A call for a moratorium on new offshore exploration.
Oil and Gas Industry
Picyure courtesy of: Cypressmfg
Tanzania is on the precipice of an economic evolution with the recent discoveries of gas. We have now confirmed reserves of 43 Trillion Cubic feet (TCF), roughly valued at USD 430bn[i]
. Plans for LNG production are moving ahead of schedule. As a result there will be considerable new gas resources available for power generation and other needs for our economy and people including domestic use, petrochemical industries and fertilizer plants.
Our nascent oil and gas industry is set to expand greatly with the upcoming Fourth Licencing Round, which, according to Minister Sospeter Muhongo, is scheduled to be launched in Houston, Texas on September 13. We are now informed that the licencing round has been delayed. This is not enough and more work needs to be done.
The Fourth Licencing Round should be put on hold – postponed for ten years. In this, we echo the demand of Parliament’s Energy and Minerals Committee earlier this year (April 2012, Annual Report of the Committee) and the concerns of other informed citizens. It is very unfortunate that the recommendation to postpone the licensing round, supported by a Parliamentary Committee on Public Investments (POAC) and approved by a Parliamentary resolution, was largely ignored by the Ministry and TPDC. A moratorium will not only allow us to manage our new resources effectively it will also ensure the welfare of future generations. This is something the Government must take seriously.
We, as responsible leaders, have a duty to safeguard this country’s resources for future generations. This will require effective and sustainable management of our oil and gas reserves. The licencing round for the oil and gas offshore blocks announced by the Ministry through TPDC undermines our mandate to the Tanzanian people. If all exploration blocks are being licenced, what will our grand-children and great-grandchildren, who will be more educated and well prepared, do? It is critical that we approach these issues not in a short-term strategic thinking but long-term. We may not be here tomorrow but Tanzania will be.
We are not prepared for an expansion of exploration activity. Current legislation is out-dated and does not mirror the current political and economic status quo. We have no overarching Gas Policy, however progress has been made as both the Gas Act and Policy are currently being crafted. Nevertheless to continue on with a new round of licensing before these policies are complete is irresponsible. More importantly, we do not have legislation that will manage revenues from the sector. We need more time for the policies and legislative acts to be implemented. We will also need more time for institutions to be in place.
A ten-year moratorium will give us the space to develop our capacity in key areas. TPDC can be overhauled to become an active exploration and production company, modelled on Malaysia’s Petronas. Currently, TPDC does not have the capacity or resources to be an effective and strong partner in developing our reserves. These capacity deficits include the ability to conduct basic geological surveys, contract negotiations and management as well as production and processing. A moratorium will allow us to support TPDC to become a strong and reliable trustee and gatekeeper of the country’s resources.
A ten-year moratorium will allow us to build the necessary institutions that we will need to effectively benefit from these resources. These include establishing and supporting a Sovereign Development Fund , to manage revenues; coordinating with our educational institutions to train and foster young Tanzanians so they can confidently work and engage in this industry; and an oversight committee that would include parliamentarians, civil society organizations and local communities. These stakeholders would be mandated to ensure that our resources are used effectively and fairly.
A ten-year moratorium on offshore exploration will ensure that our increasingly young population will enjoy the benefits of our natural resources for generations to come. We kindly request the Government to stop any new licencing of exploration blocks and refocus all efforts into building the capacity to manage the discovered resources, make wise decisions and prepare the nation for a Natural Gas Economy in a timely manner.
Our past mistakes in the mining sector should guide us, as we comprehend the challenges and opportunities presented by the oil and gas sector. The country must first build strong accountability measures, ensure transparency, develop critical human capital and learn from case studies of other gas economies before licencing any new blocks. We need to think strategically and understand the long-game rather than thinking about short-term gains. As a result, we think 10 years will be enough to implement the necessary interventions and build a strong and sustainable oil and gas economy for all Tanzanians.
Kabwe Zuberi Zitto, MP
Shadow Minister of Finance.
[i] using rule of thumb that 1TCF equals to 10bn US
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