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REFLECTING ON THE POLICY OPTIONS AND ISSUES ON OIL AND GAS
SECTOR IN TANZANIA
1. BackgroundTanzania has recently discovered massive deposits
of natural gas and the potential for oil both onshore and offshore
of the Indian Ocean and more explorations are underway. The
discoveries brought a significant foreign investment in the country
and consequently high expectations by local people to benefit out
of these resources.The existence of natural gas resources in
Tanzania is expected to contribute to its economic growth and
development and improve the living standards of its population.
With rising global interest in natural gas, there has been an
enormous expansion in exploration, yielding significant
discoveries. As a result of the new discoveries, Tanzania is
currently emerging as a potential major global player in gas
production with large discoveries of gas on deep offshore.
Oil and Natural gas related developments are associated with
both positive effects in terms of benefits, such as employment
creation, increased government revenue, improved livelihoods, and
poverty eradication. However, these developments are also
associated with risks both to people and the environment. These
risks are linked directly to the destruction of the ecosystems
which are found in areas where such discoveries are happening
especially in situation where weak institutions for natural
resources governance are in place.
There is a great concern about the negative impact of oil and
natural gas developments on animal migration corridors, tourism
sites, and areas that support fish and prawn production. These
ecosystems support widely the households or communities in terms of
products and services from their local environments for
survival.
This Policy Brief reflects on the policy options available,
scrutinizes policy issues in oil and gas industry and gives policy
advice on how to mitigate the anticipated risks from the oil and
gas exploration. It emphasizes that promotion of good governance
and environmental standards of oil and gas should be of concern to
all.
2. Context Both public and private policy makers face many
difficult challenges presented by the recent oil and gas finds.
Amongst these is how to balance the potential high economic and
development returns
Policy brief no. 3
2015
TANZANIA
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from successful exploitation of oil and gas projects against the
high financial, social and environmental risks. They also fumble
with managing price volatility, macro economic instability,
technical and logistical complexity, high capital and operating
costs, increased potential for corruption, civil unrest and
community conflicts. The overall challenge is to ensure that the
opportunities presented by the oil and gas discoveries are
exploited in a responsible way that include appropriate
environmental and social standards and public oversight so that a
positive developmental and environmental legacy benefit all
people.
The discoveries could be game changers for the regions economies
and development. This puts Tanzania on the threshold of a resource
driven period which requires comprehensive preparations to ensure
both sustainable economic benefits and environmental protection. To
make this a reality there is a need to consider various policy
options, redress policy issues and conduct policy review to take on
board and fill the gaps available.
3. Critique on legal and policy optionsThe policy has not
clearly stated how the challenges of building effective
institutional and legal frameworks, the local content, capacity
building and corporate social responsibility will be addressed or
provide the time frame to address them. There is still a concern on
environmental monitoring with respect to upstream as there is no
specific information on this aspect. In addition, in the Model
Production Sharing Agreement (PSA) of 2008 the Tanzania Petroleum
Development Corporation (TPDC) has been assigned the responsibility
to check on compliance with the environmental monitoring,
performance and evaluation on mid and downstream activities. On a
similar note, TPDC is also a contractor and this may lead to
conflicting interests.
Environmental monitoring on the mid and downstream activities is
managed by the Natural Gas Policy of 2013. The monitoring for the
upstream exploration activities are not adequately covered in the
current Natural Gas Policy 2013. In addition, some of the
institutions such as the National Environmental Management Council
(NEMC) tasked to oversee the environmental management are not
clearly mentioned in the National Gas Policy 2013 and in the PSA.
This may affect the effectiveness of monitoring and evaluation of
the natural gas projects. It must also be noted that TPDC is also a
contractor in some cases, thus environmental matters being left to
TPDC may not be dealt with accordingly due to conflicting
objectives by the same institution. This would complicate the
monitoring and evaluation on the adherence to environmental
protection.
The Model PSA which currently manages production of Natural gas
serves as the basis for negotiations with the government and TPDC.
They are updated regularly with versions published in 2004, 2008
and 2013. This implies that the envisaged benefits to the
government as far as these model PSAs are concerned is likely to be
less from what is expected. This is because; most Contract deals
have been signed under the model PSA of 2004 where the percentage
share of profit to the government is less than what is indicated in
the recent Model PSA of 2013.
It has been noted that PSAs are silent on whether indigenous
population or natives have the right of ownership on their land
where oil and gas resources are explored or exploited. PSAs are
silent on
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whether the local communities have rights of sharing revenues
derived from the sales of resources after the extraction of those
resources.
Apart from that existing policy gaps which have been noted are:
inadequate participation of the local firms, institutions and local
communities, limited supply of factor inputs: materials, labor and
finance, competitive capacities to deliver curtail benefit from the
local content, limited domestic value addition, limited role of the
Private Public Partnerships (PPP), the level of competitiveness of
markets and gas pricing system has not been clearly stipulated, the
objectives did not cover the intergenerational benefits,
preparedness of the identified institutions on the implementation
of the NGP and identification of the implementing agency to ensure
health, safety and environmental protection, the level of
preparedness on disaster management, and the absence of long term
plan (well completion) on the long term effects of gas production
on the ecology (flora and fauna) habitats.
4. Policy recommendations
SensitizationIt is necessary to inform the population about what
is happening at their doorstep and to build capacity to Government
officials who are new to the subject. Community need to be informed
on all issues pertaining gas exploration and development, that is,
what is under implementation, how the projects are going to
develop, what the Central Government is planning to do with the
resources, and how the region is going to benefit. It is important
that the NGP 2013 is translated into Swahili and widely circulated
to stakeholders. In addition, simple version of the same should
also be circulated to a wider population especially around the
areas where the natural gas is exploited, transported and
distributed. Sharing benefits and opportunities given by the
resource discoveries is a key to gain the support of the civil
society and bring the country on a stable and peaceful growth path.
There is a need to have awareness, sensitization campaign to the
local government authorities and communities on matters related
with local oil and gas exploration and development activities.
Institutional strengthening There is need to ensure TPDC, EWURA
and NEMC work in collaboration, very effectively, efficiently and
transparently to ensure prevention, reduction, control and
limitation of damage, and minimization of the risk from the
generation, management, transportation, handling and disposal of
hazardous wastes, other wastes and emissions. There is pertinent
need to strengthen the capacity of local government authorities in
oil and gas as well as natural resources governance.
Human resources Capacity building Promoting Tanzanian local
content is not only in one field of engineers who covers most
upstream activities but also on other experts and professionals
needed in mid and downstream activities. It is recommended to scale
down the use of foreign experts in oil and gas industry. This can
be done by using licenses and contracts to bind oil and gas
Companies to employ local experts. There should be a mechanism of
technology transfer in terms of human capital to generate more
employment and economic development.
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Creation of a domestic marketDomestic consumption should be
increased first by establishing and building industries
simultaneously while drilling and lying of pipeline are underway.
It is recommended to promote local economy by increasing domestic
consumption and market by also stimulating domestic investments
such as the number of industries which will be established or
increase the number of users. To raise public awareness on the cost
effectiveness of using gas for household activities rather than
other means of energy resources such as electricity, and firewood
is another key issue to be considered.
For further information please contacts;Novati Kessy, Program
Officer, Oil and Gas, WWF Tanzania country office, Plot 350, Regent
Estate Mikocheni, P.O.Box 63117, Dar es Salaam, Tanzania, Email.
[email protected], [email protected], Website.www.panda.org
AcknowledgementIt is worth to note that most of the information
which was analyzed, documented and used to prepare this Policy
Brief was collected from the consultations and interviews conducted
to members of Mazingira Network (MANET), and Mtwara Region
Non-Governmental Organizations networks (MRENGO). We also feel
indebted if we would not appreciate the insightful comments which
were given by the Oil and Natural Gas Environmental Alliance-ONGEA
during the stakeholders meeting workshop which was held in Bagamoyo
on 10th to 12th December 2014. Their views and opinions helped to
recast and revisit the contents of this Policy Brief.
DisclaimerThe statements, opinions, and ideas used in this
Policy Brief have been retrieved and paraphrased from desk review
research studies done by Environmental and Climate Change
Consultant, respectively. The views presented in this document dont
reflect the official positions of the organisations or individuals
involved.
World Wide Fund for Nature (WWF) is one of the worlds largest
and most respected independent conservation organizations. WWFs
mission is to stop the degradation of the earths natural
environment and to build a future in which humans live in harmony
with [email protected]
