facilitating resolution of complaints and disputes.

PURA will have a Board consisting of five (5) Tanzanian citizens from relevant fields. Two key members of the Board are appointed by the President on the recommendation of the Minister, the Chairman and the Director General, the latter shall also be the Secretary to the Board. The Director General has a term of office of five (5) years which may be renewed for a further five (5) years.

The other members of the Board are appointed by the Minister on the recommendation of a Nominations Committee, which will consist of representatives of various ministries (see section 27).

It should be noted that PURA only regulates activities in Mainland Tanzania.

New role for EWURA

EWURA shall be the regulator of midstream and downstream activities. EWURA has a wide ranging role. Notable functions include the issue, renewal, suspension and cancellation of construction approvals and operational licences, the collection of fees and levies for the petroleum sector in accordance with the EWURA Act. Finally, EWURA will approve applications for tariffs and prices.

Further functions of interest are the emphasis on local content. EWURA will promote the use of local goods and services produced and provided in Tanzania. It will also promote the 'maximum participation of Tanzanians in every part of the petroleum value chain'. Local content will clearly be an important issue in the coming years. A local content policy was issued some months ago which was to be followed by a Local Content Act of Parliament. We are yet to see a draft of this legislation and examine how it will interact with the provisions of PA 2015.

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