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Tanzania to revise gas drilling deals

BY NICHOLAS BARIYO

TANZANIA -- Tanzania will review all contracts with oil and gas exploration companies by the end of november, officials said, as the East African nation overhauls its laws following a string of major natural gas discoveries.

The government will examine more than 20 contracts to ensure that they are in the "best interests of the Tanzanian people," said Eriakimu Maswi, permanent secretary at Tanzania' s Energy and Minerals Ministry. The government also wants to ensure Tanzania' s state energy firm plays an active role in oil and gas projects.

Tanzania' s move comes amid a growing trend across the continent, where governments of newly resource-rich nations attempt to balance their citizens' desire for a share of any future wealth with sufficient incentives to attract foreign investment.

East Africa' s coastal waters are estimated to hold up to 441 tcf of natural gas, according to the United States Geological Survey.

Tanzania, whose own reserves estimates have nearly trebled after discoveries by firms like Statoil, Ophir Energy and BG, is expected to join Kenya and Mozambique as a major energy export hub to Asia.

Like Tanzania, Mozambique where Eni and Anadarko have made huge natural gas finds and iron-ore giant Rio Tinto has sizable coal assets is also mulling a new law to replace its existing resources legislation.

Mr. Maswi said that plans are already underway to ensure that the country' s oil and gas laws are overhauled ahead of the anticipated boom in natural gas production. The review will ensure that the state oil and gas company, TPDC, gets better profit sharing arrangements, Mr. Maswi said. The country is already in talks with Orca to increase its stake in Songo Songo, its largest gas producing field.

In July, Orca said that its proposal over modifications in its production-sharing agreement had been rejected by the Tanzanian government. The company said that it would continue the talks "in good faith, but reserves its rights to vigorously defend its position in accordance with Tanzanian and international law should no satisfactory agreement be reached."

Earlier this month, Tanzania said that it would delay a licensing round for up to nine deep-sea oil and gas blocks, previously slated for this month, to allow parliament more time to ratify the new natural gas policy. Under the new policy, government wants state owned TPDC to share in the management of exploration and infrastructure operations, said Mr. Maswi.

Tanzania is also trying to boost power generation at gas-fired thermal plants as it seeks to wean its electricity sector away from unreliable hydro power generation and expensive diesel-fired thermal plants.

Currently, Tanzania uses around 200 mcf of gas a day to run thermal plants, with plans underway to double gas production by the end of 2013. Other oil and gas exploration companies operating in Tanzania include Exxon Mobil, Beach Energy, Total and Aminex.

Dow Jones Newswires

09/18/2012

 

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