GUEST WRITER: Tanzania oil and gas discoveries- The gap between expectations and reality

Sunday August 25 2019

Residents of a gas-rich Mtwara Region protested

Residents of a gas-rich Mtwara Region protested that they would not benefit if a pipeline is constructed to ferry gas from their territory to the capital. PHOTO|FILE 

In the world we live in today, managing expectations around natural resources and their potential economic benefits is as important as managing the resources themselves. Gone are the days when multi-national corporations could come in, conclude deals with politicians with little or no regard to the interests of resource-affected communities.

We live in a world of an ever more informed, ever more engaged and ever more concerned generation. Moreover, today’s citizens are fully aware of the concept that “petroleum resources (oil and natural gas) belong to the people of Tanzania”, as captured by the National Petroleum Policy of 2014 and further expounded under section 4(1) of Petroleum Act of 2015.

Expectations: Legitimate/unrealistic)?

A common ‘mwananchi’ might be forgiven for expecting that the discovery of massive reserves of natural gas means their life is about to change for good. After all, the poor mwananchi was promised ‘Maisha bora kwakila Mtanzania’, that is, any and every Tanzanian -- but if this mwananchi is from Mtwara, he/she was promised that Mtwara would become the ‘Dubai of East Africa’, whatever that means!

Indeed, expectations have been reported to be disproportionately high among Tanzanians. A study conducted by Twaweza in 2015 revealed that a solid 17 per cent of all respondents believed they would get direct employment in the petroleum sector while over 60 per cent believed that revenues from huge gas finds were already trickling in. Such expectations are unrealistic at best and dangerous at worst, and, if unchecked and unmet could spill chaos. Such numbers have not been realised even by the most advanced oil producers in the world. According to Statistics Norway, the country’s petroleum sector provides only 6 per cent (direct and indirect) of total employment.

As for the UK, another advanced oil producer, Oil & Gas UK’s Work Force Report of 2018 indicates that there are about 300,000 jobs from the sector covering, direct (36,800), indirect (126,700) while 119, 200 are induced. This is the reality of oil and gas jobs, and as the sector becomes more automated there will be fewer, not more jobs from the industry. It is therefore, imperative that relevant authorities step up campaigns to educate the masses in an honest and pragmatic manner.

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There is no doubt that Tanzania sits on enormous hydrocarbons potential. But whether the sector can be developed to deliver Tanzanians’ expectations will depend on a number of factors, both internal and external. Tanzania’s reserves of natural gas, estimated at 57.25 trillion cubic feet (TCF) are huge but still insignificant compared to other emerging producers.

For instance, two of our southern neighbours namely, Mozambique and South Africa have combined reserves of almost 500 (TCF) of natural gas, and while negotiations are on-going for the proposed two-train liquefied natural gas (LNG) plant to be developed in Lindi; things are moving forward in neighbouring jurisdictions.

Mozambique saw American firm, Anaderko Energy Inc make final investment decision (FID) in June for LNG development estimated at $20 billion. The undertaking is said to be the single biggest LNG project in Africa. Meanwhile, Kenya became an oil-exporting country, closing a deal worth $12 million for its first 200,000 barrels of crude oil. One can only expect that investors will pick up on these developments in negotiations, and as one commentator put it, “the Mozambique card will be at play.”

Of course, Tanzania has every right to take a deep breath especially given the mining sector’s negative experience, but we shouldn’t forget that the ever-competitive market will not wait for us. Investors have their expectations and timeline and so does the government, and the people. It is very critical to strike a balance between the inherently conflicting interests. This calls for a pragmatic approach recognising that somewhere, the divergent interests must be aligned for the hydrocarbons to be profitably exploited. Along with this realisation, keeping the masses informed will go a long way to defuse speculations that feed into unrealistic expectations. Access to information, enhanced transparency and accountability will be paramount if Tanzania is to escape the so-called resource curse.

Transparent, participatory approach

The United Republic already has good laws sanctioning matters of transparency, accountability and public awareness. We just need as much zeal for implementing our laws as enacting them. The joining of the Extractive Industries Transparency Initiative (EITI) and the subsequent passage of the Tanzania Extractive Industries (Transparency and Accountability) Act (TEITA) in 2009 and 2015 respectively, was hailed as a major step in the right direction.

The Act, under section 4(1) establishes a committee “known as the Tanzania Extractive Industries (Transparency and Accountability) Committee’’, 4(2) “the committee shall be an independent Government entity which shall be an oversight body for promoting and enhancing transparency and accountability in the extractive industry.”

The Committee is tasked with, among other things, “ensuring that benefits of the extractive industry are verified, dully accounted for and prudently utilised for the benefit of citizens of Tanzania.” To this end, the Committee’s 2017 Report revealed that since joining EITI Tanzania has compiled eight reports which show that the government has collected $2.96 billion from extractive companies over the period from July 2008 to June 2016. Further, the Committee, which draws its members from the public, private sector and civil society organisations, is tasked with the role of promoting citizens’ participation and awareness of the sector as well as investigating discrepancies between government and company disclosures. Easy access to information and disclosure of contracts are key tenets of a successful management of expectations. But how exactly to release the inherently sensitive information for public consumption is often a contentious issue.

The TEITA 2017 Report indicates that in January of the same year, then Ministry of Energy and Minerals informed extractive companies operating in Tanzania that in line with section 16(1) of TEITA, 2015 the government intended to publish all contracts on its website but two companies, British Gas and Statoil (Equinor) objected for want of proprietary information issues and concern over the need to raise public awareness before disclosing agreements.

Recently, there have been renewed calls from various stakeholders for contracts to be disclosed and the ministry of Minerals announced in June that the government plans to develop a portal where mining contracts will be accessible to the public. It is hoped that the same will be done by the ministry of energy for oil and gas contracts. But just how much information should go public and whose role is it to clarify the same to the common citizen?

Way forward: Collective responsibility?

Some observers insist on the need for transparency in all activities at the different phases of development covering up stream, midstream and downstream while others contend that releasing too much information can have negative impact if the information turns out to be inaccurate or is misused/misinterpreted. However, it is generally agreed that providing a certain level of relevant information can lead to more realistic expectations from the public.

The right approach should be one of engaging the public in candid conversations (whenever feasible) and schools and universities are a good place to start.

I was extremely encouraged by how much interest I found in Form IV and universities’ students when during my brief return to Zanzibar in June I discussed ‘Challenges and Opportunities for Zanzibar’ in the oil and gas sector with students from Feza Secondary School and Zanzibar University, respectively. Students, young professionals and young influencers can be great ambassadors for the industry, but first they need understand the basics of the sector.

This group is critical because it tends to have high expectations and is susceptible to mis-information, manipulation and in the worst case, violence. If they can just get the concept that the national ‘oil & gas cake’ needs many years to be baked before we start sharing---that should be a good start.

Finally, our dear politicians have a critical role to play. First, they must refrain from playing the ‘resources card’ for political expediency, second, they should remember that Tanzanians don’t need their ‘Dubais’ or ‘Singapores’ of East Africa. All we need is a peaceful country that upholds the rule of law for furtherance of social-economic development forall Tanzanians.

Masoud Salim Mohamed is an advocate of the High Court of Zanzibar and Partner at Said Attorney& Associates, Zanzibar. He is a Chevening Scholar, currently pursuing his LLM in International Commercial Law with Oil and Gas at the University of Reading in the UK