Digest

Gas boss tells Tanzania hard truths

DAR ES SALAAM, Tanzania–Oil and gas firms in the country will have to invest more money to make sure that they realize the dream of producing oil sometime in the early or mid-2020’s.
Speaking in Dar es salaam last week the President of BG East Africa,  Derek Hudson said Tanzania was endowed with huge gas resources, but there are considerable costs involved in producing it due to the fact that the country’s gas resources are found in very deep waters, between 1500 metres and 3000 mts.
Hudson said the cost of developing the gas industry in such a situation becomes very expensive unlike in Trinidad and Tobago where gas is found in water depths of not more than 200 metres.
He said this difference in depth means added costs and may affect the country’s industrialization pace.
“Industrialization that will be taking place in Tanzania will be very different from that of Trinidad and Tobago due to gas water depth differences and this creates a lot of expenses in extraction processes” Hudson said.
He said the landscape of the bottom of the Sea in Tanzania was also too complex and this also adds to the challenge of developing oil and gas in the country.
He was however optimistic to point of that between 2020 and 2021 BG East Africa will be able to produce gas in Tanzania.
“Next year will be a busy year period for us as we plan to carry out engineering construction up to 2017 from where we will run a few tests years later and realize the dream of having full production between 2020 and 2021,” Hudson said.
He said it is important for the government to make sure that the country’s revenue generated from gas resources is used to the best optimum by transforming the lives of the majority citizens through mass beneficial development projects.
“Tanzania vast gas natural resources should aim at revamping education, hospitals as well as roads sectors that could benefit the majority citizens,” Hudson said. He said the country is able to transform its economy using oil and gas resources by learning from the past mistakes about minerals of other countries.
He said natural resources like gas can only be a curse for a country if it is not managed properly, saying the gas policies in place instituted by the government should make sure that revenues generated from such resources benefits the majority.
According to the recent third reconciliation report for Tanzania Extractive Industry Transparency Initiative (Teiti) published in June this year, almost all the major mining companies in the country were making profits, but only one pays corporate tax courtesy of the poorly negotiated Mining Development Agreements (MDAs).
The report shows that Tanzania was still being haunted by poor contracts it entered into with multinationals about 15 years ago and the lengthy time has given the firms an excuse not to pay tax in accordance with their earnings.
The report was revealed after a total of 30 mining companies underwent a research that covered the firms’ financial statements for the year ending June 2011.
Hudson however said the Tanzania government has been very keen in recent years in drafting contract sharing agreements on oil and gas in order to make sure that all the parties involved, including foreign mining firms, the government and citizens benefit from these natural resources.
He said there was need for Tanzania to do things properly with what it has before other countries can take that opportunity.
“We have heard other countries like Mozambique saying they have more gas than Tanzania and BG is not in Mozambique, but Tanzania,” Hudson said.
 He said Tanzania needed to move forward to make sure that gas plants are developed.
He said Tanzania was the foundation for the future of BG Company in East Africa and that by the time the gas construction is fully accomplished BG will be able to employ 2000 workers.
Tanzania President Jakaya Kikwete said last week during the launch of auctioning gas blocks in Dar es Salaam that the government was working in the best interests of the nation.
These efforts should allow Tanzanian citizens to have a stake in managing the oil and gas resources and making sure that the country attains more shares than foreign investors.
Kikwete said in the new production sharing formula, the government will be in a position to get the gas and oil shares ranging between 65% and 75%  where as investors might obtain shares ranging between 25%  and 35%. 
Oil and gas exploration in Tanzania started in 1952 with British Petroleum (BP) and Shell International Oil Company along the coastal basins and the islands of Zanzibar, Pemba and Mafia.