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International Oil Companies descend on Tanzania as licensing commences

A section of delegates at the launch of Tanzania's fourth licensing round

A section of delegates at the launch of Tanzania’s fourth licensing round

There was a lot of excitement in Dar-es-Salaam last week as Tanzania’s President Jakaya Kikwete launched the country’s fourth competitive licensing round in which eight exploration blocks are up for grabs.

The Mwalimu Julius Nyerere Conference Centre was filled with representatives of at least twenty International Oil Companies, numerous Diplomats and the local business community.

President Kikwete himself recognized the presence of the Chinese Ambassador, Lu Youqing, as well as that of the European Union.

“Tanzania is willing to do business with you, to facilitate your business and ensure that your business is safe,” he told the audience. “We will ensure that we train our human resource for you-investors.”

Tanzania has already captured the interest of some the world’s biggest oil and gas companies and will be looking to sustain this trend in this round. Statoil, BG, Petrobas, ExxonMobil as well as Ophir are some of the players presently operating licenses there.

With estimated reserves of at least 43 trillion cubic feet of gas, Tanzania is moving quickly to use its natural gas to generate power and run its factories. The country has already embarked on a massive project to get its natural gas to the domestic and international markets.

“This gas is sufficient enough (sic) to sustain production in the country and demand,” said Energy Minister, Sospeter Muhongo.  “In the next two weeks, we will announce who will be constructing the first LPG plant for local supply but we are planning to do global supply as well,” he revealed.

The country is already producing gas from its onshore Mnazi Bay and Songo Songo fields and is also constructing a 542 km, 36 inch diameter gas pipeline to transport gas from the Mtwara Region in the South to Dar-es-Salaam.

Concerns over local content

However, there are concerns within the local business community and the general public that the government is only focusing on pleasing investors and has ignored the locals.

The Tanzania Private Sector Foundation had wanted new licensing suspended until the oil and gas policy had been amended to accommodate substantial local participation.

But the government insists that it will not favour home grown businesses, and their participation will be on the same terms as their international counterparts.

A company will need at least $750,000 to purchase the mandatory Bid Round Data Package (BRDP) for the offshore blocks that contains the requisite information for one to place an informed bid. The Tanganyika block BRDP costs $ 350,000. Other more sophisticated data packages are going for as much as $ 3.375 million.

President Kikwete argued that the interests of Tanzanians were taken care of by the country’s National Oil Company, the Tanzania Petroleum Development Corporation (TPDC).

“We as Tanzanians get the (International Oil) company, when they make the discovery, they go to the production stage. We then allow them to pay their costs, then after, the interests of Tanzanians are catered for,” he said. “They take 25 % , we take 75 % of the profits or 35 % and we take 65 %. The 65 % is being held by TPDC in trust, on behalf of all. It is not like we do not care,” he said.

The country has also embarked on a comprehensive training program to develop its local content. Hundreds of students are currently pursuing state-sponsored oil and gas courses within the country and overseas.

Uganda’s case

A similar licensing round was expected in Uganda by the end of this year but it now seems unlikely.

Although some industry sources have informed Oil in Uganda that it may be held by mid next year, others say it may take longer because the government is considering re-parceling the existing blocks to make them more marketable and maximize returns.

Sixty percent of Uganda’s most prospective basin, the Albertine Graben, remains unlicensed and with the drilling success registered in earlier exploration efforts, Uganda’s acreage is expected to be a sell-out.

Report by Chris Musiime and Flavia Nalubega