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UNITED REPUBLIC OF TANZANIAMINISTRY OF ENERGY AND MINERALS
(DRAFT - 1)
THE NATURAL GAS POLICY
OF TANZANIA
Dar es Salaam
October, 2012
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TABLE OF CONTENTS
TABLE OF CONTENTS ......................................................................................................................................... I
ABBREVIATIONS .............................................................................................................................................III
PUBLIC PRIVATE PARTNERSHIP .................................................................................................................................. III
DEFINITIONS OF TERMS ................................................................................................................................. IV
DEFINITIONS OF TERMS ................................................................................................................................. IV
MEASUREMENTS AND CONVERSION FACTORS .............................................................................................. VI
FOREWORD .................................................................................................................................................. VII
1.0 CHAPTER ONE ........................................................................................................................................ 1
1.1 INTRODUCTION ................................................................................................................................. 1
1.2 STATUSOFTHENATURALGASINDUSTRYINTANZANIA.................................................................... 1
2.0 CHAPTER TWO ....................................................................................................................................... 3
2.1 JUSTIFICATIONFORNATURALGASPOLICY ........................................................................................ 3
2.2 VISIONANDMISSION ........................................................................................................................ 3
2.3 OBJECTIVES OF THE NATURAL GAS POLICY ....................................................................................... 3
3.0 CHAPTER THREE..................................................................................................................................... 5
3.1 POLICYISSUESANDSTATEMENTS ..................................................................................................... 5
3.1.1 UPSTREAM ACTIVITIES ............................................................................................................................ 5
3.1.2 MIDSTREAM AND DOWNSTREAM ACTIVITIES ............................................................................................... 6
A. Natural Gas Infrastructure............................................................................................................... 6
B. Natural Gas for Domestic Market................................................................................................... 8
C. Liquefied Natural Gas (LNG) Business......................................................................................... 8
3.1.3 MANAGEMENT OF NATURAL GAS REVENUE ................................................................................................ 9
3.1.4 NATURAL GAS PRICING ......................................................................................................................... 10
3.1.5 SECURITY OF NATURAL GAS SUPPLY......................................................................................................... 11
3.1.6 LINKAGES WITH OTHER STRATEGIC SECTORS.............................................................................................. 11
3.1.7 LOCAL CONTENT AND CAPACITY BUILDING ................................................................................................ 12
3.1.8 CORPORATE SOCIAL RESPONSIBILITY ........................................................................................................ 13
3.2 CROSSCUTTINGISSUESPOLICYISSUESANDSTATEMENTS .......................................................... 14
3.2.1 EFFICIENCY AND CONSERVATION ............................................................................................................. 14
3.2.2 TRANSPARENCY AND ACCOUNTABILITY ..................................................................................................... 15
3.2.3 MANAGEMENT OF THE ENVIRONMENT,HEALTH AND SAFETY ....................................................................... 16
3.2.4 REGIONAL AND INTERNATIONAL COOPERATION.......................................................................................... 16
3.2.5 GENDER MAINSTREAMING AND HIV AND AIDS ......................................................................................... 17
3.2.6 PUBLIC PRIVATE PARTNERSHIP -PPP ....................................................................................................... 18
3.2.7 PUBLIC AWARENESS AND MANAGING EXPECTATIONS IN THE NATURAL GAS INDUSTRY ...................................... 19
4.0 CHAPTER FOUR .................................................................................................................................... 20
4.1 EXISTING LEGAL AND REGULATORY FRAMEWORK ....................................................................................... 20
4.2 LEGAL AND REGULATORY FRAMEWORK FOR MIDSTREAM AND DOWNSTREAM ................................................. 20
5.0 CHAPTER FIVE ...................................................................................................................................... 21
5.1 INSTITUTIONAL FRAMEWORK.................................................................................................................. 21
5.1.1 THE ROLE OF THE GOVERNMENT............................................................................................................. 21
5.1.2 NATIONAL OIL AND GAS COMPANY ......................................................................................................... 21
5.1.3 REGULATORY AUTHORITY ...................................................................................................................... 22
5.1.4 PRIVATE SECTOR .................................................................................................................................. 23
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5.1.5 ACADEMIC AND RESEARCH INSTITUTIONS.................................................................................................. 23
5.1.6 NGOS AND CIVIL SOCIETIES ................................................................................................................... 23
5.1.7 MEDIA ............................................................................................................................................... 23
5.2 MONITORINGANDEVALUATIONFRAMEWORK .............................................................................. 24
6.0 CONCLUSION ....................................................................................................................................... 25
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ABBREVIATIONS
2D Seismic Data Two dimension Seismic Data
3D Seismic Data Three dimension Seismic Data
AIDS Acquired Immune Deficiency Syndrome
APRM Africa Peer Review MechanismBCF Billion Cubic Feet
BoE Barrel of Oil Equivalent
CBOs Community Based Organizations
CNG Compressed Natural Gas
CSOs Civil Society Organizations
CSR Corporate Social Responsibility
DPs Development Partners
EAC East African Community
EITI Extractive Industries Transparency InitiativeEWURA Energy and Water Utilities Regulatory Authority
FDI Foreign Direct Investment
GASCO Gas Supply Company Limited
HIV Human Immunodeficiency Virus
LGAs Local Government Authorities
LNG Liquefied Natural Gas
LPG Liquefied Petroleum Gas
MDAs Ministries, Departments and Independent Agencies
MEM Ministry of Energy and MineralsMW Mega Watt
NGL Natural Gas Liquids
NGOs Non Governmental Organizations
PMO-RALG Prime Ministers Office Regional Administration and
Local Government
PO-PC Presidents Office-Planning Commission
PPP Public Private Partnership
SADC Southern African Development Community
TCF Trillion Cubic FeetTPDC Tanzania Petroleum Development Corporation
UN United Nations
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DEFINITIONS OF TERMS
Aggregator A fully owned State enterprise (a subsidiary of TPDC),which will have exclusive rights to purchase, collect,sell and transport natural gas produced in the countryonshore, shallow-shore and offshore.
Associated gas Is a form of natural gas, which is commonly foundassociated with deposits of petroleum. Also calledAssociated Petroleum Gas (APG) or flare gas
Compressed NaturalGas(CNG)
Also known as is a fossil fuel substitute for gasoline(petrol), diesel, or propane/LPG and is made bycompressing natural gas which is mainly composed ofmethane [CH4]), to less than 1% of the volume itoccupies at standard atmospheric pressure. It is stored
and distributed in hard containers at a pressure of200248 bar(29003600 psi), usually in cylindrical orspherical shapes.
Downstream Activities Refer to the marketing and distribution ofnaturalgas and products derived from natural gas. Suchproducts include LPG, diesel, plastics, fertilizers,pesticides and pharmaceuticals.
Liquefaction Is the process of refrigerating gas to a temperaturebelow its critical temperature so that liquid can beformed at some suitable pressure, also below thecritical pressure.
Liquefied Natural Gas Is an alternative method to transport natural gas fromthe producer to the consumer. Natural gas is cooled to161.5 C (260 F), converting its gaseous phaseinto an easily transportable liquid whose volume isapproximately 600 times less than the original volumeof natural gas.
Liquefied Petroleum Gas(LPG)
Is a flammable mixture ofhydrocarbon gases used asa fuel in heating appliances and vehicles. LPG isprimarily a mixture of propane (C3H8) and butane(C4H10). Also called liquid petroleum gas or simplypropane.
Local content Means the added value brought to the United Republicof Tanzania through the participation and developmentof nation labour, technology, goods, services, capital
and research capabilities in the petroleum resources.
http://en.wikipedia.org/wiki/Natural_gashttp://en.wikipedia.org/wiki/Petroleumhttp://en.wikipedia.org/wiki/Fossil_fuelhttp://en.wikipedia.org/wiki/Gasolinehttp://en.wikipedia.org/wiki/Diesel_fuelhttp://en.wikipedia.org/wiki/Propanehttp://en.wikipedia.org/wiki/Liquefied_petroleum_gashttp://en.wikipedia.org/wiki/Natural_gashttp://en.wikipedia.org/wiki/Methanehttp://en.wikipedia.org/wiki/Atmospheric_pressure#Standard_atmospheric_pressurehttp://en.wikipedia.org/wiki/Bar_(unit)http://en.wikipedia.org/wiki/Gas_cylinderhttp://en.wikipedia.org/wiki/Natural_gashttp://en.wikipedia.org/wiki/Natural_gashttp://en.wikipedia.org/wiki/Petroleum_producthttp://en.wikipedia.org/wiki/Liquified_petroleum_gashttp://en.wikipedia.org/wiki/Flammablehttp://en.wikipedia.org/wiki/Hydrocarbonhttp://en.wikipedia.org/wiki/Fuelhttp://en.wikipedia.org/wiki/HVAChttp://en.wikipedia.org/wiki/Propanehttp://en.wikipedia.org/wiki/Butanehttp://en.wikipedia.org/wiki/Propanehttp://en.wikipedia.org/wiki/Propanehttp://en.wikipedia.org/wiki/Butanehttp://en.wikipedia.org/wiki/Propanehttp://en.wikipedia.org/wiki/HVAChttp://en.wikipedia.org/wiki/Fuelhttp://en.wikipedia.org/wiki/Hydrocarbonhttp://en.wikipedia.org/wiki/Flammablehttp://en.wikipedia.org/wiki/Liquified_petroleum_gashttp://en.wikipedia.org/wiki/Petroleum_producthttp://en.wikipedia.org/wiki/Natural_gashttp://en.wikipedia.org/wiki/Natural_gashttp://en.wikipedia.org/wiki/Gas_cylinderhttp://en.wikipedia.org/wiki/Bar_(unit)http://en.wikipedia.org/wiki/Atmospheric_pressure#Standard_atmospheric_pressurehttp://en.wikipedia.org/wiki/Methanehttp://en.wikipedia.org/wiki/Natural_gashttp://en.wikipedia.org/wiki/Liquefied_petroleum_gashttp://en.wikipedia.org/wiki/Propanehttp://en.wikipedia.org/wiki/Diesel_fuelhttp://en.wikipedia.org/wiki/Gasolinehttp://en.wikipedia.org/wiki/Fossil_fuelhttp://en.wikipedia.org/wiki/Petroleumhttp://en.wikipedia.org/wiki/Natural_gas7/30/2019 Muswada wa Sera ya Gesi nchini
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Midstream Activities Refers to the gathering, compression and processingfunctions required between the wellhead and thetransmission system. Midstream facilities and activitiesare found at any location where natural gas isproduced, transported, or sold.
Natural gasinfrastructure
Facilities used for processing, liquefaction,regasification, transportation, storage and distributionof natural gas.
Natural Gas Liquids(NGL)
Components ofnatural gas that are liquid at surface infield facilities or in gas-processing plants includingpropane, butane, pentane (C
5H
12) and hexane (C
6H
14).
Natural gas valueaddition
Means adding value to the gas by converting it intoother products which are relatively of higher value thanraw gas
Non associated gas is the natural gas which is in reservoirs that does notcontain significant quantities of crude oil, where thevolume of oil is small/absent and where production ofsuch gas does not significantly affect recovery of thecrude oil. It consists of gaseous hydrocarbons.
Offshore An area away from the shore located in water depthequal to or greater than 200 meters.
Onshore Located on land
Regasification is the process by which LNG is heated and convertedto a gaseous state.
Shallow shore An area along the shore with water depth up to 200meters.
Upstream Activities Refer to searching for potential underground orunderwater oil and gas fields, drilling of exploratorywells, and subsequently drilling and operating thewells that recover and bring the crude oil and/orraw natural gas to the surface.
Wellhead Is the component at the surface of an oil or gaswell that provides the structural and pressure-containing interface for the drilling and productionequipment.
http://www.glossary.oilfield.slb.com/Display.cfm?Term=natural%20gashttp://www.glossary.oilfield.slb.com/Display.cfm?Term=processinghttp://www.gawdawiki.org/wiki/LNGhttp://www.gawdawiki.org/wiki/Gashttp://en.wikipedia.org/wiki/Petroleumhttp://en.wikipedia.org/wiki/Natural_gashttp://en.wikipedia.org/wiki/Oil_wellhttp://en.wikipedia.org/wiki/Oil_wellhttp://en.wikipedia.org/wiki/Oil_wellhttp://en.wikipedia.org/wiki/Oil_wellhttp://en.wikipedia.org/wiki/Natural_gashttp://en.wikipedia.org/wiki/Petroleumhttp://www.gawdawiki.org/wiki/Gashttp://www.gawdawiki.org/wiki/LNGhttp://www.glossary.oilfield.slb.com/Display.cfm?Term=processinghttp://www.glossary.oilfield.slb.com/Display.cfm?Term=natural%20gas7/30/2019 Muswada wa Sera ya Gesi nchini
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MEASUREMENTS AND CONVERSION FACTORS
Symbol Unit Conversion
Bbl Barrel = 0.15899 cubic metres
BTU British Thermal Unit = 1.06 kJ1kJ = 0.948 BTU
CF Cubic feet = 0.02832 cubic metres
kWh kilowatt hour = 1,000 Watt hours
M Cubic metre = 6.289 barrels
mmBTU Million British Thermal Unit = 293 kWh
mmscfd Million standard cubic feetper day
= 28,316.85 cubic metres per day
TOE/toe Tonnes of oil equivalent = 39.68 million BTU = 10 million kilocalories
Tonne Metric tonne = 1,000 kilogram (kg) = 2,204.6 Pounds (lb)
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FOREWORD
Natural gas resource belongs to the people of Tanzania, and must be managed in a
way that benefits the entire Tanzanian society.
Tanzania has been exploring for oil and gas for more than half a century, where the
first natural gas discovery was made in Songo Songo Island in 1974 followed by
another one in Mnazi Bay in 1982. In 2004 and 2006 commercial production of
natural gas in both Songo Songo Island and Mnazi Bay commenced. Since
commercialization of the natural gas, Tanzania has witnessed further exploration and
discoveries of large quantities of natural gas both onshore and offshore.
These developments have created more challenges to the Government to manage
the fast growing natural gas industry. The challenges include policy, legal and
institutional frameworks to manage the industry more effectively; human resources
with the requisite skills and knowledge in the industry; natural gas infrastructure;
development of domestic market and managing export market; revenue
management; public expectations; and health, safety and environment protection.
In pursuit of realizing significant developments and addressing the challenges in the
natural gas industry, the Government has formulated natural gas policy to provide acomprehensive framework for guiding development of the industry to ensure optimal
benefits to the nation and all Tanzanians at large.
In order to maximize the benefits accrued from the natural gas resource, the
implementation of this Policy will be aligned with the Tanzania Five Year
Development Plan (2011/12-15/16), National Strategy for Growth and Reduction of
Poverty 2010-15 and other sectoral and cross-sectoral policies.
It is my expectation that the Natural Gas Policy will facilitate social and economic
transformation of Tanzania to become a middle income country by 2025.
Professor Sospeter M. Muhongo (MP.)MINISTER FOR ENERGY AND MINERALS
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1.0 CHAPTER ONE
1.1 INTRODUCTION
Tanzania has been exploring for oil and gas for the past 60 years from 1952. Thefirst natural gas discovery was made in 1974 at Songo Songo Island (Lindi Region)
followed by a second discovery at Mnazi Bay (Mtwara Region) in 1982. The Songo
Songo natural gas was commercialized in 2004 and that of Mnazi Bay in 2006. The
commercialization of the two discoveries propelled further exploration and
discoveries both onshore and offshore. For the first time, in 2005 petroleum
exploration commenced in the deep sea.
In 2010, these exploration endevours culminated in large quantities of natural gas
discoveries. These advents have continued and more gas discoveries areanticipated. Over all these years, petroleum exploration and production has been
guided by the Petroleum (Exploration and Production) Act of 1980 without any
specific policy in place. This policy therefore, has been formulated to provide
guidance to the increasing activities in the natural gas industry.
1.2 STATUS OF THE NATURAL GAS INDUSTRY IN TANZANIA
Status of Exploration
Activities are currently taking place onshore and shallow waters, deep offshore and
inland rift basins. Up to June 2012, there were 26 Production Sharing Agreements
signed with 18 oil exploration companies. Over 100,000 km of 2D seismic data has
been acquired onshore, shelf, offshore as well as inland rift basins. Recently, over
17,000 square kilometres of 3D seismic data have been acquired in the deep sea. A
total of 62 wells for both exploration and development have been drilled between
l952 and 2012, of which 53 wells are in onshore basins and 9 in offshore basins.
Natural Gas Discoveries
Natural gas discoveries of about 8 trillion cubic feet (TCF) have been made from the
onshore gas fields at Songo Songo, Mnazi Bay, Mkuranga, Kiliwani North and
Ntorya. As of June, 2012 natural gas discoveries of about 33 TCF (6 billion barrel of
oil equivalent BoE) have been made from both onshore and offshore basins. The
deep sea discoveries have indicated a new era in the exploration for petroleum in
Tanzania and the region at large. Tanzania looks at these developments as an
important platform towards future exploration successes. Inspite of the developments
registered, the industry is facing a number of challenges including:
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(i) Policy, institutional and legal frameworks to administer the industry effectively;
(ii) Human resources with the requisite skills and knowledge in the natural gas
industry;
(iii) Natural gas infrastructure;
(iv) Development of domestic market for natural gas;(v) Natural gas revenue management;
(vi) Health, safety and environment; and
(vii) Management of expectations.
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2.0 CHAPTER TWO
2.1 JUSTIFICATION FOR NATURAL GAS POLICY
The Natural Gas Policy provides a comprehensive framework for guiding thedevelopment of the natural gas industry to ensure optimal benefits to the national
economy in the short, medium and long term. Maximization of the benefits will be
attained through the optimization of the value chain which consists of upstream,
midstream and downstream activities. The formulation of this Policy was aligned with
the Tanzania Development Vision 2025, the National Energy Policy of 2003, other
sectoral and cross-sectoral policies the Tanzania Five Year Development Plan
(2011/12-15/16) and the National Strategy for Growth and Reduction of Poverty
2010-15.
2.2 VISION AND MISSION
Vision
A vibrant natural gas industry contributing significantly to socio-economic
transformation of Tanzania.
Mission
To create enabling conditions for the supply of natural gas to all market segments ina reliable, cost-effective, safe and environmentally friendly manner.
2.3 OBJECTIVES OF THE NATURAL GAS POLICY
This policy document recognizes that natural gas resource belongs to the people of
Tanzania, and must be managed in a way that benefits the entire Tanzanian society.
Main Objective
The main objective of the policy is to provide guidance for the development of the
natural gas resource to ensure that its benefits are maximized and contribute to the
transformation of the Tanzanian economy.
The natural gas resources should also contribute to improving the quality of life in
Tanzania in the years to come. This demands striking a balance between domestic
and export oriented natural gas industry; between foreign and domestic investment,
between foreign contribution of capital and technology on the one hand, and national
and local participation on the other hand; and between direct fiscal benefits andbroader long-term development linkages.
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Specific Objectives
a) To ensure sustainable exploration, production, processing, liquefaction,
transportation, storage, distribution facilities and utilization of natural gas for
domestic market and value addition for export;
b) To ensure that the Government and Tanzanians participate strategically in the
natural gas value chain;
c) To strengthen human capacity development as well as institutional, legal and
regulatory framework for natural gas industry development;
d) To ensure effective management of natural gas revenue to achieve the
national development goals;
e) To strengthen Corporate Social Responsibility mechanism in the natural gas
activities and projects areas, in order to maximize benefits to the local
communities;
f) To ensure that prices of natural gas and related services are economically
efficient and promote natural gas industry growth;
g) To promote linkages between the natural gas industry with other strategic
sectors of the economy to accelerate socio-economic transformation;
h) To ensure transparent and accountable system in the management of the
natural gas industry;
i) To benefit from regional and international community in the development of
natural gas industry; and
j) To ensure that all activities in the natural gas value chain are undertaken in a
manner that protects peoples health, safety and environment.
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3.0 CHAPTER THREE
3.1 POLICY ISSUES AND STATEMENTS
3.1.1 Upstream Activities
Upstream activities include exploration, appraisal, development and production
stages of oil and gas operations. In order to achieve sustainable natural gas supply,
upstream activities need to be aligned with mid and downstream activities. Detailed
policy issues on natural gas upstream activities will be addressed under Petroleum
Policy.
Exploration and Production
Issue: Optimize exploration and production activities in a socially, economically and
environmentally responsible manner.
Effective strategy is required to enhance exploration and production of natural gas.
Exploration and production activities generate both fiscal and non-fiscal benefits. For
Tanzania to maximize such benefits, these activities must be undertaken in the most
efficient and effective manner in line with national development plans, strategies,
priorities and sectoral linkages.
It is through competition among licensees, operators and suppliers, that cost
effective choices can be achieved. Competition enables selection of the most
capable operators, the most efficient, the best quality, and the most reliable suppliers
thereby ensuring high levels of productivity. This fundamental consideration justifies
the principle of open bidding and enables the country to maximize its returns to
society both for the current and the future generations. It is essential that a
framework be established that supports fair competition with a view of improving
efficiency and productivity in natural gas operations and maximizing the countrys
benefits from its natural gas resources.
Objective: To ensure sustainable exploration and production of natural gas
resource.
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Policy Statements:
The Government shall:
(i) Participate strategically in upstream activities through its National companyresponsible for development of petroleum or its subsidiaries;
(ii) Ensure promotion of investment in exploration and production of natural gas
resources;
(iii) Ensure adoption of modern technologies for exploration and production of
natural gas;
(iv) Ensure competitiveness in the grant of petroleum licenses to promoteproductivity and maximize the countrys benefits from its natural gas
resources unless under exceptional cases for national interest;
(v) Ensure natural gas is produced efficiently and effectively with minimal flaring
activities where necessary; and
(vi) Ensure adoption of optimized production profile to ensure high recovery of
natural gas.
3.1.2 Midstream and Downstream Activities
The mid-stream and downstream segment of the natural gas industry involves gas
processing, liquefaction, transportation, storage, regasification, distribution and other
ancillary services. These activities are inherently natural monopolies and therefore
subjected to regulations. Specific regulations will be needed for the midstream and
downstream natural gas industry.
A. Natural Gas Infrastructure
Issue: Optimizing investment for natural gas infrastructure to serve the domestic
and regional markets.
Natural gas infrastructure covers processing, liquefaction, transportation, storage
and distribution facilities, which form the natural gas supply chain. The Government
considers such facilities to be of strategic significance to the industry and national
economy. During the infancy stage, the main natural gas infrastructure will be owned
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by the Government through its National company responsible for development of
petroleum or its subsidiaries.
The provision of service by a monopoly service provider raises the issue of access to
common facilities and services by third parties. Ensuring non-discriminatory accessis a critical issue which requires owners and operators of facilities such as
processing plants, offloading platforms and pipelines to provide services to all
customers in a transparent manner.
Objective: To promote development of facilities for natural gas processing,
liquefaction, transportation, storage and distribution to ensure reliability
of supply.
Policy Statements:
The Government shall:
(i) Participate strategically through its National company responsible for
development of petroleum or its subsidiaries to develop and operate major
infrastructure for natural gas;
(ii) Ensure that all natural gas processing activities are undertaken in common
facilities onshore in the most cost effective manner;
(iii) Ensure separation (unbundling of operations) of value chain activities in order
to promote efficiency;
(iv) Facilitate establishment of storage facilities and associated regasification
terminals;
(v) Establish a licensing regime for gas suppliers, distributors and marketers who
will obtain their gas supplies from the natural gas aggregator who will benational company responsible for development of petroleum or its
subsidiaries; and
(vi) Ensure transparent and non-discriminatory terms and conditions are
developed and enforced to promote access to service by third parties.
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B. Natural Gas for Domestic Market
Issue:Supply and utilization of natural gas for local consumption.
Natural gas is one of our abundant natural resources which could be utilized in anumber of applications including, thermal applications in industries/ institutions and
electric power generation, as well as transport and households for cooking. In this
regard the Government considers facilitating wide utilization of this indigenous
resource domestically to minimize the use of foreign currency for importing
petroleum products.
Objective: To develop and serve the domestic market for natural gas to minimize
dependency from imported petroleum products.
Policy Statements:
The Government shall:
(i) Facilitate reliability in production, efficient utilization and value addition of the
countrys natural gas resource;
(ii) Promote production of natural gas based Liquefied Petroleum Gas (LPG),
Liquefied Natural Gas (LNG) and Natural Gas Liquids (NGL) for domesticmarket; and
(iii) Promote establishment of industrial parks for natural gas industries.
C. Liquefied Natural Gas (LNG) Business
Issue: Maximizing gains from LNG value chain (Liquefaction, Shipping,
Regasification and Storage).
The market for natural gas is more mature and strong in developed economies.
Generally, the main incentives for international oil and gas companies to invest in
deep sea exploration in developing countries is usually to get an export oriented
market in the absence of the well developed local market. Tanzania intends to
participate in LNG trading globally. Although large volumes of natural gas are
required to justify LNG investment, with the latest discoveries in Tanzania, world
market prices and demand for LNG justifies such investments.
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Objective: To ensure the effective participation of Government and Tanzanians in
the LNG business.
Policy Statements:
The Government shall:
(i) Through its entities, strategically invest in the LNG value chain to optimize
benefits from natural gas;
(ii) Ensure that all LNG facilities are located onshore wherever possible through
common facilities;
(iii) Ensure domestic market is given first priority over the export market;
(iv) Ensure efficient technologies in LNG production; and
(v) Ensure appropriate LNG trading for regional and international market.
3.1.3 Management of Natural Gas Revenue
Issue: Managingrevenue arising from natural gas with a view to benefit the presentand future generations of Tanzanians.
Natural gas resource is a potential source of revenue to the Government. However, if
not properly managed such resource is likely to be a curse instead of a blessing.
Since natural gas is a finite resource, it is crucial that the revenue is managed in a
manner that will bring about lasting benefits and welfare to the Tanzanian society.
Revenues from natural gas resource can be aligned with the national development
vision by directing them into strategic investments such as infrastructure.
Successful management of this resource will require putting in place mechanisms of
governance to mitigate spending pressure and preclude rent seeking opportunities;
fiscal management to mitigate effects of revenue volatility due to changes in
production levels or fluctuation of global oil and gas prices; and economic
diversification and linkages with other sectors.
Natural Gas Revenue Fund will be established to ensure transparency and
accountability over collection, allocation and management of the natural gas
revenue. The fund will be structured to provide for stabilization of revenue transfer tothe Government for public expenditure in strategic areas and for domestic savings
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for future investment. In addition, sound fiscal management of the natural gas
revenue spending shall be in accordance with national development plans and
strategies.
Objective: To ensure effective management of natural gas revenue to achieve thenational development goals.
Policy Statements:
The Government shall:
(i) Establish Natural Gas Revenue Fund for development of natural gas industry
and national strategic projects;
(ii) Ensure fiscal regime in the natural gas industry supports development of the
industry; and
(iii) Ensure the local communities benefit from revenue emanating from the
natural gas activities in their localities.
3.1.4 Natural Gas Pricing
Issue: Appropriate pricing structure to sustain supply and demand sides.
Pricing of natural gas is a critical element for sustainable natural gas industry. The
Government envisages to establish an appropriate pricing mechanism to be based
on a set of key principles, including cost reflectivity, prudently incurred costs,
reliability and quality of service; fair return on invested capital, and capacity
allocation to the most valued use.
Objective: To ensure that prices of natural gas and related services are
economically efficient and promote natural gas industry growth.
Policy Statements:
The Government shall:
(i) Ensure an appropriate pricing structure is in place which encourages
economic use of the system capacities in the natural gas value chain;
(ii) Ensure the pricing structure provides incentives for promoting investments
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while sustaining supply and demand for natural gas; and
(iii) Ensure that natural gas prices to strategic industries and households are
affordable and predictable.
3.1.5 Security of Natural Gas Supply
Issue: Security of natural gas supply in the domestic market.
Natural gas is an important source of energy for power generation, manufacturing
industries, transportation, commercial and households for thermal applications. With
the increasing dependence on natural gas supply, it is critical to ensure reliability of
supply is maintained. To achieve this necessary measures must be taken including
natural gas infrastructure development, defining terms of infrastructure access,managing contractual commitments, prioritizing allocation of natural gas in the event
of insufficiency as well as monitoring of production and storage facilities. These
measures require the establishment of framework for security of supply including
protocols for natural gas allocation that are transparent, non-discriminatory and
consistent with the requirements of developing domestic natural gas markets.
Objective: To align natural gas supply and demand to ensure reliability.
Policy Statements:
The Government shall:
(i) Ensure sufficient production and rational utilization of natural gas to sustain
supply to the domestic market; and
(ii) Ensure optimal investment for the national natural gas infrastructure to ensure
reliability of energy supply to the country.
3.1.6 Linkages with Other Strategic Sectors
Issue: Mainstreaming natural gas resource utilization in other strategic sectors.
Natural gas can be used to stimulate development in other sectors of the economy
such as agriculture, transport, mineral, commercial and industrial and contribute to
the socio-economic benefits. In addition, activities in the natural gas industry, such
as exploration, construction and system operations which further create demand forlabour, goods and services. The use of natural gas as an alternative to woodfuel
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reduces pressure on forests, which cause rains and hence supporting agricultural
activities, power generation and other sectors.
Objective: To promote linkages between the natural gas industry with other strategic
sectors of the economy to accelerate socio-economic transformation.
Policy Statements:
The Government shall:
(i) Ensure growth of the natural gas industry supports strategic investments in
other sectors of the economy; and
(ii) Promote private sector participation for rapid development of strategicindustries such as petrochemicals, steel and other energy intensive industries.
3.1.7 Local Content and Capacity Building
Issue: Empowerment of Tanzanians to benefit from the natural gas industry.
Local content in Tanzania context refers to added value brought to Tanzanians
through activities of the natural gas industry. These may be measured andundertaken through employment and training of local workforce; investments in
developing supplies and services locally; and procuring supplies of services locally.
Currently, most goods and services are supplied by foreign companies due to
inadequate capital and requisite skills to Tanzanians. Participation of Tanzanians in
areas where natural gas activities are intensive is important for industry stability,
integration into local economies and poverty reduction.
Tanzania can maximize these benefits through strategic participation in the natural
gas value chain. Successful maximization of local content benefits requireimplementation of proper policies, strategies, action plans, continuous consultation
with key stakeholders and strengthening capacity of various institutions such as
Local Government Authorities (LGAs) and Community Based Organizations (CBOs).
Objective: To develop capabilities of Tanzanians to participate strategically in the
natural gas value chain.
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Policy Statements:
The Government shall:
(i) Ensure that opportunities for supply of goods and services, employment andinvestments are made available to Tanzanians and local companies;
(ii) Promote joint venture arrangements between Tanzanians and foreign
companies in implementing projects in the natural gas industry;
(iii) Ensure that capabilities of Tanzanians are developed in the natural gas value
chain through skills development, transfer of technology and applied research;
(iv) Strengthen capacity of national company responsible for development ofpetroleum to participate strategically in the natural gas industry;
(v) Establish oil and natural gas center of excellence and strengthen capabilities
of the training institutions to impart requisite skills to Tanzanians; and
(vi) Review mandates of Tanzania Petroleum Development Corporation (TPDC)
to ensure effective management of the natural gas industry.
3.1.8 Corporate Social Responsibility
Issue: Addressing immediate needs of local communities
Companies implementing projects and activities in the natural gas industry are
required to contribute in the development process of the local communities through
their Corporate Social Responsibility policies. It is in the interest of both parties to
avoid or mitigate the negative perceptions and maximize the positive effects.
Currently, activities under Corporate Social Responsibility are not addressing thepressing needs of local communities due to lack of guidelines and little participation
of local communities.
The Government will emphasize implementation of Corporate Social Responsibility
through proper communication and supporting priority development projects and
activities of the local communities to ensure timely achievements in the investments
of the companies. The local communities will also participate effectively in protection
of the natural gas infrastructure.
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Objective: To strengthen Corporate Social Responsibility mechanism in the natural
gas activities and projects areas, in order to maximize benefits to the
local communities.
Policy Statements:
The Government shall:
(i) Ensure that there is a contractual obligation to all contractors in the natural
gas activities to undertake community developmental programmes;
(ii) Ensure companies in the natural gas industry to submit credible Corporate
Social Responsibility action plans to the national company responsible for
development of petroleum; and
(iii) Ensure companies in the natural gas industry and local government
authorities enter into agreement to implement projects as per agreed action
plans.
3.2 CROSS CUTTING ISSUES POLICY ISSUES AND STATEMENTS
3.2.1 Efficiency and Conservation
Issue: Sustaining present and future demand for natural gas.
Natural gas is a finite resource and therefore it is non renewable. Although its
availability is in significant amounts there is a need to ensure sustainability in supply
and demand sides. The demand side covers end use systems, which include
electricity generation and thermal applications in households, transport,
manufacturing industries and commerce.
Presently significant amount of natural gas is used to generate electricity due to
unreliability of hydro power systems as well as inadequate utilization of other
sources of energy including coal. In order to ensure sustainable supply of natural gas
and its future availability there is a need to utilize it efficiently as well as using other
alternatives particularly in generating power.
Policy Objective: To ensure rational use of natural gas in all sectors of the
economy.
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Policy Statements:
The Government shall:
(i) Ensure prioritization of natural gas utilization based on the Gas Utilization
Master Plan; and
(ii) Ensure monitoring of the natural gas supply from reservoirs to the end-use
systems.
3.2.2 Transparency and Accountability
Issue: Transparency and accountability to the public on natural gas activities.
Access to information is a fundamental right in activities that may positively benefit or
negatively impact individuals, communities and society as a whole. Dissemination of
information makes the public aware of the developments in the industry. Therefore,
the Government and stakeholders have important roles to play in order to achieve
transparency and accountability as well as eliminating possible elements of
corruption in the natural gas industry. In addition, the Government has joined the
Extractive Industry Transparency Initiative (EITI) to improve transparency andaccountability as well as accessing information in relation to revenue accrued from
extractive industries.
Objective: To ensure transparent and accountable system in the management of
the natural gas industry.
Policy statements:
The Government shall:
(i) Promote transparency and accountability in the natural gas industry; and
(ii) Facilitate collection and dissemination of information related to natural gas
industry to stakeholders.
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3.2.3 Management of the Environment, Health and Safety
Issue: Sound practices in environmental, health and safetymanagement.
Natural gas operations may have adverse effects on the environment, health andsafety of people. Adherence to good industry standards and practices will contribute
significantly to preventing or mitigating such effects. It is important to plan for
remedial measures prior to any natural gas operation. The regulation of these
operations is necessary to ensure that natural gas activities are conducted taking
environment, health and safety issues into consideration.
Objective: To ensure that all activities in the natural gas value chain are undertaken
in a manner that protects peoples health, safety and environment.
Policy Statements:
The Government shall:
(i) Ensure that health, safety and environmental issues are mainstreamed into all
operations in the industry; and
(ii) Ensure compliance to environmental protection and best practice in the
industry.
3.2.4 Regional and International Cooperation
Issue: Compliance with regional and international community trade policies.
Cooperation with regional and international community is important for development
of the natural gas industry. Tanzania can realize benefits of being a member of
regional blocks such as EAC and SADC. There is need to strengthen cooperation
with international bodies to take advantage of facilities, resources and information
provided by those blocks.
Objective: To benefit from regional and international community in the development
of natural gas industry.
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Policy Statements:
The Government shall:
(i) Promote cross border projects and investment to maximize benefits accruing
from natural gas exploitation;
(ii) Consider regional markets in the development of natural gas infrastructure in
Tanzania; and
(iii) Endeavour to share best practices and experiences in the management of
natural gas industry with the international community.
3.2.5 Gender Mainstreaming and HIV and AIDS
Issue: Gender based opportunities and addressing HIV and AIDS issues in the
natural gas industry
The Government provides equal opportunity to all citizens of Tanzania, the active
participation of women in the natural gas industry is encouraged. Natural gas
industry development is likely to have different impact on women, men and
vulnerable groups. The use of natural gas for cooking in households relieves womenfrom wasting time looking for woodfuel and indirectly improves health due to better
kitchen environment that is free from smoke and soot.
HIV and AIDS is associated with other infectious diseases which have greatly
affected socio-economic development and livelihoods. Like many other large scale
projects, natural gas projects will attract the concentration of people looking for
employment and other related activities. In the process, this may escalate the HIV
and AIDS infections. Awareness and education on HIV and AIDS to all stakeholders
is important to reduce its impacts in such projects.
Objective: To promote and support women to participate actively in natural gasactivities and addressing HIV and AIDS issues.
Policy statements:
The Government shall:
(i) Create conducive environment and promote women participation in natural
gas industry;
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(ii) Ensure that programmes related to natural gas industry are based on gender
equality and equity; and
(iii) In collaboration with partners/players will provide education on HIV and AIDS
to stakeholders in the natural gas industry.
3.2.6 Public Private Partnership - PPP
Issue: Private sector participation synergy.
The Government recognizes the role of private sector in bringing about socio-
economic development through capital investment, managerial skills and technology
as stipulated in the PPP Policy of 2009. Like other sectors of the economy, projects
under PPP arrangements have been implemented in the petroleum and natural gas-
sub sector. However, the Government has experienced challenges in such projects
including risks sharing mechanisms and insignificant benefits. In order to address
these challenges, proper mechanism for risks sharing in natural gas PPPs
investments needs to be put in place, to ensure mutual benefits for both parties
involved.
Objective: To ensure minimal risks allocation for PPPs projects to maximizeGovernment benefits from the natural gas industry.
Policy statements:
The Government shall:
(i) Provide conducive environment for PPPs arrangements to facilitate
investments in the natural gas industry; and
(ii) Promote development of natural gas infrastructure, petrochemical industries
and energy intensive industries utilizing natural gas (Industrial Parks) under
PPP arrangements.
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3.2.7 Public Awareness and Managing Expectations in the NaturalGas Industry
Issue: Improving public awareness on matters pertaining to the natural gas industry
Public awareness is important for supporting implementation of projects and
activities in the natural gas industry. Following recent discoveries of natural gas in
the country, public expectations have increased based on the perception that
discoveries are likely to yield immediate benefits. These expectations have to be
managed since such benefits take time to be realized.
This situation calls for the need to increase awareness on natural gas operations to
the public and stakeholders, particularly local communities where natural gas
projects and activities are being implemented.
Objective: To manage public expectations on benefits from natural gas activities.
Policy statements:
The Government shall:
(i) Provide accurate and timely information on activities implemented throughout
the natural gas value chain to the public, especially the local authorities and
communities; and
(ii) Improve communication mechanism and flow of information on natural gas
industry to the public.
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4.0 CHAPTER FOUR
4.1 Existing Legal and Regulatory Framework
The existing Legal and Regulatory framework for energy sector does not addresscomprehensively the governance of the natural gas industry. As a result of significant
discovery of natural gas deposits, there will be tremendous increase of upstream,
midstream and downstream activities. These require enactment of specific legislation
to address the situation.
4.2 Legal and Regulatory Framework for Midstream and Downstream
Legal and Regulatory Framework for midstream and downstream industry will,
among others, comprise of licensing, tariff structure, rates and charges, quality andstandards, healthy and safety issues, access to common infrastructure and services,
revenue management and related aspects of natural gas industry administration and
regulation. Therefore, the role of Government shall be to:
(i) Establish legal and regulatory framework to govern the processing,
transportation, liquefaction, distribution, supply and trading of natural gas to
ensure efficient management, expedite development of midstream and
downstream activities to maximize benefits accrued from natural gas
resource;
(ii) Establish proper mechanisms to provide for security of supply to domestic
market;
(iii) Ensure that an appropriate regulatory authority for natural gas industry is
established;
(iv) Develop appropriate standards for natural gas industry based on international
generally accepted standards; and
(v) Ensure stable and predictable legal framework for natural gas industry.
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5.0 CHAPTER FIVE
5.1 Institutional Framework
The successful implementation of Natural Gas Policy and other nationaldevelopment policies depends crucially on the institutional framework that is in place
to develop tools for operationalizing, enforcing and monitoring to ensure desired
outcomes. The proposed institutional framework articulates major roles of key
institutions and direction towards a transformed economy and sustainable
development.
5.1.1 The Role of the Government
Rapid growth in the natural gas industry in Tanzania requires state involvement indirecting resources and leading other players towards a desired development
direction. Therefore, in addition to traditional roles of facilitation and regulation the
Government will also participate in investment and ownership of strategic
infrastructure. The role of the Government shall be to:
(i) Administer and enforce the Natural Gas Act and Regulations;
(ii) Promote investment and own strategic natural gas infrastructure;
(iii) Attract and encourage foreign direct investment in capital intensive and
technologically challenging natural gas projects;
(iv) Support national enterprises and Tanzanians to participate actively in the
natural gas;
(v) Strengthen capacity of Government institutions responsible for the natural gas
development; and
(vi) Set targets and monitor results.
5.1.2 National Oil and Gas Company
The National Oil and Gas Company will have to take new roles and responsibilities in
the light of natural gas discoveries. Currently, the oil and gas activities including
commercial and regulatory roles are carried out by Tanzania Petroleum
Development Cooperation (TPDC) on behalf of Government. This necessitates
reviewing of TPDCs roles, functions and structure. The review will lead to
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appropriate organizational structures, incentive systems, financing mechanisms,
reporting and control systems to ensure that the Corporation remains independent to
protect its revenue base, and to ensure integrity of its management systems and
operations. The role of TPDC in mid and downstream natural gas activities shall be
to:
(i) Advise the Government on policy issues regarding to mid and downstream
natural gas activities;
(ii) Participate and own natural gas strategic projects on behalf of the
Government;
(iii) Carry out specialized operations in the natural gas value chain through
subsidiaries; and
(iv) Aggregate and develop natural gas market.
5.1.3 Regulatory Authority
The current regulatory authority has the mandate to regulate downstream activities,
while the upstream activities are regulated by the Government through TPDC. Active
participation of TPDC in commercial and regulation activities is not prudent industry
practices. The potential size of the natural gas resources in the country and itsexpected multiple uses require the robust regulatory authority. The roles of regulator
for natural gas shall be:
(i) Performing the functions conferred in accordance with the gas legislation;
(ii) Granting, renewing, suspending and cancelling of licenses;
(iii) Establishing standards for goods and services in the natural gas industry;
(iv) Regulating rates and charges in the natural gas industry;
(v) Monitoring performance of natural gas activities including levels of investment,
cost of services and availability of gas supply; and
(vi) Facilitating the resolution of complaints and disputes.
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5.1.4 Private Sector
Private sector players are important in providing substantial capital investment and
technology needed for exploration and development of natural gas resources. The
Government will continue to promote and facilitate private sector participationthrough PPP or other arrangement in natural gas value chain. They will also be
expected to play key role in national development including capacity building in their
respective value chain activities as part of their overall corporate social
responsibilities.
5.1.5 Academic and Research Institutions
Academic and Research Institutions are important for development of natural gas
industry at large. Development of natural gas sector has increased demand for skillscurrently not adequately supplied by the country education and training institutions.
The Government has taken measures to introduce and expand training in relevant
fields in the oil and gas industry. The Government will promote such institutions in
development of human resources required in natural gas industry. It will also
promote research activities in order to maximize benefit emanating from natural gas
value chain.
5.1.6 NGOs and Civil Societies
This policy recognizes the role of NGOs and civil societies can play through
advocacy, mobilization and dialogue with communities. These societies will
contribute to holding the different players accountable with regard to gas activities
and participate in getting the voice of the public into designing, monitoring and
implementation of programme in the gas industry. Civil societies may also be
contracted in the delivery of various services especially in the communities where
gas activities are undertaken.
5.1.7 Media
The role of media in providing accurate and balanced information on natural gas
issues to the public is highly emphasized in this policy. In this regards, the
Government will strengthen collaboration with media to ensure that such information
are delivered timely. This will enhance public awareness on matters pertaining to the
natural gas industry.
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6.0 CONCLUSION
Natural gas resource belongs to the people of Tanzania and therefore, must be
managed in a manner that benefits the entire Tanzanian society.
This Policy provides guidance for ensuring that benefits from the natural gas value
chain are maximized and contribute to the transformation of Tanzanian economy. It
also forms a comprehensive framework for guiding development of the natural gas
industry to ensure optimal benefits to the nation and all Tanzanians at large.
The Government is determined to build capacity for national company responsible
for development of petroleum and to ensure Tanzanians participate strategically in
the natural gas value chain. The ultimate goal is to contribute towards improving the
quality of life of Tanzanians at present and in the years to come. This could be
achieved through a mechanism which balances domestic and export markets and
attracts foreign investment. A linkage of the natural gas industry with other sectors is
considered to be of paramount important.
This policy document is supported by a Strategy to ensure effective implementation
towards facilitating social and economic transformation of Tanzania to become a
middle income country by 2025.
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