New move on gas, minerals

Dar es Salaam. Tanzania Revenues Authority (TRA) wants to review all contracts signed between the government and investors in the lucrative gas and mining sector so that the country collects more revenue from them. However, already there is concern that if not well handled, the move could create uncertainty and fear among foreign investors.

The TRA yesterday announced that it was looking for consultants to renegotiate all the Mining Development Agreements (MDAs) and Production Sharing Agreements (PSAs) signed between the government and investors to cushion possible revenue leakages.

TRA Commissioner General Rished Bade confirmed that the government’s revenue collector would task the consultants to advise on the process of renegotiations on the MDAs and PSAs.

Asked to clarify, the taxation chief said yesterday the basic aim of the plan was to increase revenue generation from the mining sector, including expected revenue boom in the oil and gas sub-sector arising from the PSAs signed between Tanzania Petroleum Development Corporation (TPDC) and companies licensed to deal in oil and gas exploration. “Yes, we are looking for consultants to express their interests for provision of technical assistance for renegotiation of the Mining Development Agreements and Production Sharing Agreements. The consultants will also propose the time-frame for completion of that work. We will agree on the terms of reference,” said Mr Bade.

He further said that the work for renegotiation on the MDAs and PSAs should be completed within the 2014/15 financial year.

When The Citizen sought further clarification, the Commissioner for Energy and Petroleum in the ministry of Energy and Minerals, Mr Hosea Mbise, said in the case of MDAs, the fresh process was just starting while the PSAs implementation has been on since last year.

“What I know is that the new modality for signing production sharing agreements is already in place; what I also remember is that on Monday the TRA requested us to furnish them with all product sharing agreements. We have submitted them but they are in different stages,” said Mr Mbise.

According to him, the PSAs have four stages that include exploration, appraisal, development and production with their respective tenets of the signed agreements.

“In most cases, under PSAs in oil and gas, the production stage is the most important because of profit sharing between the government and investors. Since in the exploration stage the bulk of work is done by investor, it is unlikely for the government to reap ample gains,” Mr Mbise further said.

Until this month, the government has signed 26 PSAs out of which only two are in the production stage. The two include The Songo Songo Agreement with Pan-African Energy and Mnazi Bay Agreement with the Maurel et Prom, according to Commissioner for Energy and Petroleum.

Under the statement advertised in the print media yesterday, the TRA says that invitation for expression of interest follows the General Procurement Notice (GPN) which appeared in Mwananchi and The Citizen newspapers yesterday.

“The Tanzania Revenue Authority now invites eligible firms to indicate their interest in provision of consulting services for provision of technical assistance on the renegotiation of Mining Development Agreements and Petroleum Production Sharing Agreements to be executed within a period of four months,” reads the statement in part.

According to the statement, the TRA has received funds from the development partners towards the cost of Tax Modernisation Programme (TMP) and it is intended that part of the funds will be used to hire consultants for provision of technical assistance to renegotiate the MDAs and PSAs.

Under the 2010 mining law, there is a provision for the government to renegotiate with investors on the MDAs and last year, minister for Energy and Minerals Sospeter Muhongo issued a directive to the TPDC to review the PSAs on the basis of setting new modalities of signing those agreements.

The mining rights activists under Haki Madini NGO and some politicians have been calling for a review of mining contracts on the grounds that the country has been losing colossal amounts due to bad contracts, arguing for changes that could earn the Treasury more cash to lessen Tanzania’s donor-aid dependency.

Last week, Kigoma-North MP Zitto Kabwe raised the red flag again over the StatOil/Exxon Mobil deal, claiming that it would cost the country a staggering loss of $55 billion (Sh92 trillion) should it sail through.

MORE INFO: CONTRIBUTION OF THE MINING SECTOR

The government’s National Development Vision estimates that the contribution of mining to GDP will reach 10 per cent by 2025 from the current 3.5 per cent.

Reported by Ludger Kasumuni