/Tanzania Needs to Ramp Up Modernization of Fiscal Terms to Become a Regional and Global Gas Hub

Tanzania Needs to Ramp Up Modernization of Fiscal Terms to Become a Regional and Global Gas Hub

Tanzania could become a regional and global natural gas hub; however, the government will need to accelerate the modernization of its tax and policies. Tanzania, with its 57.54 trillion standard cubic feet of natural gas reserves, has the potential to become a regional and global energy hub. With global liquefied natural gas (LNG) prices anticipated to increase and peak in 2025, and supply deficit anticipated from 2024 onwards, Tanzania, owing to its strategic location and vast gas reserves, is well suited to become a global supplier.  The African Energy Chamber (AEC), in its Q1 2022 report, the State of African Energy, estimates that Tanzania has the potential to produce up to 20 million tons of LNG per annum. However, fiscal terms have forced some majors to pause business expansion plans within Tanzania, hampering the development of the country’s extensive offshore gas resources. In 2020, Equinor wrote off $900 million from its books related to Tanzania LNG projects. The government has also been struggling to attract investment and increase the participation of international firms to boost gas exploration, production and infrastructure development. However, with the government starting to revitalize the hydrocarbons market through various initiatives such as tax and fiscal policy reforms and regional partnerships, Tanzania’s gas market is entering a new era. In November 2021, H.E. January Makamba, the Minister of Energy, Tanzania, visited Saudi Arabia and Algeria to discuss cooperation on gas development and investment opportunities for Algerian and Saudi energy firms within the east African country’s gas market. Additionally, in 2021, the government, through the Petroleum Upstream Regulatory Authority (Pura), also started discussions with international oil and gas firms to kickstart the country’s LNG market expansion. With Pura expected to sign Host Government Agreements worth $30 billion with Shell, Equinor, ExxonMobil, Pavilion and Oph by the end of May 2022, for the development of a large-scale LNG project in Lindi province, massive investments will flow into the country’s gas market. However, with both the Financial Investment Decision and development of the Lindi LNG project anticipated to take six years, the AEC as the voice of the African energy sector, is calling for the Tanzanian government to fast track the development and implementation of capital-attractive tax, fiscal and policy reforms to accelerate the development of the LNG initiative whilst also attracting other investments to kickstart a series of exploration activities aimed at expanding the country’s reserves and production capacity. With the M&P Exploration and Production Tanzania-operated Mnazi Bay Complex Conventional Gas Field – which produces 51% of the country’s daily output – reaching peak production in 2018, Tanzania needs to expand investments within the upstream sector. “Tanzanian gas will play a vital role to make energy poverty in Africa by 2030. We urge the government to ramp up the modernization of its fiscal and policy frameworks to avoid being left with stranded assets, to be to address its energy woes and to fuel industrialization and GDP growth,” stated NJ Ayuk, the Executive Chairman of the AEC. African Energy Week (AEW), Africa’s premier event for the oil and gas sector, which will take place from 18 – 21 October 2022 in Cape Town, provides a perfect platform for Tanzania to meet with other African hydrocarbon producing countries such as Nigeria, Niger, Equatorial Guinea and Angola to learn best approaches to developing a capital-attractive regime which will support increased investments, local content and infrastructure development. Under the theme, “Exploring and Investing in Africa’s Energy Future while Driving an Enabling Environment,” AEW 2022 will host panel discussions, high-level meetings and investor and ministerial forums to discuss how best Tanzania can attract investments to boost its hydrocarbons market.