Bunge moves to investigate oil, gas agreements with investors

Tuesday January 2 2018

Vice President Samia Suluhu Hassan views a map

Vice President Samia Suluhu Hassan views a map showing the route of the proposed Uganda–Tanzania oil pipeline after opening an oil and gas meeting in Dar es Salaam last year. PHOTO | FILE 

By The Citizen Reporter @TheCitizenTz news@thecitizen.co.tz

Dar es Salaam. Parliament’s investigation into Tanzania’s benefits from gas and oil extraction begins today, with reports indicating that tension was rife among investors who fear the outcome of the probe.

The Citizen has learnt that a parliamentary committee similar to the ones that investigated diamond and tanzanite mining is set to review gas and oil development agreements with investors in the sector.

Speaker Job Ndugai told The Citizen that it was indeed true that yet another special committee will lead in the investigation whose mandate is to recommend to the government changes to make in the sector to boost the country’s earnings.

Mr Ndugai said the 12-member team was meant to start the investigations in November but was delayed. He did not specify the reasons for the delay but said the team will hand over its recommendations by February.

Investors and prospective investors in the sector are however anxious about the expected outcome and how it may impact on existing contracts and the legal and administrative systems.

Their unease is mainly drawn from the recent experience in the gold, diamond and tanzanite mining which saw sweeping changes following similar investigations.

The earlier investigations led to the overhaul of the legal, taxation and administrative systems guiding the mining sector. The first investigation on gold mining was ordered by President John Magufuli while Parliament undertook those in diamond and tanzanite mining.

Both the teams’ findings showed that the country was losing billions of shillings in reported massive under declaration, sabotage and sometimes outright fraud in the business.

These findings have since lead to far-reaching changes in the management of mining resources, including a review of all Mining Development Agreements (MDAs) and mining laws that have raised Tanzania’s stake significantly.

While remaining optimistic the final report of the parliamentary team will not be a cause for new controversies, some investors are however raising concern over directives they view as prejudicial to the supposed investigation.

An oil and gas consultant who wished to remain anonymous due to the sensitivity of the matter pointed out that a letter describing the mandate of the committee was not in good faith.

“To put on the preamble of the letter that the peoples’ expectations on the benefits of gas and oil is fading is to prejudice the work of the committee,” says the expert.

He says the committee has to start its work on a clean sheet and avoid the preconceptions.

“The committee has to work soberly and take time to understand the environment and decision making process that led to the signing of agreements and legal arrangement that govern the sector today. Other decision were discussed and approved by the Cabinet and government official had nothing to do but to faithfully implement them,” he says.

He advises the committee to take time to study international best practices in the gas industry if it is to arrive at a fair and progressive outcomes.

Investors want involvement

The expert has advised that investors be fully involved in the exercise, including being given the chance to explain and table facts about their businesses.

“Allow them (stakeholders) to put facts about their business on the table and discuss with them so as to avoid witch-hunting and reach a conclusion that will be beneficial to both the government and investors,” he said.

Mr Ndugai has told The Citizen that the question of sitting with investors in the industry is inevitable.

“We will involve them widely because the intention is to see that the nation is benefiting from the sector which we are generally being shortchanged,” Mr Ndugai said in the interview with The Citizen.

Statoil Tanzania says it was willing and open to cooperate and collaborate as appropriates when asked to do so.

“Statoil does not interfere with the processes that are being set up by any government to ensure its own effectiveness and achieve its stated policies,” says Statoil press spokesperson Erik Haaland in an email reply to The Citizen.

Commenting in relation to Statoil’s investments in Tanzania, Mr Haaland says: “It is important to note that sanctity of agreed terms, stability and predictability of a legal, commercial and fiscal framework are the necessary elements for the success of LNG development.”

There was also a concern among key players in the gas industry over the fact that majority of MPs forming Mr Ndugai’s 12-member team lack the ABCs on the management and operations of the gas sub-sector with the exception of its chairman, Mr Dotto Biteko, who has previously worked with the Energy and Minerals ministry.

But Mr Ndugai says investors need not to worry about his team which is capable of delivering. “They (members) were chosen very carefully. MPs who have experience in the oil and gas industry are very few in the House and were chosen carefully to ensure they deliver,” said Mr Ndugai.

International oil companies taking part in searching and extraction of oil and gas In Tanzania include Shell, Statoil, Songas, Petrobras, ExxonMobil, Heritage Oil, Afren, Maurel and Prom Ltd, Swala, Ophir Energy, Wentworth Resources

An official in a big oil company who asked to be named was not ready to comment on what he described as “a very sensitive issue.”