No favours for locals in gas deals, says JK

Any hope that Tanzanian investors will receive special treatment in natural gas exploration was dashed again yesterday when President Jakaya Kikwete weighed in, again, in the debate on the place of locals in natural gas exploration. 

Far from appeasing local entrepreneurs, Mr Kikwete reiterated the government’s stand that there would be no preferential treatment for them.

The debate kicked off in earnest last year as the government announced its intention to auction oil and gas blocks. The government and the private sector have been engaged in a back and forth war of words ever since.

The private sector, led by the chairman of the Tanzania Private Sector Foundation (TPSF), Mr Reginald Mengi, wants a special arrangement to enable local entrepreneurs engage in gas exploration. 

But the government refuses to budge, saying interested parties must follow due process.

Tanzania opened up the fourth oil and gas licensing round last October. The tenders will be closed in May.

Speaking for about three hours at a symposium organised by religious leaders yesterday, President Kikwete said favouring individuals or a group of people in the oil and gas sector will only serve to enrich a few. 

He noted: “If the government let Kikwete & Sons Co. Ltd acquire gas blocks favourably, it is the Kikwete family that will benefit. Mr Kikwete might donate to charities or help the disabled and the poor if he wishes to do so. But our aim is that the government should be the custodian and collect gas revenue on behalf of all Tanzanians.”

He spent a lot of time explaining that investing in oil and gas is not only expensive and beyond the means of many local entrepreneurs but it is also a risky business. 

“It must be understood that the government has not denied exploration license to any local firm that applied for it in accordance to procedures,” the President added. “Locals are free to participate in the oil and gas business but only if they follow the law.”

He also dismissed the idea of allocating special blocks to locals separate from the competition of foreign firms. 

“Allocating blocks to locals for exploration has also its own problems, in addition to the fact that it will be equally expensive and risky,” the president said. “If exploration does not yield results, people will start saying that the government deliberately allocated to locals areas that do not have gas reserves.”

He also took his time to explain how the participation of the Tanzania Petroleum Development Corporation (TPDC) will benefit the whole country. 

The idea is that TPDC will take between 65 per cent and 70 per cent of the profits accrued after oil and gas firms have deducted their operational costs. 

TPDC is eventually expected manage its own exploration and production like Statoil, Petrobras and Petronas firms in Norway, Brazil and Malaysia, resoectively. “We want to form our own Statoil like the Norwegians did,” he added.

The government intends, though, to explore how locals would participate in the oil and gas business at the production stage, most probably via TPDC. 

The government is still figuring out how this can be done.  But TPDC might either enter into partnership with local firms or sell shares. 

But even then, TPDC and any other firms participating in the oil and gas business will be subjected to the same laws as foreigners. “Read my lips,” the President added. “There are no favours here.”

In the meantime, the government is working on a law to introduce a sovereign fund. 

All funds generated from the gas sector will be put in the fund. The law will indicate how much should be allocated to the country’s budget each year and this will help ensure that future generations benefit from revenue generated from the gas sector,  Mr Kikwete said.
Source: The Citizen, reported from Dar es Salaam, Tanzania
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