1 Legal and regulatory framework
1.1 What role does the national state play in the oil and gas industry in your jurisdiction? Are oil and gas rights owned by the state or is private ownership allowed?
The government plays a significant role in the oil and gas industry in Tanzania. Thus, the entire property in and control over oil and gas resources is vested in the public and exclusively managed by the government in trust for the people of Tanzania. It is based on this core structure that rights are protected and are indispensable from the state. Private ownership of oil and gas rights is not allowed, although private individuals may be granted rights to exploration or development.
1.2 Which national legislative and regulatory provisions govern the oil and gas industry in your jurisdiction?
The main legislation governing the oil and gas industry is the Petroleum Act, which is supplemented by regulations, rules and guidelines made thereunder. Other laws that play a significant role in regulating the oil and gas industry in Tanzania include:
- the Natural Wealth and Resources (Permanent Sovereignty) Act No. 5 of 2017;
- the Income Tax Act (Cap 332 RE 2019);
- the Environmental Management Act No. 20 of 2004;
- the Tanzania Extractive Industries (Transparency and Accountability) Act No. 23 of 2015;
- the Oil and Gas Revenue Management Act No. 22 of 2015; and
- the Energy and Water Utilities Regulatory Authority Act (Cap 414 RE 2006).
1.3 What other national legislative and regulatory provisions have relevance for oil and gas activities in your jurisdiction?
Other laws that are relevant to oil and gas activities include those relating to:
- employment matters;
- health and safety issues;
- the regulation of explosives;
- registration with professional bodies such as those regulating contractors and engineers;
- the regulation of foreign exchange;
- the establishment and regulation of subsidiaries; and
- dispute resolution.
These laws include:
- the Employment and Labour Relations Act (Cap 366 RE 2019);
- the Occupational Health and Safety Act No. 5 of 2003;
- the Explosives Act No. 56 of 1963;
- the Contractors Registration Act No. 17 of 1997;
- the Engineers Registration Act No. 15 of 1997;
- the Foreign Exchange Act No. 1 of 1992;
- the Companies Act No. 12 of 2002; and
- the Civil Procedure Code (Cap 33 RE 2019).
1.4 Are there any regional treaties or laws that need to be taken into account?
Oil and gas in Tanzania is governed by local laws and regulations. However, Tanzania has ratified a number of treaties relating to oil and gas, including:
- the International Convention for the Prevention of Pollution from Ships of 1973;
- the International Oil Pollution Compensation Fund of 1992;
- the International Convention on Oil Pollution Preparedness, Response and Cooperation of 1990; and
- the International Convention Relating to Intervention on the High Seas in Cases of Oil Pollution Casualties of 1969.
From a regional perspective, the East African Community (EAC) continues to make efforts to harmonise a framework of regional solutions for the energy sector. The Energy Security Policy Framework of 2018 is among the instruments that assist with the EAC's vision of addressing energy security and ensuring developments aimed at addressing the energy security challenge in the region. Specifically, the Energy Security Policy Framework:
- sets out various models for energy security monitoring, evaluation and management; and
- proposes an institutional framework for a more coordinated regional approach to energy security management.
1.5 Which national regulatory bodies are responsible for enforcing the applicable laws and regulations? What powers do they have?
The ministry in charge of oil and gas resources is the Ministry of Energy (MoE). In this regard, the MoE has overarching powers to:
- formulate and review policies and plans for the sector;
- enter into agreements on behalf of the government; and
- initiate inquiries and studies on petroleum activities.
The Petroleum Upstream Regulatory Authority (PURA) regulates upstream petroleum activities; while the Electronic and Water Utilities Regulatory Authority (EWURA) regulates mid-stream and downstream petroleum activities.
PURA has a mandate to:
- negotiate arrangements;
- issue and cancel petroleum exploration licences, development licences and production permits;
- review and approve licence holder budgets;
- impose sanctions on stakeholders for non-compliance with the Petroleum Act and its regulations; and
- issue rules and guidelines on the conduct of petroleum operations.
On the other hand, EWURA is responsible for:
- issuing and cancelling licences for the construction of petroleum infrastructure and undertaking midstream and downstream activities;
- monitoring the performance of licensees;
- obtaining information or evidence; and
- holding inquiries.
Both PURA and EWURA also regulate compliance with the local content requirements.
1.6 What is the national regulators' general approach in regulating the oil and gas industry?
PURA and EWURA's general approach to regulating the oil and gas industry is to act as a facilitator.
1.7 What role do provincial, state and/or other local government regulatory bodies play in the regulation of the oil and gas industry?
In some ways, local government authorities assist with regulating operators in the oil and gas industry. The National Environment Management Council relies on local government authorities to act as environmental management officers when monitoring compliance and conducting environmental audits. Further, operators must ensure that local government authorities are notified of any significant and disruptive land developments.
2 Oil and gas industry
2.1 How mature is the oil and gas industry in your jurisdiction?
Considering that exploration endeavours have been underway for decades, the oil and gas industry in Tanzania is quite mature. Over the years, the Ministry of Energy has built on this experience to formulate legislation that befits the Tanzanian industry and establish key bodies to engage with players that conduct such activities.
2.2 What are the key oil and gas products which are produced in your jurisdiction and where are activities typically based?
As the country undergoes exploration, significant discoveries of natural gas have been made at Songo Songo in the Lindi region and Mnazi Bay near Mtwara; and oil discoveries have been made in the west coast of Pemba Island offshore and near Mafia Island. Currently, gas is being produced in Mnazi Bay within the Mtwara region and there is an ongoing liquefied natural gas project in the Lindi region.
2.3 Who are the key players in the oil and gas industry in your jurisdiction?
There are three key players which regulate the oil and gas industry in Tanzania:
- the Ministry of Energy;
- the Petroleum Upstream Regulatory Authority; and
- the Energy and Water Utilities Regulatory Authority.
The Tanzania Petroleum Development Corporation is a key player, as the national oil company that participates in upstream, midstream and downstream activities and is responsible for the government's participating interests in petroleum and gas agreements. Major players in the oil and gas industry in Tanzania from the private sector include:
- Songas Ltd;
- Maurel & Prom;
- Shell Tanzania Limited;
- PanAfrican Energy Tanzania; and
2.4 How are the following reflected in the domestic energy mix?
(a) Oil and gas
(b) Imports and exports?
(a) Oil and gas
Despite increasing discoveries of oil and gas resources in the country, the domestic energy composition is largely made up of hydropower. The country recently commenced construction of the Julius Nyerere Hydropower Station, which will be the largest hydropower station not only in the country, but also in the region. This notwithstanding, there are a few projects where energy is produced using natural gas. These include:
- the Songas Ubungo plant;
- the Mtwara gas turbine combined power project plant; and
- the Kinyerezi gas plant.
(b) Imports and exports
For the most part, Tanzania relies on imports of petroleum as opposed to domestically sourcing it for local consumption. The government has established a government agency, the Petroleum Bulk Procurement Agency, to administer the import of all petroleum products into the country and act as a platform for tendering the importation of petroleum products.
3 Exploration and production
3.1 What rights are required to undertake exploration and production in your jurisdiction? Do these vary depending on the type or location of the activity?
The early stages of exploration are conducted with a reconnaissance permit, which allows the holder to conduct geo-scientific and geo-technical activities for preliminary evaluation, acquisition and interpretation of data and seismic data in shallow drilling in an area. Reconnaissance permits are not exclusive and thus different permits may be issued for different activities in the same area. The data and information collected by the permit holder is the property of the government of Tanzania, though the Petroleum Upstream Regulatory Authority (PURA) may authorise the permit holder to sell the data subject to the proceeds of the sale being shared with PURA. The permit is valid for a period not exceeding three years.
Exploration and production licences (and all other petroleum rights except for reconnaissance permits) are exclusively reserved for the Tanzania Petroleum Development Corporation (TPDC), the national oil company; and once granted, are not transferable. Other persons intending to undertake exploration or production activities must enter into partnership with the TPDC subject to ministerial consent and the TPDC must maintain a 25% interest in such arrangement. In order to qualify to enter into the envisaged partnership, the person intending to so must:
- be a body corporate registered in Tanzania; and
- have the necessary capacity, technical knowledge and financial capability.
3.2 What regulatory or contractual requirements must be satisfied to obtain exploration and production rights?
As outlined in question 3.1, the most important requirement is local registration of the entity that intends to engage in exploration and production (as well as other petroleum activities). See also question 3.3.
3.3 If there is state ownership of oil and gas rights in your jurisdiction, what is the procedure for obtaining exploration and production rights? How long does this typically take?
Private persons intending to conduct exploration or production can do so through contractual arrangements with the TPDC. In other words, it is the TPDC that applies for licences to the minister responsible for petroleum affairs; once a licence has been granted, the TPDC may conclude contractual arrangements with other persons regarding the licences granted. Insofar as exploration rights are concerned, the application to the minister must not be for more than 40 blocks; but the minister may consider an application for up to 80 blocks if there are special circumstances. The application must be accompanied by:
- proposals for work and minimum expenditure in respect of the block specified in the application;
- particulars of the applicant's technical and petroleum industry qualifications and employees;
- technical and resources details;
- financial resources available, including capital, credit facilities and guarantees; and
- proposals on the local content plan as it relates to the training and employment of citizens of Tanzania.
When making an application, the applicant may set out other matters that it wishes the minister to consider. The law requires the minister to notify the grant or refusal of the application within 60 days of the date of the application.
Upon the discovery of petroleum in an exploration area, notice must be given to the minister and PURA, which may direct further investigations to assess the feasibility of the construction, establishment and operation of facilities for the recovery of petroleum. The licence holder may then apply for a development licence that allows the developer to conduct production operations, which must be completed during the development phase. The applicant for a development licence must submit a development plan, accompanied by:
- proposals for development;
- detailed proposals on the construction of the facilities;
- an assessment on the coordination of activities with other licensees and stakeholders;
- an estimation of production profiles;
- cost estimates; and
- an economic feasibility study.
On the advice of PURA, the minister may decide to grant a production permit. The process takes a minimum of 60 days.
3.4 Who can own exploration and production rights in your jurisdiction? Do specific requirements or restrictions apply to foreign operators? Do any indigenous ownership requirements apply?
Exploration and production rights are granted and owned by the TPDC, which in turn may enter into contractual obligations subject to the conditions and restrictions stated in the law. Apart from the requirement that a body corporate be registered under the Companies Act and have recognised capacity and technical knowledge and financial capabilities that qualify it to undertake exploration and production activities, there are no restriction which specifically apply to foreign operators. There are no indigenous ownership requirements.
3.5 If there is state ownership of oil and gas rights in your jurisdiction, what fees and other charges are incurred in obtaining exploration and production rights?
The following charges apply once an exploration licence is granted per square kilometre (km2) of the contracted area:
- Initial exploration period – $50 per km2
- First extension period – $100 per km2
- Second extension period – $200 per km2
In addition to the foregoing, a contractor for a development licence must pay $500 per km2 of the contract area to the TPDC.
On commencement of production, a production bonus of not less than $5 million becomes payable.
3.6 What is the duration of exploration and production rights? What is the process for renewal?
An exploration right is granted for a period not exceeding four years, which is subject to renewal. An application for renewal must be made no later than 90 days before the licence is due to expire. An application for renewal is made through the application for extension form and must be accompanied by:
- detailed particulars of the work carried out and the amount expended in the area during the term of the licence; and
- adequate proposals for work and minimum expenditure for the area.
The applicant may also set out other matters that it requires the minister to consider. The minister must issue a decision on renewal within 90 days and in any event before the licence expires. It is thus imperative that the application be lodged in a timely manner.
Production rights are granted for a fixed period that is stipulated in the permit. The law does not provide the extension or renewal of production rights. The reasoning behind this is that the permit is prescribed for a tenure that is required by the applicant to complete the production operations for development.
3.7 What are the operator's rights and obligations under exploration and production rights?
An exploration licensee holds the exclusive right over the exploration area for the purposes of carrying out its operations and executing works as necessary. The holder may assign exclusive rights to contractors to conduct exploration activities in the contract area.
3.8 Are there any requirements re relinquishment of exploration and production rights or part of the area covered by such rights?
Yes, half of the number of blocks in respect of which the licence was granted must be relinquished on an application for grant or upon renewal of an exploration licence.
3.9 Can exploration and production rights be transferred or assigned? If so, how and subject to what government consents? Do any fees, taxes or other charges apply to direct or indirect transfers?
Yes, exploration and production rights may be transferred or assigned, provided that this is done in writing and has been approved by the minister responsible for petroleum. The application for approval to the minister must be accompanied by:
- an undertaking that the transferee is capable of discharging the obligations of the transferor;
- details of the transferor;
- agreements between the parties;
- tax clearance from the Tanzania Revenue Authority;
- an integrity pledge by the transferee;
- details of the technical and financial capabilities of the transferee; and
- any other information that the minister may deem necessary in deciding on the transfer.
The TPDC retains the right of first refusal to acquire the participating interest of a contractor.
The law does not provide for any charges payable due to a transfer. However, this does not exempt the transferor and transferee from the taxes that materialise from the transfer.
3.10 Can security be taken over exploration and production rights?
A development licence can be used as a form of security. Upon the advice of PURA, the minister may consent to the use of a development licence as security where the financing is for activities associated with the production licence. However, the security is limited in scope to the licence holder's share of entitlement of the future revenue from the production of petroleum, as provided in the agreement.
3.11 What contractual or regulatory provisions apply with regard to cessation of exploration and production or abandonment of exploration and production rights?
If a licensee decides to cease petroleum activities, it must submit a decommissioning plan to PURA at least five years before the termination of operations. In some instances, PURA may require further information and evaluation, or an entirely new or amended decommissioning plan.
4 Surface rights
4.1 Does the law of your jurisdiction distinguish between exploration and production rights and surface rights? If so, how does an owner of exploration and production rights acquire surface rights?
Under the Petroleum Act read together with the Land Act (Cap 112 RE 2019), surface rights are clearly distinguished. Thus, the lawful occupier of any land in an exploration or a development area can continue with his or her activities – including the right to graze stock or cultivate the surface of the land – provided that such activities do not interfere with the exploration or development activities. However, the holder of surface rights cannot construct buildings or structures without the consent of the licence holder.
In the case of unalienated land, surface rights are granted by the president of Tanzania where this is deemed necessary for development purposes or purposes ancillary to development. Where the land already has pre-existing owners, surface rights may be acquired by compensating for the disturbance of the surface rights and relocating the occupiers. This process involves the appointment of an approved and registered valuer to conduct a valuation of the property for the payment of compensation and, where necessary, resettlement.
4.2 Where surface rights are acquired, what are the operator's rights and obligations as regards the landowner? And what are the landowner's rights and obligations as regards the operator?
The obligations of an operator as against the landowner are:
- to conduct the operations in a manner that will not cause injury to the landowner; and
- to compensate and resettle the landowner where co-existence is not possible.
Where the operator and the landowner are co-existing, the latter must seek the consent of the operator before constructing any buildings or structures on the land. Where consent is unreasonably withheld, the minister responsible for petroleum may intervene and give consent.
4.3 Is there a process for the mandatory acquisition of surface rights? If so, what does this involve?
There are no provisions on the mandatory acquisition of surface rights under the Petroleum Act; rather, it provides a process for the acquisition of surface rights as necessary. However, a separate law – the Land Acquisition Act (Cap 118 RE 2002) – empowers the president to compulsorily acquire land where this is required for public purposes. The president rarely exercises this power and has not done so in recent years. The process for acquiring land compulsorily involves the president obtaining approval from the National Assembly, signified by resolution and an order published in the Government Gazette, declaring the purpose for which such land is required. The occupier of the land must be served with three days' notice of the intention to conduct a preliminary examination and the authorised person may then enter the area to conduct an examination of the land. If the president is satisfied from the examination that the land is required for a public purpose, the minister of lands must serve written notice of the intention to acquire the land. In accordance with the law, the minister must compensate the persons entitled. Thereafter, the land may accordingly be transferred within six weeks of publication of the notice in the Government Gazette.
4.4 Are any native title issues applicable?
There are no native title issues in Tanzania.
4.5 Are any other rights needed to use the land (eg, zoning permissions or planning requirements)?
Depending on the use of the land, other rights may be needed, including:
- building permits from the relevant local government authority to erect any building or structure; and
- planning consent from the local relevant planning authority to subdivide land or change the use of the land.
5 Processing, refining and export
5.1 What requirements and restrictions apply with regard to the processing and refining of oil and gas?
The processing and refining of oil and gas fall under the regulation of the Electronic and Water Utilities Regulatory Authority (EWURA), since these are midstream activities. Generally, in order to conduct such activities, a licence from EWURA must be obtained.
The restrictions that apply to processing and refining activities include the following:
- The activities must not be conducted in a manner that is contrary to environmental management or occupational health requirements;
- The validity of all licences may not exceed 25 years; and
- Transfers and assignments of licences are subject to the approval of EWURA.
Other restrictions may also be prescribed as conditions in the specific licence.
Gas processing facilities must be located onshore.
5.2 What requirements and restrictions apply to the export of oil and gas?
Under the Petroleum (Refinery Operations) Rules of 2018, regulated activities to export oil require a licence. Applicants must:
- be in possession of a facility, with adequate skilled personnel to conduct regulated activities; and
- prove their financial capability not only to operate the facility, but also to maintain it.
A licensed exporter of oil is restricted in conducting its activities for the period of the licence – that is, 15 years. Further:
- the licensee must observe strict environmental, health and industrial safety standards; and
- the facility, transportation and storage units must adhere to the prescribed specifications.
The export of gas is governed by the Petroleum (Natural Gas Midstream and Downstream) General Regulations of 2020. The EWURA requires gas exports infrastructures and quality to comply with applicable laws and best international petroleum industry practices. To this extent, the applicant must submit to EWURA:
- proof of its financial and technical capabilities;
- a local content plan;
- an environmental and social impact assessment;
- a business plan describing the scope of the activities; and
- details of the source, destination, volume of and means by which the gas will be exported.
Where the EWURA issues approval for the export of gas, the approved person must provide it with details in the form of a declaration of export 30 days prior to the intended export date and restricted to the validity period of the approval.
6 Transport and storage
6.1 What requirements and restrictions apply with regard to the transport and storage of oil and gas? Do these vary in the case of cross-border transportation?
A person cannot transport or store oil and gas without registering with the Electronic and Water Utilities Regulatory Authority (EWURA). The Petroleum (Refinery Operations) Rules govern the transportation of petroleum products and require that:
- transportation units be registered and licensed with EWURA; and
- activities be conducted in accordance with safety, health and environment requirements.
The licence is restricted for a period of 15 years, unless the licence is renewed; and the transportation unit must comply with the relevant specifications.
The Petroleum Act and the Petroleum (Natural Gas Midstream and Downstream) General Regulations govern the licences required to transport and store gas. A transportation system for third-party access, such as by end users or buyers, must provide access and transportation facilities that are commercially viable and technically feasible. The holder of a storage licence must also obtain approval for tariff charges (if any). A compressed natural gas facility for the transportation or storage of natural gas must:
- comply with the relevant standards; and
- be certified by the Contractors Registration Board.
In the case of the transportation of natural resources which were not produced in Tanzania, the Petroleum Act allows for special arrangements relating to various matters, including licensing. However, such arrangements must be approved by the Cabinet.
6.2 What requirements and restrictions apply to the construction and operation of transport and storage infrastructure?
EWURA issues specific approvals for the construction of various facilities that handle petroleum products. A storage facility requires construction approval; and EWURA will require confirmation of the following:
- Insurance cover has been obtained;
- The land use laws have been observed; and
- All health and safety standards and environmental requirements have been complied with.
Once approval has been granted, the applicant must:
- commence construction within 24 months to prevent the approval from expiring; and
- notify EWURA 30 days prior to commencing construction.
As is the case with most authorisations, EWURA expects the applicant to ensure that its activities conform with the applicable codes and standards on safety, hazardous substances, security, health and the environment. In addition, any major replacement or maintenance to a facility or part thereof must be notified to EWURA.
7 Environmental issues
7.1 What environmental authorisations are required to undertake oil and gas activities in your jurisdiction? Do these vary depending on the type or location of the activity?
The environmental crux of all oil and gas activities in Tanzania is the requirement to obtain an environmental impact assessment (EIA) certificate from the National Environment Management Council (NEMC). In order to obtain an EIA certificate, the project operator must register the proposed activities with NEMC by submitting a prescribed application completed by an appointed environmental expert. The NEMC will review the application and thereafter direct the environmental expert to undertake an EIA. Once the EIA study has been undertaken, it must be submitted to the NEMC for review.
The fees payable for monitoring requirements by the NEMC differ depending on whether the activities are for production, distribution, storage, exploration, development or processing.
7.2 What environmental regulations or contractual obligations must the operator observe while oil and gas facilities are operational?
Once issued with an EIA certificate, the NEMC does not impose a contractual obligation on the operator of the oil and gas facilities, but requires compliance with the commitments and the environmental management plan submitted as part of the environmental studies conducted. Regular monitoring must be carried out to ensure compliance with the prescribed conditions; this is conducted through environmental audits to track the progress of the project and the processes undertaken to ensure conformity with the environmental management plans. The environmental audits can be carried out through questionnaires, site visits, test analysis or in any other manner as directed by the NEMC.
This notwithstanding, there are other regulations that must be observed to ensure the protection of the environment. They include regulations dealing with the management, treatment, transportation and disposition of hazardous waste from the time it is produced.
7.3 What environmental regulations or contractual obligations must the operator observe in relation to decommissioning?
Once a project ceases, the holder of an EIA certificate must notify the minister responsible for matters relating to the environment at least six months in advance of its intention to surrender the certificate and proceed to surrender it to the minister responsible for matters relating to the environment. For the surrender to be effective, the minister responsible for matters relating to the environment must issue an EIA certificate of surrender.
7.4 What are the potential consequences of breach of these requirements – both for the operator itself and for directors, managers and employees?
Generally, where the holder of an EIA certificate breaches any requirements thereunder and is found liable, the NEMC will issue a fine ranging from TZS 500,000 to TZS 10 million. A breach may also result in penal sanctions. In some instances, the court may:
- direct that full clean-up costs be paid;
- issue a prevention order to protect the environment;
- impose a penalty; or
- order the forfeiture of equipment or appliances.
Where a corporation commits an offence, the presumption is that every director, partner and persons concerned with management has committed that offence. To avoid liability, such persons must prove that:
- the offence was committed without their consent; or
- they exercised due diligence to present the commission of the offence.
For this reason, it is imperative that the management of a corporation which is undertaking activities that involve environmental compliance matters take all necessary steps to prevent any contravention of environmental obligations.
7.5 Which national, provincial/state and/or local government regulatory bodies are responsible for enforcement of environmental obligations?
The enforcement of environmental obligations falls under the mandate of the NEMC, which is responsible, among other things, for reviewing, enforcing and monitoring the environmental compliance of activities conducted in Tanzania. The NEMC's environmental inspectors are tasked with inspecting projects and assessing their impact on the environment, including checking compliance with the conditions set out in the EIA certificate.
At the local level, the NEMC is assisted by local government authorities, whose environmental management officers are tasked with inspecting the implementation of the conditions prescribed in the EIA certificate. Local government authorities monitor compliance through the district council, city council and municipal council.
7.6 What is the regulators' general approach in regulating the oil and gas sector from an environmental perspective?
The NEMC is focused on protecting the environment while not discouraging investment in the country. It will control all behaviours that could be harmful to the environment, including by checking compliance with the conditions in the EIA certificate.
8 Health and safety
8.1 What key health and safety requirements apply to oil and gas operators in your jurisdiction?
Given the dangers of handling oil and gas products, health and safety requirements are paramount at all levels of oil and gas operations. The Petroleum Act requires all activities to be conducted in a manner that prioritises health and safety. This is further emphasised in the subsidiary legislation and rules. Specifically, participants in such activities must:
- maintain emergency preparedness;
- surround facilities with safety zones; and
- adopt international standards and specifications in matters of public health and safety.
8.2 Which national, provincial/state and/or local regulatory bodies are responsible for enforcement of health and safety regulations or obligations? What reporting requirements apply with regard to oil and gas accidents in your jurisdiction?
Various regulatory bodies enforce health and safety obligations, with the main regulator being the Occupational Safety and Health Authority (OSHA). The main regulators in the oil and gas sector – the Petroleum Upstream Regulatory Authority and the Electronic and Water Utilities Regulatory Authority (EWURA) – and the National Environment Management Council also play significant roles in ensuring that health and safety requirements are observed.
Where a conveyor of flammable gas through a fixed pipe distribution system, or an importer or supplier of a refillable container of liquefied petroleum gas, receives notification of a death or major injury in connection with its activities, it must notify the chief inspector of OSHA within seven days. Notification is also required where there is:
- an accidental leakage of gas;
- inadequate combustion of gas; or
- inadequate removal of the products of the combustion of gas.
The unintentional release of oil on or from an offshore installation which results in a fire or explosion, or action to prevent or limit the consequences of a potential fire or explosion or which has the potential to cause death or major injury to any person, amounts to a dangerous occurrence that must be reported to the chief inspector of OSHA. The following incidents also require reporting:
- the release or escape of dangerous substances;
- the collapse of an installation or plant;
- collisions between vessels or aircraft; and
- the loss of stability or buoyancy of a floating installation.
Generally, an employer must report to its health and safety representatives the occurrence of an incident in a factory or workplace. It is also the duty of employees to report to the employer or health and safety representatives:
- an unsafe or unhealthy situation; or
- their involvement in an incident that affects health or causes an injury.
8.3 What are the potential consequences of breach of these requirements – both for the operator itself and for directors, managers and employees?
Failure to comply with the reporting requirements within the prescribed period will result in EWURA issuing a written notice ordering the operator to take certain steps at its own cost to rectify the accident. Non-compliance with the directions of an order will amount to an offence and, on conviction, will result in the imposition of a fine on the operator.
Where it is proven that the offence was committed with the consent or connivance of, or negligence attributable to, a director, manager, secretary or officer of the operator body corporate, he or she will also be held liable.
8.4 What best practices in relation to health and safety should operators consider adopting in your jurisdiction?
In accordance with best industry practice, operators are expected to establish, implement, follow up and develop an appropriate management system to ensure systematic and continuous compliance with all applicable requirements for health, safety and the working environment. Operators in Tanzania must also:
- identify hazards and evaluate risks associated with any work performed in the course of activities carried out under a licence that constitute a hazard to health of persons employed for the purposes of that work;
- prevent exposure to hazardous elements; and
- develop a plan setting out prevention, handling and mitigation measures on transmittable and communicable diseases in the area of licensed operations.
8.5 What is the regulators' general approach in regulating the oil and gas sector from a health and safety perspective?
Health and safety is a key priority for regulators in the oil and gas sector. Among other things, this is evident from EWURA's Five-Year Rolling Strategic and Operational Plan for 2020/21–2024/25, which includes intervention against HIV/AIDS and non-communicable diseases as one of the regulator's six strategic objectives. At the same time, OSHA has made it a requirement that workplaces and personal be adequately protected both prior to starting work and during the works by monitoring compliance annually.
9 Taxes and royalties
9.1 What national, provincial/state and/or local taxes, royalties and similar charges are levied on oil and gas operators in your jurisdiction? How are these calculated?
Taxes: There is no specific direct or indirect tax legislation for oil and gas. The general laws for direct and indirect tax – some of which contain specific rules on the taxation of oil and gas – are applicable.
Oil and gas operators are subject to 30% corporate income tax on their taxable profits and must also withhold tax when making payments in relation to:
- dividends at 10%;
- payment of interest at 10%;
- service fees provided by non-residents at 15%; and
- local professional and consultancy services at 5%.
The value added tax (VAT) rate is 18%.
There is also a city service levy, which is a local government tax levied at a rate of 0.3% on the gross turnover of business entities operating within the territorial boundaries of a specific municipality.
Royalties: In addition to taxes, royalties are payable to the government for the gross volume of petroleum production. The prescribed amount is 12.5% for onshore areas and 7.5% for offshore areas. In case of failure to comply with the payment of royalties, the Petroleum Upstream Regulatory Authority may prohibit any dealings with the licence holder.
Other charges: Capital gains tax is applicable to both resident and non-resident companies and applies to land, buildings, shares and or securities at a rate of 30%. Farm-out arrangements are treated as disposals of investments assets and as such, any losses thereon are not deductible against ‘business income', the definition of which would include petroleum operations.
9.2 Are any tax incentives available for oil and gas operators?
There are no tax holidays available for new projects in the oil and gas sector, and there is no reduced corporate tax rate with regard to new investments in the oil and gas sector. However, any company may benefit from a reduced corporate tax rate of 25% for three consecutive years if:
- it is listed on the Dar es Salaam Stock Exchange; and
- more than 30% of its equity is issued to the public.
There are no tax benefits which are specific to companies involved in the oil and gas sector; instead, they can benefit from all other benefits that are available to other companies in other sectors. However, imported goods for use in petroleum operations are free from import duty, subject to meeting several conditions; and specific petroleum products are exempt from VAT.
9.3 What other strategies might oil and gas operators consider to mitigate their tax liabilities?
Oil and gas operators should ensure that additional tax incentives conferred through production sharing agreements or certificates of incentive from the Tanzania Investment Centre are published in the Government Gazette in order to legalise them. Publication also helps to shield the investor's interest when dealing with the Tanzania Revenue Authority and mitigates the risk of the incentives becoming latent, particularly if they relate to income tax.
9.4 Have there been any significant changes to the taxation rates applicable to oil and gas operators in the last three years?
There have been no recent changes to the applicable taxation rates for the oil and gas industry in general. However, specific reliefs and/exemptions have been given to the East African Crude Oil Pipeline project.
10.1 In which forums are oil and gas disputes typically heard in your jurisdiction?
The relevant forum for determining oil and gas disputes depends on the activities and the disputing parties. Where the dispute is between operators or between an operator and a third party and pertains to upstream petroleum activities, the Petroleum Upstream Regulatory Authority (PURA) will decide on it. Once PURA has issued a decree or order, it is enforceable before a civil court. For a dispute arising from downstream regulated activities, either between a licensee and a customer or between licensees, the Electronic and Water Utilities Regulatory Authority (EWURA) will adjudicate the matter. Where a person is aggrieved by a decision of either EWURA or PURA, the Fair Competition Tribunal will determine the appeal.
However, the parties may agree to resolve the matter through arbitration or in the ordinary civil courts of law in Tanzania. This is also the case for disputes arising from an agreement between the government of Tanzania, the Tanzania Petroleum Development Corporation and a licensed contractor whereby the model agreement refers disputes to arbitration.
The only caveat for dispute resolution is stipulated under the Natural Wealth and Resources (Permanent Sovereignty) Act. This Act provides that disputes in Tanzania arising from extraction, exploitation or acquisition and use of natural wealth and resources, including oil and gas, may not be the subject of proceedings in any foreign court or tribunal. To this extent, oil and gas disputes must be determined by judicial bodies or other bodies established in Tanzania. However, this law does not apply to disputes arising from the transportation of natural resources not exploited in Tanzania, provided that there are special arrangements approved by the Cabinet.
10.2 What issues do such disputes typically involve? How are they typically resolved?
In general, the disputes that are resolved by PURA involve the following issues:
- the boundaries of an exploration or development area;
- any act committed, omitted or alleged in the course of exploration or development operations;
- an assessment or payment of compensation; or
- any other matter in relation to exploration and development operations.
On the other hand, EWURA handles all disputes arising from downstream activities and gas industry activities.
Where a complaint is lodged between licensees or between a licensee and a third party that is not an end user, the matter will be resolved by PURA or EWURA, depending on the activities, and the parties will be duly notified of the decision. However, the law provides that PURA may refuse to decide a dispute and notify the parties in writing of its reasons.
The process is clearly prescribed for disputes arising between service providers and between service providers and end users under the Energy and Water Utilities Regulatory Authority (Consumer Complaints Settlement Procedure) Rules. The procedure commences with an investigation of the complaint, notice of the dispute and a quasi-conciliatory hearing that ends with EWURA issuing orders.
10.3 Have there been any recent cases of note?
There have been no significant recent cases before EWURA, PURA or the Fair Competition Tribunal.
11 Trends and predictions
11.1 How would you describe the current oil and gas landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?
Tanzania's oil and gas landscape has seen significant positive developments of late. The major topic of conversation is the construction and development of the East African Crude Oil Pipeline Project, which will transport gas from Hoima in Uganda to the Tanga region in Tanzania for export. The government of Tanzania recently signed a host government agreement which signifies its readiness to proceed with the project. This was followed by the amendment of various laws – including those on the environment, dispute resolution and gas transportation licensing – to allow for the introduction of special arrangements to accommodate the development of the pipeline project. It is anticipated that a number of legal and regulatory framework arrangements will be introduced to ensure that the project moves forward.
The other important project is the Liquefied Natural Gas Plant Project, which had stalled for a number of years due to disagreements between the government and the developers. However, the government has signalled that it is now ready to proceed with the project and it appears that discussions with developers may soon restart.
12 Tips and traps
12.1 What are your top tips for oil and gas operators in your jurisdiction and what potential sticking points would you highlight?
In 2017, the government introduced some significant changes to the laws regulating natural resources in Tanzania. The Natural Wealth and Resources (Permanent Sovereignty Act), among other things, declared that disputes involving natural resources must be adjudicated by judicial bodies in Tanzania. On the other hand, the Natural Wealth and Resources Contracts (Review and Re-negotiation of Unconscionable Terms) Act empowered the government to renegotiate any term in an agreement involving natural resources. These changes reduced investor confidence in Tanzania's natural resources law. However, since the new government took over earlier in 2021, the attitude towards new investment has changed and confidence among the investment community has been boosted. That said, however, it must be remembered that these two laws are still in force and plans must be made accordingly.
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