Restructuring Tanzania Petroleum Development Corporation (TPDC)
Mapendekezo ya Kamati ya POAC
Ilipendekezwa kuwa Shirika la maendeleo ya Petroli Tanzania (TPDC ) ligawanywe ili kupata Mashirika mawili ya Umma moja likisimamia utoaji wa leseni na Udhibiti wa Uchimbaji (upstream regulator) (Tanzania Petroleum Authority or National Hydrocarbons Authority) na lingine kuwa Kampuni ya kibiashara ya Mafuta na Gesi (National Oil and Gas Company) ambapo kila sehemu ya Muungano itakuwa na Kampuni yake na kuondoa malalamiko ya sasa juu ya Mafuta na Gesi. Pendekezo hili Serikali haijalitolea majibu wala utaratibu wa kulitekeleza ili kuboresha usimamizi wa sekta ya Gesi na Mafuta.
Vile vile Pendekezo hili litaweka msingi wa Sekta ya Mafuta na Gesi kusimamiwa na chombo cha muungano badala ya sasa ambapo kinasimamiwa na TPDC ambayo sio Shirika la Muungano. Pendekezo hili litekelezwe mara moja.- POAC Report 2010
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Tanzania’s gas players
Songas consortium consists of PanAfrican Energy Limited, a subsidiary of Orca Exploration, CDC Globeleq and the state-owned Tanzania Petroleum Development Corporation (TPDC). Songas has operational rights over the Songo Songo-Dar es Salaam pipeline and well-established relationships with the government. Despite approaching new competition, it is keen to lock in the monopoly benefits it has enjoyed to date – hence its application for a 70% tariff increase for gas supplied to the Tanzania Electric Supply Company (Tanesco).
Maurel & Prom operates the Mnazi Bay field, hoping to supply a power plant at Mtwara and a newly announced fertiliser operation. With clear direction from the government, it could transform Mtwara and its own profits. No guidance is yet forthcoming. Both Maurel & Prom and Songas will face stiff competition if Britain’s Ophir Energy-BG Group and Petrobras develop their gas fields. The latter two have considerable acreage while the companies already in place have two discoveries. Both groups will be eyeing up the neighbouring exploration blocks on offer in the new round of bidding in April. The newcomers’ operations are likely to dwarf the existing ones. They see their main business opportunity in liquefied natural gas for export rather than for local markets.
A key figure will be David Jairo, Permanent Secretary at the Energy and Minerals Ministry, who is close to President Jakaya Kikwete having served as his Private Secretary. In the early 1990s, he was also in the Ministry of Water, Energy and Minerals, as it was then known, when Kikwete held the portfolio. He will be important in mediating among institutions, business and politicians. While Zitto Kabwe and January Makamba are putting energy at the top of their political agendas, more important in coming years will be whether Edward Lowassa wins 2015’s presidential election. If past performance is anything to go by, he could have an unfortunate impact on energy policy.
Gas finds offer hope of ending power-cuts
Powerful interests stood in the way of a sound energy policy emerging but everyone wants to turn on the gas
Despite obstacles from corrupt politicians, the exploitation of gas is likely to gather pace this year with new offshore discoveries. The opening on 12 April of the fourth offshore bidding round for 13 new blocks is likely to coincide with the commencement of drilling by Brazil’s Petrobras. Just one overworked pipeline runs the 200 kilometres from Songo Songo Island to Dar es Salaam. Last year’s gas discoveries by Ophir and British Gas in Tanzanian waters and this year’s by Anadarko in Mozambique, along with high fuel prices, will also help to generate interest in new export pipelines, liquefied natural gas (LNG) and much delayed gas-fired electricity generation.
However, Tanzania’s two existing gas deposits are not fully utilised. The oldest operation is the Songo Songo field, now operated by PanAfrican Energy Limited, a subsidiary of the Toronto-listed Orca Exploration Group. As part of the Songas consortium, it supplies gas to Dar es Salaam’s Ubungo power plant as well as to over 30 industrial facilities in the city.
Further south, the Mnazi Bay field near Mtwara town, now run by Maurel & Prom, is operating greatly below capacity since the collapse of plans to build a 300-megawatt power plant involving the gold mining companies Barrick and Artumas, the previous operators of Mnazi Bay. Three of the four Mnazi Bay wells are capped and the fourth is operating at just 10% of capacity. However, China is discussing financing that could revive plans for the plant at Mtwara, and Songas and Maurel & Prom hope to benefit from plans by the national electricity utility, Tanzania Electric Supply Company (Tanesco), for Dar es Salaam’s Kinyerezi plant to start generation in 2013.
Tanzania also has substantial coal reserves. Investors in gas fields cannot be certain that gas-generated power plants will necessarily be built and thus provide them with a market in the long run. Two feasibility studies will be carried out for a pipeline to Mombasa, one by Orca-owned EastCoast Transmission and Marketing, one by the East African Community. Ophir and BG are pinning their hopes on the development of LNG facilities.
The challenges are considerable. The power sector has been mismanaged for over 20 years. Power-rationing, first resorted to in the early nineties, is now a fact of daily life. The government first said it wanted to increase the use of natural gas in the 1990s but plans were thwarted by the corruption of key politicians and officials tied to Western companies exporting generating equipment that was not fuelled by gas. Also central has been the quick fix of hastily arranged power-purchases. Consequently, the power sector remains hamstrung and both the Dowans and IPTL generators are idle because of contractual disputes with Tanesco.
Many of those linked to the well-known cases of corruption in the power sector are still in or near to the corridors of power. Andrew Chenge was Attorney General when he approved the IPTL contract and he still sits on the Central Committee of the governing Chama cha Mapinduzi and in Parliament (AC Vol 51 No 4). Former Prime Minister Edward Lowassa, who resigned following revelations of his central role in the Richmond-Dowans affair, now chairs the Parliamentary Foreign Affairs, Defence and Security Committee and is believed to be preparing for a bid for the presidency in 2015.
One long-serving energy sector observer has also noted the tension between the Ministry of Energy and Minerals, Tanesco and the National Development Corporation. The NDC is responsible for state mining interests and is actively seeking investors in coal and wind power. NDC remains a key broker and has struck deals in China for the Mchuchuma coal mine as well as for wind in Singida Region. Yet another monolithic state institution in the power mix is unlikely to help to improve planning.
Regulation is also an issue. The Tanzania Petroleum Development Corporation has roles as both the regulator of upstream operations and as the state oil company and ultimate rights holder, which creates confusion and conflicts of interest. Legislation in the sector is outmoded, dating from 1980. A Natural Gas Bill has been in the works for some years but has been delayed by turf wars between fuel importers, TPDC, Parliament and Ministry officials. TPDC is looking to hive off an independent gas distribution entity and maintain its regulatory and operational roles. Industry interests want price control taken away from the Energy and Water Utilities Regulatory Authority. Moreover, there is pressure from Parliament to split TPDC and to have one upstream regulatory body and two state-owned oil companies, one each for Zanzibar and the mainland. The principal political backer for this is an opposition member of parliament, Zitto Kabwe, Chairman of the Parliamentary Public Investments Committee.
The lack of clarity in regulation, oversight and planning gives the advantage to companies already present and people with political connections. The Songas consortium and Orca’s PanAfrican Energy have considerable influence on pricing and infrastructure management. The senior management of these companies also has important personal and professional relationships with key players in government. Orca Deputy General Manager William Chiume is the son of the late Kanyama Chiume, an exiled Malawian politician resident in Tanzania and a confidant of former Presidents Julius Nyerere and Benjamin Mkapa. William Chiume also has President Kikwete’s ear.
Two politicians hope for political success through staking out development in the energy sector as their territory: Kabwe, of the opposition Chama cha Demokrasia na Maendeleo, and CCM’s newly elected MP, January Makamba. Kabwe chairs the Public Investments Committee and is seeking restructuring of TPDC and the directing of public funds to the power sector.
Makamba is a son of CCM party Chairman Yussuf Makamba and a former aide to Kikwete. Articulate and energetic, he is building alliances with the private sector as well as oil and gas investors with a view to achieving quick gains – such as switching on the Dowans generators, which cannot be used because of court orders – and medium-term infrastructure development, such as investment in the Songas-operated Songo Songo-to-Dar pipeline.
Kabwe and non-governmental organisations have also taken considerable interest in mining. Yet populist measures on royalties and taxation, as well as the absence of any major new ventures in the sector since 2007, have seen this interest diminish. The recently released Extractive Industries Transparency Initiative report for Tanzania covered TPDC, Songas and Maurel & Prom among other mining companies but it is unlikely to lead to the broad popular and political interest that mining evinced since it has not yet been verified and its conclusions are not clear. Consumers can only hope that the new gas finds will lead to lower prices and more capacity – despite the obstacles.
Source: Africa Confidential