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Tanzania to Increase Royalties and Fees

Source: Reuters 7/27/2012, Location: Africa

Tanzania plans to raise royalties on gas and demand signature bonuses for energy contracts as the east African nation tries to secure bigger benefits from major offshore discoveries. Tanzania recently tripled its estimated gas reserves and is fast becoming a regional energy hub after finds by Norwegian oil company Statoil, U.S. group ExxonMobil and Britain's BG Group and its partner Ophir Energy.

Energy and Minerals Minister Sospeter Muhongo said royalties on gas production would rise from 12.5 percent to an unspecified level and the new signing fee would be introduced under a new gas policy, masterplan and law now being drafted. In a presentation to parliament, he said it would take effect in 2012/13.

Tanzania is one of the world's poorest countries. Like its east African neighbours, it is now positioning itself for a gas bonanza. Last month, it raised its estimate of recoverable natural gas reserves to 28.74 trillion cubic feet (tcf) from 10 trillion.

Muhongo said Tanzania would launch a new licensing round in Houston, Texas, in September for additional oil and gas exploration blocks in its deep-sea area. "The government will review existing contracts and conduct a detailed evaluation before entering into new production sharing agreements for oil and gas to ensure national interests are upheld," he said. He said at least 18 global energy companies had spent nearly $920 million on oil and gas exploration.

As part of its plan to get more from its gas, Muhongo said Tanzania would own a new gas pipeline and processing plants. Construction started last week on a 532-km (330 mile) pipeline financed with a $1.2 billion Chinese loan. The minister said Tanzania hopes to build two gas-powered plants to produce 390 megawatts of power at a combined cost of $598 million - reducing its reliance on hydro electric power which has proved vulnerable to drought. Loan agreements would be reached in September with the Japan Bank of International Cooperation and South Africa's Absa Bank for construction of one of the plants, meant to produce 240MW, he said. Forty percent of Tanzania's 1,375 MW capacity came from natural gas by the end of June compared to 1,014 MW a year earlier. Peak demand rose to 820 MW from 730 MW.

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Related Articles: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Insurance  Investment  Mergers and Acquisitions  Risk Management 

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