UNDERSTANDING GAS SECTOR IN TANZANIA

Foreign countries are have entered the sector of oil and gas in Tanzania due to the discovery of the gas particularly in Mtwara region.

Oil and gas

To understand the industry one has to understand the meaning of oil and gas, there are several definition both complicated and simple, but in short they all imply that oil and gas are fossilfuels which are deposits buried from the dead organisms for many millions of years sometimes exceeding 650Milion years.

These deposits have high percentage of carbon which includes coal, petroleum and natural gas.

Tanzania has been blessed with wide reserves of natural gas. Natural gas is a naturally occurring hydrocarbon gas (chemical combination of hydrogen and carbon gas) with a mixture of methane.

With natural gas there are a lot of benefit a country can rip while at the same time there are a lot of challenges involved.

 

Benefits

It is confirmed that Tanzania sits on 43 trillion cubic feet of proven natural gas reserves, equivalent to approximately US $430 billion at current prices, or 15 times Tanzania's current GDP ($28.25). According to U.S. Geological Survey, East Africa’s coastal waters are expected to hold up to 441trilion cubic feet of natural gas.

Benefits can be from economical to social and political. Depending on the policies and structures of the country involved, gas can bring a significant amount of revenue to boost the country’s economy.

Natural gas can be a good source of energy often used for heating, cooking, electricity generation, machinery operation, fueling vehicle, manufacture of plastics to mention a few. With such amount of gas reserve, Tanzania can rip benefits in many ways, from selling raw gas to using it domestically.

However, there are other important benefits like employment, where jobs and employment will be created as a result locals will be employed and hence boosts economic activities.

 

Exploration to production of oil and gas

It takes not more than 7 to 10 years before production starts. There are four stages before starts extraction and selling final product in the market. These are Exploration, Appraisal,
Development and Production

Exploration is the process of finding possible sites which have potential oil and gas. This process involves geologgical experts with state of the art equioments to locate gas. During this process explorers are expected to point the potential areas, the volums of gas reserve and the type of gas found.

Once gas is found and confirmed, the second stage is apprisal. This stage involves identifying the right policies, possible investors and issuing liscence, signing agreements, etc

After apprisal the third stage is development where investors starts buildung infrustructures for production of gas. It is in this stsge where investors spend a lot of money to generate drilling process, refining process, transporting etc. This stage requires large investments and needs a lot of time to complete.

Production is the last stage where it is basically to extract gas from where it ready to use. At this stage is when gas will be produced transported and sold ready to be used.

TanzaniaPetroleum Development Corporation(TPDC), the state owned agency under the Tanzania Ministry of Energy and Minerals is authorised to implements its petroleum exploration and development policies.

Petroleum exploration and development in Tanzania is governed by the Petroleum (Exploration and Production) Act 1980. The Act expressly permits the Government to enter into a petroleum agreement under which an oil company may be granted exclusive rights to explore for and produce petroleum.

Exploration started 60 years ago in Tanzania, according to TPDC, most multinational petroleum companies were represented in one area or another at some point.

Exploration process in Tanzania has been in 5 phases according to TPDC, these stages are :-

Phase 1 (1952 – 64)BP and Shell were awarded concessions along the coast, including the large islands of Mafia, Zanzibar and Pemba. Although it was not very successful, they confirmed the presence of seal, reservoir and source rocks combinations in the stratigraphic column.

Phase 2 (69-79)TPDC was established in 1969, and the first Production Sharing Agreement (PSA) was signed with AGIP on former BP/Shell concessions. During this period large regional, on and offshore, seismic surveys were conducted.

AGIP, joined by Amoco in 1973, drilled three onshore and two offshore wells, including the significant gas discovery at Songo Songo in l974. The discovery was confirmed by TPDC in 1975-79, through a three well program one of which (SS-2) was a blow-out.

Phase 3 (80-91)Adoption of The Petroleum (Exploration and Production) Act of l980 and high oil prices, encouraged increased activity. Most of the drilling in Tanzania occurred in this period, including the delineation of the Songo Songo Gas Field and the gas discovery at Mnazi Bay (l982) by AGIP.

Phase 4 (92-99)At the start of this phase there were no active concessions and little activity except for various studies, and a dedicated effort by the authorities to achieve fiscal and technical agreements for the development of the Songo Songo gas field.

Phase 5 (2000- )This phase was marked by the acquisition of an open grid 2D seismic survey by TPDC and Western Geco over the deepwater areas offshore Tanzania in the Year 1999 - 2000. Nearly 11,000 live km of high resolution 2D seismic data was acquired.

March this year Statoil and Britain's BG Group planed to build a $10 billion East African liquefied natural gas (LNG) terminal well placed for exports to Asia, after the Norwegian company made a new find off the coast of Tanzania.

Potential Benefits

Gas industry has a very important role in the economic growth, energy supply and technology development. With current discoveries the sector assures us for energy security, jobs, tax revenue and growth are set to be maximized

Tanzania is in the process of building a pipeline which will be the bigest project in Sub-Saharan Africa as long as 512-kilometre from Mtwara to Dar es Salaam the cost of will be 1.86 trillion shillings ($1.2 billion) when completed.

Tanzanian governement has signed agreement with three Chinnese companies to construct the pipeline of which will be completed in 18 months starting from july, 2013. According to Ministry of Energy and Minerals Permanent Secretary Eliakimu Maswi the project is funded by a loan from  the Export-Import Bank of China.

The new pipeline will have the capacity to transport 784 cubic feet of gas per day, which will generate 3,920 MW of electricity. Tanzania's current demand is 720 MW per day. By generating 3,920 MW through domestic gas reserves, the country would have a surplus of more than 3,000 MW. Savings from low cost gas power generation would be passed on to industrial and other users, raising Tanzania's competitiveness and growth prospects.
Challanges

According to Farouk Al-Kasim, an expert in Oil and Gas from Norway, many countries with such discoveries are exposed to similar challanges, such challanges are national economy entirely depends on oil. With such attitude it leads to collapse of other sectors of economy (refered to as Dutch disease)

Other challanges involves corruption, fall of efficiency in production of fuel. Moreover, it is believed gas can be a curse and blessing. It is a curse when there is piece instability as a result of unequal distribution of wealth examples Nigeria, Iraq, afghanistan, Angola to mention a few.

With the discovery of gas, Tanzania is in the same risk like other countries. Recently Mtwara citicenz have erupted to protest over construction of gas pipeline to be built from Mtwara to Dar es Saaam. The strike comes as ongoing rumor of unequal distribution of gas revenues.

 This could be regarded as signs to the gas curse if the responsible authorities wont take measurs. Appart from considering the experts oppinions, also the governement of Tanzania will need to invest in educating its citizens on the maters of gas.

 The govenement needs to speed up the process of formulating gas policy while taking into account good governance and transparency.

Other nations have learned that upholding a broad agreement on fundamental policy is vital for ensuring good governance of the sector as well as mitigating the oil curse, a good example is Lebanon.

To mitigate above challanges, experts suggests several steps to be taken, these ae to  include gas in the constitution since it belongs to the country. Following by formulation of strong gas policy which will lead to creation of gas law. Other remedies will include decrees, regulations and instructions.

There is also a need to have clear strategies, plans and concession rounds for guiding, protecting and use of gas.

As a result of above the nation will reap economic benefits for the benefits of all and not few individuals.