Tanzania gets gain tax from gas block sales

For the first time in history,Tanzania is set to receive capital gain tax from sale proceeds of three gas blocks.

The Singaporean firm, Pavilion Energy, owned by Temasek Holdings, entered an agreement with Ophir Energy to take 20 per cent stake of UK’s Ophir Energy offering 1.3 billion US dollars (about 2tri/-).

The Minister for Energy and Minerals, Prof Sospeter Muhongo (pictured), told the National Assembly last week that the government would get 258 million US dollars as a capital gain tax.

“We are proposing that the proceeds to be used as capital to enable TPDC (Tanzania Petroleum Development Corporation) to acquire two gas blocks at the border of Tanzania and Mozambique,” Prof Muhongo said.

He added: “we have written to the treasury to ask them to release the funds for TPDC I think the treasury will take note of our letter.” According to the statement circulated to media houses by Pavilion, the transaction is scheduled to be completed in the first quarter of 2014.

The minister said TPDC will in the future sell shares in production-sharing agreements through the Dar es Salaam Stock Exchange (DSE) to enable more Tanzanians to participate in the oil and gas industry. TPDC would take a stake off up to 75 per cent of a new production-sharing contracts on the behalf of the Treasury.

“The production-sharing formula will either be 35 per cent to investors and 65 per cent to the government or 25 per cent to the remaining 75 per cent to us,” President Jakaya Kikwete said when launching the country’s fourth licensing round.

Mr Kikwete said the government would consider selling stakes held by the state-run TPDC in production- sharing agreements to Tanzanians through initial public offerings (IPOs). 

The investment helps Pavilion Energy diversify its supply of LNG to meet Asian demand as Singapore vies to become a gas-trading hub.

The first deliveries from Tanzania are scheduled to start in 2020. “The natural gas developments in Tanzania hold tremendous potential, not just for Pavilion Energy but for Singapore and Asia,” Chairman Tan Sri Mohd Hassan Marican said in today’s statement.

Temasek set up Pavilion in April to supply LNG in Asia, the company said at the time. Pavilion Gas, the unit that manages operations and LNG distribution, started trading and plans to complete its first delivery to Asia by February, Chief Executive Seah Moon Ming said in a speech last month.

The Singaporean state firm has increased its capital to 6.9 billion US dollars from the initial 1.0 billion US dollars earlier this year.
Source: Daily News, reported by Abduel Elinaza from Dar es Salaam, Tanzania
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