Is there a right formula for managing the oil and gas sector in Tanzania?


by Namwaka Omari

Discussion and debates around natural resources in Tanzania have in recent years focused on the projected revenues from the gas sector. The new discoveries of natural gas have shifted the nation’s conversation to turn to look at what this gas can do for the country. The underlying assumption here is that if the gas is developed, processed, piped and exported, it will bring in significant cash flow to the government; a new cash cow of sort. This is all well and good – in theory. In practice, the process is not all that simple and if not managed ‘right’, then we may not realise the projected revenues that are meant to come from the gas reserves. How then do we properly manage the sector? What should we put in place? What should we do first? What should we NOT do?

These are all important questions that we should be asking ourselves and thinking critically as to how to position ourselves to truly benefit from our natural resources. They cannot all be answered at one go, nor should they be attempted to be answered at one go as this is a complex sector that needs careful analysis. What we should do is learn from others that have gone before us on this journey, and determine which lessons we can take forward and which we should leave behind. Not all will work for us as Tanzania, but there may be some experiences that we can take from and build on – some good foundations.

An example of this is from a recent trip to Ghana, which revealed that their natural resources are protected in the mother law – the Constitution – with powers vested in the parliament to look at each and every contract that is in the realm of natural resources prior to approval. This oversight role is important in ensuring that each contract attains maximum benefit for citizens. This is indeed an important lesson for us in Tanzania, where does the buck stop with us?

What I am offering here is one foundation, which borrows from the Natural Resource Charter framework. I am offering a few of the ingredients in the recipe of how we can start to possibly think about ‘getting it right’:

Ingredient 1: Have in place a comprehensive national strategy or ‘vision’ for the sector with an effective coordination framework; this means developing a shared blueprint (vision) and creating an “authorizing environment” for the natural gas sector which spans all the relevant ministries and is housed at a high office.

Ingredient 2: Ensure Government ownership of geological information so that the Government knows how much is available and where, this will provide ownership of the data to the Government.

Ingredient 3: Empower citizens with correct information which speaks to the need to have a critical mass of informed citizens which can hold the Government accountable.

Ingredient 4: Secure efficient allocation of licenses to ensure maximum benefits by having a transparent licensing regime.

Ingredient 5: Realise the full value from the natural resources by vesting ownership to the Government through empowering the National Oil Company as a commercial entity, as well as ensuring that tax regimes enable the government to realize the value of resources.

Ingredient 6: Put in place an effective regulatory framework by establishing a regulatory authority and frameworks for upstream, as well as effective institutions and frameworks for midstream and downstream.

Ingredient 7: Make sure environmental and social costs of oil & gas projects are accounted for, mitigated and offset, which will mean enhancing monitoring of company operations, enforcement of compliance to laws that safeguard surrounding communities from harmful environmental impacts, as well as putting in place an effective system to respond to environmental disasters (such as oil spills or hazardous leaks).

Ingredient 8: Invest oil & gas revenues to achieve optimal and equitable outcomes for both current and future generations. Here we could learn from others and establish a Gas Revenue Fund which is independent, with the purpose of ring-fencing funding for continuous development of the oil & gas industry, ensuring financing of strategic infrastructure, managing fiscal volatility as well as saving for the future generations.

[Watch the In Focus show on understanding Sovereign Wealth Funds here]

Ingredient 9: Design integration of the oil and gas sector for economic transformation, by harnessing oil and gas to transform other critical sectors such as infrastructure as well as ensuring local content (employment, local supply chain,s etc.) and local skills are developed.

Ingredient 10: Dialogue with International Oil Companies (IOCs), to ensure they are committed to contributing to sustainable development through their Corporate Social Responsibility (CSR) in line with local development plans, as well as adhering to national standards.

Ingredient 11: Engage the International Community to support the sustainable development efforts of the country, by encouraging IOCs to operate in the same way as they operate in their countries of origin. Information sharing initiatives should be enhanced, while ensuring that the host country proactively engages with the IOCs.

This does not suggest that these ingredients are a magic pill; nor that they will guarantee ‘getting it right’, but it is a start. There is no one ‘right’ formula – no one size fits all in managing the sector, however, there are ingredients which are essential, and looking at what other countries have done, which give us a starting point, may put us on a path that could potentially work for Tanzania.

Other resources on managing natural resources:

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