Tanzania Stands to Lose US$1 billion Annually in a Exxon Mobil-Norwegian Gas Deal*
Exxon-Mobil has partnered with Norways Statoil in the oil fields of Tanzania. Rothschild is the advisory bank for Statoil. Statoil has a 65% working interest, while Tanzania Petroleum along with Exxon-Mobil has a 35% working interest, so who benefits?
Statoil (U.K.) Ltd is one of the companies that provide financial support to the Crisis Group along with Exxon-Mobil. The International Crisis Group (ICG) in real terms creates regional crises as exampled by Thailand and Egypt. Mohamed El-Baradei one of the key figures in Egypt’s counter-revolution is an ICG member.
By Pernille Baerendtsen
No one knows for sure how much gas there is in Tanzania, though estimates put the amount at around 51 trillion cubic feet (TCF). But expectations surrounding gas exploration in Tanzania are soaringly high.
Across Tanzania’s commercial capital, Dar es Salaam, both traffic and new construction are burgeoning. The African Development Bank’s (AfDB) designation of Dar es Salaam as the fastest growing city in East Africa is almost literally palpable. The AfDB report, “Tracking Africa’s Progress”, predicts that the city’s population will increase from 4 million to 6.2 million over the next 10 years. Predictions regarding the country’s economic growth are based on future income from natural resources, like gas from the region of Mtwara. AfDB’s forecast, for instance, makes reference to the potential jobs this activity will create.
Protests in January and May 2013, however, by residents in the port city of Mtwara, signal a lack of confidence that the future envisioned by the AfDB will also materialise for remote rural areas of Tanzania such as Mtwara Region. The catalyst for the protests was the announcement of a decision by the government to construct a gas pipeline from Mtwara to Dar es Salaam instead of a gas processing plant in Mtwara. The latter would have fed into an industrialisation strategy that would boost local development.
An incident in early July 2014 involving a production sharing agreement (PSA) between the Tanzanian Petroleum Development Corporation (TPDC) and the Norwegian multinational Statoil, along with Exxon Mobil, highlights how fraught the question of revenues from Tanzania’s gasfields—and who will benefit from them—has become. Though not directly linked to the protests in Mtwara, the TPDC-Statoil affair underlines a growing awareness among Tanzanians of the issues surrounding oil and gas, and an increasing dissatisfaction with the way the government handles natural resources contracts and communicates this information to citizens.
At the center of the matter is an addendum to Statoil’s original contract with the Tanzanian government for gas extraction in Mtwara Region that was leaked, then brought to the attention of the Tanzanian press in early July 2014. According to media reports, under the terms of the agreement as outlined in the leaked document, the government stands to lose US$1 billion annually.
On social media Tanzanians wondered how the two multinationals had managed to strike such a good deal. A cartoon by Masoud Kipanya published in the Tanzanian daily Mwananchi depicts a white man with a tank labelled “GESI” (Swahili for “gas”) on his back, extracting gas from the ground while handing out pennies to a Tanzanian. Another Kipanya cartoon shows a mouse saying in Swahili: “I wish that we would let our gas remain underground till our country reaches adolescence.”
Statoil’s gas extraction project in Tanzania is one of the largest investments ever in Sub-Saharan Africa. Writing on Africa Arguments, the analyst and blogger Ben Taylor claimed that the potential revenue from natural gas is on a scale that could release Tanzania from its heavy dependence on development aid.
“Another indication of the scale involved here,” wrote Taylor, “is that since the Norwegian government is Statoil’s majority shareholder, the extra revenue to the Norwegian government from this deal could be worth more than double the total of all Norwegian aid to Tanzania since independence.”
Zitto Kabwe, a member of parliament and Chairman of the Public Accounts Committee, highlighted some of the leaked document’s key points in a Q&A on his blog, and critiqued the fact that the PSA was not made publicly available. In a July 6 article in the Daily News the TPDC responded to Kabwe, asserting that claims that the country risked losing US$1 billion per year were unfounded. Kabwe and others countered the TPDC’s comments on Twitter, and Kabwe called on the TPDC to clarify the terms of the deal.
According to a July 19 article in The Citizen, the TPCD confirmed its position in a press conference on July 16:
“Outgoing TPDC managing director Yona Killagane strongly refuted the claims that the country would incur a loss of $1 billion annually if the pact is fully implemented as agreed. Instead, he insisted that the government was likely to earn more money and that it stood a higher chance to benefit from the contract.”
Tanzanians are not particularly pampered with regard to transparency around natural resources contracts, but this latest affair gives rise to even further mistrust. Nor does it help when the likes of Patrick Rutabanzibwa, chairman of PanAfrican Energy, the company that runs the Songo Songo Gas and gas-fueled power plant in Ubungo in Dar es Salaam (also the former Permanent Secretary of the Ministry of Energy and Minerals), minimise the matter.
“We are failing to enter into resource contracts as it was in mining and currently in oil and gas because our capacity is very low,” said Rutabanzibwa. “But if Tanzanians will be empowered then, contracts will be balanced. . . . We should let bygones be bygones and start by legally making investment contracts in the natural gas sector public; I am sure there will come a day where all investment contracts are public.”
For stakeholders with particular interests in business and investments in Tanzania, criticism makes a challenging investment area like gas even more difficult, and some will even argue that it will result in less money going to neglected areas. Others might say that regardless of Tanzania’s share of the revenue, there will still be benefits in the form of jobs and local growth in Mtwara.
Analyst Ben Taylor is less optimistic.
“One of the big political risks with oil and gas,” wrote Taylor, “is that it can be seen by politicians and senior officials as ‘easy’ money that doesn’t come with the kind of scrutiny that taxpayers demand when they pay their taxes and donors demand when they provide aid.
“Unless somebody – the media, politicians, civil society – steps up to fill the gap, decision makers in government will be left free to make whatever decisions they choose, unencumbered by any need to protect the public interest. The Statoil PSA may well have cost Tanzania several billion dollars – yet it appears no-one is trying to hold those responsible to account.”
Nordic Region http://www.rothschild.com/nordic/
Statoil: High-Impact Gas Discovery Offshore Tanzania ogfj.com/articles/2014/06/statoil-high-impact-gas-discovery-offshore-tanzania.html