WORLD BANK, IMF, AfDB STUDY TANZANIA GAS SECTOR PROSPECTS

Energy and Minerals minister Prof. Sospeter Muhongo

With the country yet to formulate a policy and enact a law to govern the potential gas sub-sector and prospective petroleum discovery, World Bank experts say proven natural gas resources could earn the government up to $2.5 billion (Sh4 trillion) annually at optimal exploitation. Such earnings could on current figures account for about 27 percent of the government budget on the basis of the 2012/13 estimates put at Sh15 trillion, being 46 percent of total projected domestic revenue this year, estimated at Sh8.7 trillion. The prospective level of earnings is contained in a preliminary write up by a collective mission led by World Bank consultant Paul Collier, who also represents the UK agency, DFID. The group is titled Gas Scoping Mission, and sits for a week-long discussion between the government and development partners, from tomorrow to Friday. Mission members are drawn from the International Monetary Fund (IMF), the World Bank, the UK Department for International Development (DfID), the European Union and the African Development Bank (AfDB). Germany has an environment expert and China a stakeholder in gas exploration and investment. Paul Collier, a veteran World Bank expert will lead the mission in his personal capacity, and sit for DfIDF on savings and investment issues in formulating a gas policy before formal exploitation of the resources starts. Chief Secretary Ambasador Ombeni Sefue will lead the government delegation to the meeting, with its members expected to have a scheduled meeting with President Jakaya Kikwete late Wednesday. The mission has allocated each member from a major development ageny a specific aspect in accordance with their specializations either in those agencies on in personal qualifications. The areas are savings and investment issues to be handled by Paul Collier, while World Bank expert Albert Zeufack shall handle downstream (arising from gas, oil exploitation) fiscal revenues management, both in terms of public investment management and local or central government allocation, the mission statement indicated. IMF expert Philip Daniel shall take up upstream (costs, operating companies) fiscal management and revenue sharing agreement, while African Development Bank expert Stephen Karangizi shall take up contract negotiations and legal framework (including sectoral regulations) for the team. Chinese joint venture firm Texan Brine Corporation (TBC) shall represent China in the mission, as it has interests in continuing gas exploration work, it was noted. European Union expert Karl Kaspareck shall handle aspects of education and training, while German expert Markus Wagner shall take up environment aspects, it said. The Gas Scoping Mission write up says that recent finds suggest that Tanzania has very substantial gas reserves. �These have the potential to generate government revenue of as much $2.5 billion per year, which could transform Tanzania. �Careful management will be needed to maximize benefits to Tanzania from the gas discoveries, and to avoid the natural resource �curse� that some countries have experienced,� the seven page document intoned. Energy and Minerals minister Prof. Sospeter Muhongo told Parliament in the last budget sitting that the country has confirmed reserves of 29 trillion standard cubic feet, while the mission document refers to confirmed gas reserves of 21 trillion cubic feet. Collier in the document prepared for the World Bank affirms that the country is likely to discover more gas reserves, even suggesting that total likely potential could triple current confirmed reserves. The potential of the geological basins off the coast of Tanzania has not yet been fully appraised, but for comparison the Ruvuma basin just south of the border in Mozambique is estimated to have a potential of 100 trillion cubic feet or more, the consultant noted. Ophir/BG (British Gas), Statoil and Petrobras are currently carrying out more exploratory activity on the Tanzanian side, he further noted, projecting that the final potential could equal Mozambique findings. Development partners realize that the large gas discoveries could be a game changer for the country, in which case the development of an LNG (Liquefied Natural Gas) export market is a pre-requisite for the development of deep offshore gas discoveries as the domestic market would not be able to absorb much of the gas available in Tanzania, the mission noted. �On LNG, Tanzania is likely to face competition from other gas producing countries including Mozambique. At this stage, there is a potential for competition among the different private sponsors active in Tanzania (BG Group, Statoil, Petrobras) and active in Mozambique (Anadarko, ENI), but also room for cross border cooperation. Mozambique, which is more advanced in its exploration, may move first and become the main LNG terminal host in the region,� the report noted. In the view of development partners, the beginning of production in Tanzania could be expected after 10 to 12 years. �In a green field environment like Tanzania, a two-train LNG plant (the minimum development configuration) would be required to process around 15 trillion cubic feet reserves for an estimated cost of around US$30 billion. Export receipts could amount to between US$100 and US$200 billion over the life of the project, depending on price assumptions,� the write up indicated. Apart from the President and the Chief Secretary, the development partners delegation is also scheduled to meet representatives from the Ministry of Energy and Minerals and the Tanzania Petroleum Development Corporation (TPDC), Ministry of Finance, Attorney General�s Office, President�s Office (Planning Commission), Bank of Tanzania and the Tanzania Revenue Authority. Other key personalities lined up to meet the delegations are chairpersons of Parliamentary Standing Committees but prior to that the mission will meet Kabwe Zitto, the head of the Parastatal Organisations Accounts Committee (POAC). The mission will also meet private sector organisations, including the Tanzania Private Sector Foundation, the CEOs Roundtable, the Confederation of Tanzania Industries (CTI) plus civil society organisations such as the Policy Forum, Worldwide Fund (WWF) and the Journalists� Environment Network.

SOURCE: GUARDIAN ON SUNDAY