Economy Energy FDI Gas Government Infrastructure Natural Resources Tanzania

Opinion: Road towards LNG made clearer in Tanzania

Approximate reading time: 5 minutes

IN a ‘Daily News’ edition last week, the Tanzania Petroleum Development Corporation (TPDC) officially announced that it had acquired the title deed for the land where they would construct Liquefied Natural Gas (LNG) Plants (Trains) in Lindi.

This was a significant development for investors in the International Oil and Gas companies in Tanzania, who were initially worried that acquisition of land for the LNG had delayed in 2015. At the time, they were not certain the new fifth government would pull this off that quickly especially since it was one of the ‘unfinished businesses’ by the previous government in late 2015.

The development of acquisition of the title deed for the land could have passed many eyes unnoticed, but the significance of the development is strong especially in the ongoing efforts to build local content and future supply chains of the oil and gas industry in Tanzania. It is land of about 2,000ha for the LNG Trains as well as gas processing projects.

In Addition, the government has also set aside another 17,000 hectares in surrounding areas for development of industrial parks that will purchase the gas from the facility. Through TPDC, the government paid $6m (over 12bn/-) for assessment and compensation of some 450 people in the backwater coastal town, located in Lindi.

TPDC acquired the title deed for about 2,000 hectares of land for the LNG Trains as well as gas processing projects in the town. According to the advert in ‘Daily News’, the government has also set aside another 17,000 hectares in surrounding areas for development of industrial parks that will purchase the gas from the facility.

This is the newest development, as the country had sealed 2015 with the passing of the oil and gas policy and legislations. The new laws include the Petroleum Act 2015, The Tanzania Extractive Industries (Transparency and Accountability) Act, 2015 as well as the Oil and Gas Revenues Management Act, 2015.

This was a major step towards ensuring the country’s fiscal and economic stability, since the legislations will help ensure revenue from natural gas discoveries brings socio-economic progress for Tanzanian citizens. When there is legislation, those with capital and intention know when to invest and be more certain that they are protected by law and their money would return.

One of the next steps perhaps as we look forward to 2016 is for the government to put in place standards for local companies to help them achieve international credibility in the eyes of investors. This would help to harmonize technical specifications of products and services and breaking down barriers.

Conformity to international standards would help reassure consumers (investors) that products are safe, efficient and good for the environment. It should also be noted that the recent gas discoveries have the potential to bring in as much as 1.4 billion US dollars per year to the country — more than 10 per cent of current government revenues — within the next decade.

The new revenues could help provide basic needs for citizens such as improved primary healthcare and access to quality education. The next step for the government will be to develop detailed regulations and procedures to implement the new laws. The new administration, under President John Magufuli, will face policy decisions on how to manage and allocate resources in a responsible way and in accordance with the laws.

Maintaining a focus on human development goals, transparency and ensuring public awareness and debate with key stakeholders and citizens will be crucial. Only in this same year, a new study by the African Development Bank and the Bill & Melinda Gates Foundation shows that despite recent drops in commodity prices, revenues from recently discovered oil, gas and mineral reserves in countries such as Tanzania, Ghana, Liberia, Mozambique, Sierra Leone, and Uganda could add between 9 per cent and 31 per cent to those governments’ revenues.

The report also provided updated projections on the timing and magnitude of these natural resource revenues and guidance on how to effectively direct them toward strengthening health, education and other social services and supporting long-term economic growth. The release of the AfDB–Gates Foundation report and the signing of the new legislation in Tanzania came at a pivotal moment.

In September, global leaders from nearly 200 countries met at the United Nations in New York to adopt the UN Sustainable Development Goals (SDGs). A central issue for this 15-year global anti-poverty and development agenda is how African countries will help provide the financing needed to meet the basic needs of their people.

“New natural resource revenues could be a meaningful source of this funding—if they are effectively and responsibly managed. When policymakers, donors, technical partners, and private companies work together to develop the necessary policies and support smart planning and rigorous management, entire nations can benefit from expanded opportunity and growth.

Through good management principles, we hope that the new legislation will turn into a legacy of good natural resource management that can be followed by other African countries in the months and years to come. In the same year, a new poll from across the country showed that citizens oppose using gas as collateral for government borrowing.

Released in Dar es Salaam recently the study dubbed, ‘How Tanzania should use its natural gas citizens’ views from a nationwide deliberative poll’ shows more citizens support extracting and selling the country’s natural gas internationally to raise revenue, rather than directly financing domestic electricity generation. It shows that Tanzanians nominally support ‘strict limits’ on spending gas revenue and oppose using gas as collateral for government borrowing.

The study, done by REPOA and Centre for global Development between 2014 and July 2015, also shows that most Tanzanians support both publishing all gas contracts and a role for international oversight of how the government uses gas revenues. Most respondents also supported the idea of direct distribution of resource revenues to households in principle.

But when offered a choice between cash transfers and government programmes, most Tanzanians prefer that gas revenue be spent on government programmes rather than cash transfers, according to the report.

Source: ORTON KIISHWEKO for the Daily News


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