africa Economy Government oil Tanzania

Tanzania’s rift with oil companies leaves $30 billion project in limbo

Approximate reading time: 3 minutes

International oil companies have been accused of wanting to make bigger stakes from the multi-billion project

 

Tanzania’s Head of State John Magufuli is unhappy about the commandment between the Government and the oil companies involved in the $30 billion gas project. President Magufuli has expressed his concerns over the share of the bargain the oil firms want from the multi-billion project, accusing them of wanting to finesse the country economically.

The President claims the investors want to have a larger piece of the king’s share that may slow the economic progress of the nation. The misunderstanding left the project in a state of limbo, delaying the rapid development of the infrastructure. It is the second setback the project has encountered and could send signals that its construction may take longer than expected.

Addressing the citizens on a rally, the elected head of Tanzania said international companies are on the driver’s seat and hence taking charge of the country’s natural gas resources. Their beacon of hope would be the Stiegler’s Gorge hydro project to generate electricity. However, the power station has faced rough hostility from conservationists.

The Parliament allocated $306 million for the construction of the power project, accounting for 40 per cent of the national budget. With a potential of 2,100 MW capacity, the infrastructure would help as many Tanzanians to access electricity and boost the economic status of the country. Lack of electricity access in some regions in the country has discouraged business startups.

The twist and turn between the oil firms and Tanzania Government may force the latter party to focus on the Stiegler’s Gorge hydroelectric project to avoid further delays the country’s progress. Financiers injecting funds on the power project are antagonising the Government, but the chief of state is adamant to carry on with construction.

He added that if the financial investors’ hands grow cold, the country will use its use revenue from its pocket to fund the project. Indeed, it will be a costly affair, given the fact that President Magufuli is fond of foreign investments that have contributed to the growth and development of the state. FDIs have created employment opportunities to help the Government eradicate the ate of the poverty level in the East African nation and eased the financial burden on the shoulders of Government officials.

The powerhouses involved in the Liquified Natural Gas (LNG) project include Shell, Ophir, Pavilion, Statoil and Exon Mobil. The growth in the oil industry in Tanzania has continued to attract further foreign investments that look to enjoy the business opportunities available. The conundrum has brought the oil project to a standoff for a moment and may discourage the key players.

The differences continue to hinder the success of the project that began a year ago. The only way forward would be to find common ground and not rush into making a decision that may prove costly.

Source: The Exchange

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