Government aims for more natural gas returns

Tuesday May 28 2019

Discover Americas -83, Oil and Gas exploration

Discover Americas -83, Oil and Gas exploration Ship at the Deep Sea in Indian Ocean. Photo |PURA 

By Kelvin Matandiko @TheCitizenTZ news@tz.nation

Dar es Salaam. The acting director general of the Petroleum Upstream Regulatory Authority (Pura), Mr Charles Sangweni, has said that the government will increase the rate of its returns through the ongoing review of 11 contracts on natural gas.

The review is being undertaken by the Office of the Attorney General.

However, stakeholders in the fuel business have said that the rate of increase in the government’s returns will depend on negotiations with investors in the gas sector after the State issues a special report on the review.

National Resource Governance Institute (NRGI) Africa Zone director Silas Olang’ told The Citizen that many arguments will be expected to be raised during the negotiations on several areas within the Petroleum Act 2015 and the Natural Wealth and Resources Contracts (Review and Re-negotiation of Unconscionable Terms) Act, 2017.

He said if the contracts were not reviewed, returns expected from the natural gas sector would be affected through the laws, cautioning that a big rate would affected many areas of investors, who signed the contracts before the new laws were passed.

The reviews of the contracts of the Model Production Sharing Agreements (MPSA) of 2013 involves Shell Tanzania, Pan African Energy Tanzania (Paet), Tanzania Petroleum Development Corporation (TPDC), Heritage Oil, Ndovu Resources Ltd, Equinor and Swala.

Advertisement

The production sharing agreements (PSAs) give each investor nine years to complete natural gas exploration at its own cost. After the start of production, the investor will recover costs without cheating through a procedure specified in the contract by the PSA within 25 years of production.

Mr Sangweni said: “The 2013 model indicates that the government should get 75 per cent of returns while the investor is to get 25 per cent minus his costs. This means that the government will not get returns below 70 per cent, depending on the production.”

Asked about the rate increase, he said, “Of course life has changed. Before 2013, the government’s returns were 70 per cent, while 30 per cent was for the investor. So, as the government, if I negotiate to get 80 per cent, I will be right. But if I’m to get 70 per cent, I will be in breach of the model.”