Tanzania to renegotiate natural gas contracts

Dar es Salaam. The government has hinted at a fresh round of talks with potential natural gas investors at the end of an ongoing process to review Production Sharing Agreements (PSA).

A senior government official told The Citizen that the review exercise started two months ago.

Tanzania is seeking to scrap sections it deems tilted against it, hence denying earnings to the country.

Mr Hamisi Mwinyinvua, Permanent Secretary in the Ministry of Energy, confirmed that the government would embark on talks with potential investors at the completion of the exercise that’s being handled by the office of the Attorney General.

“The problem has always been on how revenues are shared and the fiscal regimes in general,” he told The Citizen. “We are reviewing to outline areas that need to be changed so that in the end, there is a win-win situation in the extraction of Tanzania’s natural resources.”

The first contract was signed in 1999 between the government and Pan African Energy Tanzania, while the last one was signed in 2012 between the government and Swala, an oil and gas company.

A parliamentary probe committee that was formed last year to assess Tanzania’s benefits from gas and oil extraction recommended the review of PSAs.

The committee, chaired by Dunstan Kitandula, revealed that a gas firm had occasioned the government a loss of Sh291 billion.

In June 2017, Parliament passed three laws aimed at ensuring that Tanzania gets its rightful share of revenues from its natural resources.

One of the laws is the Natural Wealth and Resources Contracts (Review and Re-negotiation of Unconscionable Terms) Act, 2017, which empowers Parliament to review all the arrangements and agreements (existing and prospective) made by the government regarding natural resources.

“Part II provides for powers of the National Assembly, in the discharge of its oversight role under the Constitution, to review arrangements and agreements made by the Government and, where necessary, direct the Government to re-negotiate any unconscionable terms identified,” reads a section in the law.

Investors remain optimistic that the review exercise will be conducted in a manner that provides for a win-win situation.

Equinor says it will strive to ensure that gas resources discovered in Tanzania are developed in a way that benefits all parties, and most of all Tanzania.

The company, which operates Block 2 and has invested over Sh2 billion in Tanzania, said in a statement to The Citizen that it has agreed with the government to start negotiations on the Host Government Agreement (HGA) for the planned LNG plant in Lindi.

It, however, noted that there was need for a stable and predictable framework for both parties to realise the benefits.

“An LNG development is a mega-project that requires large upfront investments. To ensure that all parties benefit from such a project, stable and predictable framework conditions for the more than 30-year lifetime of the plant is essential,” the statement, e-mailed to The Citizen on Friday, February 1, 2019, reads.

“We trust that the government of Tanzania has a long-term view on this major industrial investment.” Energy minister Medard Kalemani told Parliament in June last year that the actual construction of an LNG plant in Tanzania would start in 2022.

He said the government was doing well with its negotiations with multinational firms that were interested in the project.

“We met the investors recently and everything is progressing well…What is happening now is that the multinational firms are competing among themselves regarding which one should lead the project execution. By 2022, actual construction will start,” he told Parliament.

However, the Africa co-director for Natural Resource Gas Institute, Silas Olan’g said details from the contract reviews – in line with the law – may still bring some challenges to investors, especially those who signed agreements before the laws were enacted.