Why Tanzania has turned to global investors for oil and gas exploration

The Round is aimed at reigniting investor interest, expanding exploration activities, and generating broader economic benefits such as employment creation and increased local content.

“We are in the process of preparing for the next bidding round, which is expected to take place early next year, subject to official approval,” Mr Sangweni said.

He pointed out that the capital intensity of upstream exploration continues to be a major barrier for local investors.

The cost of drilling a single onshore well can reach approximately $20 million, while offshore operations may exceed $175 million, with no certainty of success.

Mr Sangweni noted that only 44 of the 96 wells drilled to date have resulted in the discovery of natural gas, highlighting the sector’s inherent risk.

“If TPDC or a local investor were to drill a $20 million well that turns out dry, public and political backlash would be swift,” he said.

“People would question why such substantial sums were not directed towards urgent priorities such as education or healthcare projects.”

Foreign investors, he added, are better positioned to absorb exploration risks owing to their diversified global portfolios. Losses incurred in one country can be offset by gains elsewhere, thereby minimising financial exposure.

Reflecting on recent developments, Mr Sangweni recalled that during the fifth-phase government, lengthy debates arose concerning the implementation of existing Production Sharing Agreements (PSAs), with Parliament engaging on the matter for nearly three years and assigning the Attorney General to review contract terms.

Under the sixth-phase administration, however, a more pragmatic approach has been adopted.

Rather than halting ongoing operations, the government has moved to renegotiate and restructure existing agreements, signalling a shift towards regulatory clarity and investment facilitation.

“Global energy dynamics are evolving rapidly. There is an emerging recognition that natural gas, much like coal, may face declining demand in the foreseeable future. We must act decisively and without delay,” he stressed.

In response to these developments, Tanzania has embarked on comprehensive legal and regulatory reforms. These include the revision of the Model Production Sharing Agreement (MPSA) and the modernisation of several outdated laws, some of which date back to the 1980s.

The reforms are designed to create a more conducive investment climate and mitigate uncertainties, especially those triggered by the 2014 oil price crash that saw crude prices plummet from $100 to $30 per barrel.

The government has also addressed a longstanding investor concern regarding the dual role of the Tanzania Petroleum Development Corporation (TPDC) as both regulator and commercial player.

The establishment of PURA as an independent regulator has gone a long way in restoring investor confidence in the upstream segment.

Tanzania has made notable strides in the development of its gas sector, with significant reserves discovered in Mnazi Bay and Songo Songo.

 These discoveries have led to the establishment of processing facilities in Madimba, Mtwara and Songo Songo Island, as well as the construction of a strategic pipeline transporting gas to Dar es Salaam through Lindi and Coast regions.

Natural gas is now widely used in power generation, industrial processes, public institutions, household consumption and transportation.

Mr Sangweni highlighted PURA’s achievements in promoting local content, stating that 85 percent of jobs in the sector are held by Tanzanians, while 60 percent of goods and services are sourced locally.

He further outlined key milestones achieved under the sixth-phase government. These include the issuance of a development licence for the Ntorya gas field, rehabilitation of five wells to boost production, strengthened partnerships between local and international firms, integration of digital systems, and enhanced regional cooperation.

PURA has also supported TPDC’s seismic data acquisition efforts and facilitated groundwork for the planned liquefied natural gas (LNG) project.

“Between March 2021 and March 2025, Tanzania produced over 301 billion cubic feet of natural gas, including 158.98 billion cubic feet from Songo Songo and 142.35 billion cubic feet from Mnazi Bay. This represents a significant increase in production,” he said.

He added that all exploration activities are carried out under PSAs, under which international companies finance exploration costs, and—if discoveries are made—profits are shared among the investor, TPDC and the government.

Should exploration efforts prove unsuccessful, the land reverts to the government without incurring additional costs.

In a further display of regulatory vigilance, PURA has recovered more than Sh340 billion through rigorous financial audits, which would otherwise have been lost due to inflated cost claims.