Tanzania, Struggles to Get Its Energy Industry Off The Ground

Tanzania, Struggles to Get Its Energy Industry Off The Ground

The case of Tanzania, long mooted to become the star of the nascent East African oil bonanza, is a fitting example of why the coronavirus-triggered market impacts are so divergent.

Over the last couple of years Tanzanian authorities seemed to do their utmost to scare off foreign investors. First, they have ran ashore with tightening upstream licensing terms in the 4th Licensing Round by increasing the government’s total take to a whopping 94%. Second, it has tied all oil and gas-related arbitration to local courts via the Natural Wealth and Resources Act in 2017, rendering the engagement of international majors even more difficult.

Against the background of waning interest, Tanzania has also stopped all negotiations with international oil companies on the review of PSA terms and conditions. The Tanzanian government claimed that it needs to suspend communication so as to be able to focus on a thorough review of gas-related PSAs.

As a consequence of all the above developments, Tanzania is compelled to postpone its 5th upstream licensing round well into 2021-2022, despite initial promises to hold it as soon as 2017. All this only a couple of months after Tanzania stated its intention of reopening its hydrocarbon licensing activity after an almost 5-year hiatus.

The licensing round would have included 8 deep-water blocks in water depths of 2-3000 meters with quite a remarkable drilling history: Blocks 1,2,3 and 4 have a total of seven gas discoveries yet were subsequently relinquished at different stages by Statoil, ExxonMobil, BG and Ophir. Tanzania’s hydrocarbon exploration story is essentially one that revolves around oil majors going deeper and deeper into the abyss of the Indian Ocean.

Tanzania has also been very slow to advance the Tanzania LNG project. Having first discovered natural gas in the country’s offshore in 2010, constructing an LNG terminal in Lindi to supply the Asian market has been on the agenda for 6-7 years already and even under the most optimistic scenarios it is only in 2028 that it would be commissioned. 

More : The African Nation That Can’t Get Its Energy Industry Off The Ground, By Viktor Katona for Oilprice.com

Source / More information : oilprice.com

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