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TANZANIA

Policy brief no. 3

2015

REFLECTING ON THE POLICY OPTIONS AND ISSUES ON OIL


AND GAS SECTOR IN TANZANIA
1. Background
Tanzania has recently discovered massive deposits of natural gas and the potential for oil both
onshore and offshore of the Indian Ocean and more explorations are underway. The discoveries
brought a significant foreign investment in the country and consequently high expectations by local
people to benefit out of these resources.
The existence of natural gas resources in Tanzania is expected to contribute to its economic growth
and development and improve the living standards of its population. With rising global interest in
natural gas, there has been an enormous expansion in exploration, yielding significant discoveries.
As a result of the new discoveries, Tanzania is currently emerging as a potential major global player
in gas production with large discoveries of gas on deep offshore.
Oil and Natural gas related developments are associated with both positive effects in terms of
benefits, such as employment creation, increased government revenue, improved livelihoods, and
poverty eradication. However, these developments are also associated with risks both to people
and the environment. These risks are linked directly to the destruction of the ecosystems which are
found in areas where such discoveries are happening especially in situation where weak institutions
for natural resources governance are in place.
There is a great concern about the negative impact of oil and natural gas developments on
animal migration corridors, tourism sites, and areas that support fish and prawn production. These
ecosystems support widely the households or communities in terms of products and services from
their local environments for survival.
This Policy Brief reflects on the policy options available, scrutinizes policy issues in oil and gas
industry and gives policy advice on how to mitigate the anticipated risks from the oil and gas
exploration. It emphasizes that promotion of good governance and environmental standards of oil
and gas should be of concern to all.
2. Context
Both public and private policy makers face many difficult challenges presented by the recent oil and
gas finds. Amongst these is how to balance the potential high economic and development returns

from successful exploitation of oil and gas projects against the high financial, social and environmental
risks. They also fumble with managing price volatility, macro economic instability, technical and
logistical complexity, high capital and operating costs, increased potential for corruption, civil unrest
and community conflicts. The overall challenge is to ensure that the opportunities presented by the
oil and gas discoveries are exploited in a responsible way that include appropriate environmental
and social standards and public oversight so that a positive developmental and environmental
legacy benefit all people.
The discoveries could be game changers for the regions economies and development. This puts
Tanzania on the threshold of a resource driven period which requires comprehensive preparations
to ensure both sustainable economic benefits and environmental protection. To make this a reality
there is a need to consider various policy options, redress policy issues and conduct policy review
to take on board and fill the gaps available.
3. Critique on legal and policy options
The policy has not clearly stated how the challenges of building effective institutional and legal
frameworks, the local content, capacity building and corporate social responsibility will be addressed
or provide the time frame to address them.
There is still a concern on environmental monitoring with respect to upstream as there is no specific
information on this aspect. In addition, in the Model Production Sharing Agreement (PSA) of 2008
the Tanzania Petroleum Development Corporation (TPDC) has been assigned the responsibility to
check on compliance with the environmental monitoring, performance and evaluation on mid and
downstream activities. On a similar note, TPDC is also a contractor and this may lead to conflicting
interests.
Environmental monitoring on the mid and downstream activities is managed by the Natural Gas
Policy of 2013. The monitoring for the upstream exploration activities are not adequately covered
in the current Natural Gas Policy 2013. In addition, some of the institutions such as the National
Environmental Management Council (NEMC) tasked to oversee the environmental management
are not clearly mentioned in the National Gas Policy 2013 and in the PSA. This may affect the
effectiveness of monitoring and evaluation of the natural gas projects. It must also be noted that
TPDC is also a contractor in some cases, thus environmental matters being left to TPDC may not be
dealt with accordingly due to conflicting objectives by the same institution. This would complicate
the monitoring and evaluation on the adherence to environmental protection.
The Model PSA which currently manages production of Natural gas serves as the basis for
negotiations with the government and TPDC. They are updated regularly with versions published
in 2004, 2008 and 2013. This implies that the envisaged benefits to the government as far as these
model PSAs are concerned is likely to be less from what is expected. This is because; most Contract
deals have been signed under the model PSA of 2004 where the percentage share of profit to the
government is less than what is indicated in the recent Model PSA of 2013.
It has been noted that PSAs are silent on whether indigenous population or natives have the right
of ownership on their land where oil and gas resources are explored or exploited. PSAs are silent on

whether the local communities have rights of sharing revenues derived from the sales of resources
after the extraction of those resources.
Apart from that existing policy gaps which have been noted are: inadequate participation of the
local firms, institutions and local communities, limited supply of factor inputs: materials, labor and
finance, competitive capacities to deliver curtail benefit from the local content, limited domestic
value addition, limited role of the Private Public Partnerships (PPP), the level of competitiveness of
markets and gas pricing system has not been clearly stipulated, the objectives did not cover the
intergenerational benefits, preparedness of the identified institutions on the implementation of the
NGP and identification of the implementing agency to ensure health, safety and environmental
protection, the level of preparedness on disaster management, and the absence of long term
plan (well completion) on the long term effects of gas production on the ecology (flora and fauna)
habitats.
4. Policy recommendations
Sensitization
It is necessary to inform the population about what is happening at their doorstep and to build
capacity to Government officials who are new to the subject. Community need to be informed
on all issues pertaining gas exploration and development, that is, what is under implementation,
how the projects are going to develop, what the Central Government is planning to do with the
resources, and how the region is going to benefit. It is important that the NGP 2013 is translated into
Swahili and widely circulated to stakeholders. In addition, simple version of the same should also
be circulated to a wider population especially around the areas where the natural gas is exploited,
transported and distributed. Sharing benefits and opportunities given by the resource discoveries is
a key to gain the support of the civil society and bring the country on a stable and peaceful growth
path. There is a need to have awareness, sensitization campaign to the local government authorities
and communities on matters related with local oil and gas exploration and development activities.
Institutional strengthening
There is need to ensure TPDC, EWURA and NEMC work in collaboration, very effectively, efficiently
and transparently to ensure prevention, reduction, control and limitation of damage, and minimization
of the risk from the generation, management, transportation, handling and disposal of hazardous
wastes, other wastes and emissions. There is pertinent need to strengthen the capacity of local
government authorities in oil and gas as well as natural resources governance.
Human resources Capacity building
Promoting Tanzanian local content is not only in one field of engineers who covers most upstream
activities but also on other experts and professionals needed in mid and downstream activities. It is
recommended to scale down the use of foreign experts in oil and gas industry. This can be done by
using licenses and contracts to bind oil and gas Companies to employ local experts. There should
be a mechanism of technology transfer in terms of human capital to generate more employment
and economic development.

Creation of a domestic market


Domestic consumption should be increased first by establishing and building industries simultaneously
while drilling and lying of pipeline are underway. It is recommended to promote local economy by
increasing domestic consumption and market by also stimulating domestic investments such as
the number of industries which will be established or increase the number of users. To raise public
awareness on the cost effectiveness of using gas for household activities rather than other means of
energy resources such as electricity, and firewood is another key issue to be considered.
For further information please contacts;
Novati Kessy, Program Officer, Oil and Gas, WWF Tanzania country office, Plot 350, Regent
Estate Mikocheni, P.O.Box 63117, Dar es Salaam, Tanzania, Email. NKessy@wwftz.org, info@
wwftz.org, Website.www.panda.org
Acknowledgement
It is worth to note that most of the information which was analyzed, documented and used
to prepare this Policy Brief was collected from the consultations and interviews conducted to
members of Mazingira Network (MANET), and Mtwara Region Non-Governmental Organizations
networks (MRENGO).
We also feel indebted if we would not appreciate the insightful comments which were given
by the Oil and Natural Gas Environmental Alliance-ONGEA during the stakeholders meeting
workshop which was held in Bagamoyo on 10th to 12th December 2014. Their views and
opinions helped to recast and revisit the contents of this Policy Brief.
Disclaimer
The statements, opinions, and ideas used in this Policy Brief have been retrieved and paraphrased
from desk review research studies done by Environmental and Climate Change Consultant,
respectively. The views presented in this document dont reflect the official positions of the
organisations or individuals involved.

World Wide Fund for Nature (WWF) is one of the worlds largest and most respected independent
conservation organizations. WWFs mission is to stop the degradation of the earths natural
environment and to build a future in which humans live in harmony with nature.
info@wwftz.org