ABBREVIATIONS and acronoms
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2D Seismic Data
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Two dimensional Seismic Data
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3D Seismic Data
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Three dimensional Seismic Data
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AIDS
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Acquired Immune Deficiency
Syndrome
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BCF
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Billion Cubic Feet
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BoE
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Barrel of Oil Equivalent
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CBOs
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Community Based Organizations
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CNG
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Compressed Natural Gas
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CSOs
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Civil Society Organizations
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CSR
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Corporate Social Responsibility
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DPs
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Development Partners
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EAC
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East African Community
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EITI
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Extractive Industries
Transparency Initiative
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EWURA
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Energy and Water Utilities
Regulatory Authority
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FBOs
FDI
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Faith Based Organizations
Foreign Direct Investment
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GTL
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Gas To Liquid
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HIV
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Human Immune deficiency Virus
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LGAs
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Local Government’s Authorities
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LNG
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Liquefied Natural Gas
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LPG
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Liquefied Petroleum Gas
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MDAs
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Ministries, Departments and
Independent Agencies
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MEM
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Ministry of Energy and Minerals
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M&E
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Monitoring and Evaluation
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NGL
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Natural Gas Liquids
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NGOs
NSGRP/MKUKUTA
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Non Governmental Organizations
National
Strategy for Growth and Reduction of Poverty
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PMO-RALG
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Prime Minister’s Office –
Regional Administration and Local Government
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PO-PC
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President’s Office-Planning
Commission
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PPP
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SADC
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Southern African Development
Community
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TCF
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Trillion Cubic Feet
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TPDC
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Tanzania Petroleum Development
Corporation
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Aggregator
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A fully owned State enterprise
(a subsidiary of the National Oil and Gas Company), which will have exclusive
rights to purchase, collect, transport and sell natural gas produced in the
country-onshore, shallow-shore and offshore.
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Associated Gas
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Natural Gas that is found in association with oil,
either as dissolved in the oil at reservoir conditions of temperature and
pressure that becomes free gas at surface conditions of temperature and
pressure or as a cap of free gas above the oil in the reservoir.
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Compressed Natural Gas (CNG)
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Natural gas which is mainly composed of methane
[CH4], and compressed to less than 1% of the volume it occupies at
standard atmospheric pressure. It is
stored and distributed in hard containers at a pressure of 200–248 bar
(2900–3600 psi).
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Delivery
Point
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The point at the wellhead or at an inlet flange
of a processing plant for the case of deep-water well.
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Downstream Activities
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The marketing and distribution of natural gas and products derived
from natural gas. Such products include LPG, diesel, plastics, fertilizers, pesticides
and pharmaceuticals.
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Foreign Company
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A company incorporated outside the United
Republic of Tanzania.
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Industrial Park
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An area of land developed as a site for factories
and other industrial business.
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Liquefaction
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The act or process of turning a gas into a liquid. Liquefaction is usually achieved by
compression of vapours (provided the temperature of the gas is below critical
temperature), by refrigeration or by adiabatic expansion.
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Liquefied Natural Gas (LNG)
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A liquid form of natural gas, which has been
cooled to about minus 1620C (minus 260oF) at normal
pressure. The liquefaction coverts the gaseous phase into an easily
transportable liquid whose volume is approximately 600 times less than the
original volume of natural gas.
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Liquefied Petroleum Gas (LPG)
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Light hydrocarbon material, gaseous at atmospheric temperature and
pressure, held in the liquid state by pressure to facilitate storage,
transport and handling. Commercial liquefied
gas consists essentially of either propane, butane or a mixture of both.
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Local Company
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A company incorporated
in Tanzania whose shares are wholly or at least 50% of its shares are held by
Tanzanian nationals.
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Local Content
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The added value brought
to the United Republic of Tanzania through the participation and development
of nation labour, technology, goods, services, capital and research
capabilities in the hydrocarbon resources.
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Mid-stream Activities
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Refer to the gathering, compression and processing functions required
between the wellhead and the transmission system. Mid-stream facilities and
activities are found at any location where natural gas is produced, transported or sold.
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National Company
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A company established under the laws of Tanzania
in which the Government or its agent owns fifty one percent or more of the
shares.
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National Oil and Gas Company
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An oil and gas company established under the laws
of Tanzania in which the Government or its agent owns fifty one percent or
more of the shares.
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Natural Gas
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A fossil fuel naturally occurring as a gaseous mixture of light
hydrocarbons in sedimentary rocks. Main constituents of natural gas are
methane, ethane, propane, butane and pentane with other non-hydrocarbons
compounds including carbon dioxide, hydrogen, sulphide, nitrogen and rare
gases found in small quantities.
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Natural Gas Infrastructure
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Facilities used for
processing, liquefaction, regasification, transportation, storage and
distribution of natural gas.
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Natural Gas Liquids (NGL)
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Liquid hydrocarbons found in association with
natural gas. The components of natural gas
that are liquid at surface in field facilities or in gas-processing
plants include propane (C3H8), butane (C4H10),
pentane (C5H12) and hexane (C6H14).
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Natural Gas Value Addition
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Adding value to the gas by converting it into
other products which are relatively of higher value than raw gas
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Offshore
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An area away from the
shore located in water depth equal to or greater than 200 metres.
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Onshore
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Located on land
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Regasification
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Shale Gas
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Natural gas being trapped within shale
formations.
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Shallow Shore
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An area along the shore
with water depth up to 200 metres.
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Unconventional Gas
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Natural gas that is
difficult or of less economic value to extract mainly because of technology
to reach it, and hence has not been developed or is too expensive to extract.
Example of unconventional Natural Gas includes shale gas, tight gas, coalbed
methane and deep gas.
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Upstream Activities
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Include exploration, appraisal, development and
production stages of oil and gas operations of wells that recover and bring
the crude oil and/or
raw natural gas to
the delivery point.
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Value
Chain
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All activities involved in ensuring that the
natural gas and its products are produced and ready for use by final
consumers. These activities include exploration, production, processing,
transportation and marketing.
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Symbol
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Unit
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Conversion
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Bbl
Boe
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Barrel
Barrel of oil
equivalent
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= 0.15899 cubic metres
= 5,800 cubic
feet
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BTU
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British Thermal
Unit
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= 1.06 kJ
1kJ = 0.948 BTU
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CF
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cubic feet
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= 0.02822 cubic
metres
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kWh
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kilowatt hour
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= 1,000 Watt
hours
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M3
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cubic metre
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= 6.289 barrels
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mmBTU
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million British
Thermal Unit
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= 293 kWh
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mmscfd
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million standard
cubic feet per day
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= 28,316.85 cubic
metres per day
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TOE/toe
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Tonnes of oil
equivalent
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= 39.68 million BTU = 10 million
kilocalories
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Tonne
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Metric tonne
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= 1,000 kilogramme (kg) = 2,204.6 Pounds
(lb)
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FOREWORD
Natural gas
resource found in Tanzania belongs to the people of the United Republic 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. The first
natural gas discovery was made on the Songo Songo Island in 1974 followed by
another one in the Mnazi Bay in 1982. In 2004 and 2006 commercial production of
natural gas on the Songo Songo Island and in the Mnazi Bay commenced,
respectively. From 2010, Tanzania has witnessed further exploration and
discoveries of significant quantities of natural gas both on- and off-shore.
These
developments have created more challenges to the Government on how 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; development
of natural gas infrastructure; development of domestic market and managing
export market; revenue management; high public expectations; and health, safety
and environment protection.
In pursuit
of realizing significant natural gas industry developments and addressing its
challenges, the Government has formulated natural gas Policy to provide a
comprehensive framework for guiding the development and growth of the industry and
that ensures optimal benefits to the Nation and its citizens.
The Policy
preparation process was basically participatory. Several zonal workshops were
held in the years 2012 and 2013 to discuss the status of the sector and lay
down strategies for boosting the development of natural gas sub-sector. Based on
the inputs received, a draft Policy document was prepared and discussed by
stakeholders in regional workshops held at Arusha, Dar es Salaam, Dodoma, Kigoma,
Lindi, Mbeya, Morogoro, Mtwara, Mwanza, Pwani, Rukwa, and Tanga. Oil
exploration companies, Community-Based Organizations and Development partners
participated in the formulation of this Policy.
Let me take
this opportunity to extend my sincere appreciation to all stakeholders who
participated in the preparation of this Policy. May I also take this opportunity
to reiterate the Government’s commitment towards continued improvement of the
enabling environment for natural gas business. The success of this Policy
framework relies to a great extent on the cooperation of all stakeholders. Let
me therefore take this opportunity to invite all stakeholders to play their
part in the development and growth of natural gas sub-sector for sound shared
benefits.
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 aiming at eradicating poverty in
Tanzania.
It is my
expectation that this Natural Gas Policy will contribute significantly towards
the acceleration of growth and socio-economic transformation of our country in
accordance with our National Development Vision 2025 - Tanzania to become a
middle income country by 2025.
Prof. Sospeter M. Muhongo (MP.)
MINISTER FOR ENERGY AND
MINERALS
1.1. INTRODUCTION
Tanzania
has been exploring for oil and gas for the past 60 years since 1952. The first natural
gas discovery was made in 1974 on the Songo Songo Island (Lindi Region)
followed by a second discovery at the Mnazi Bay (Mtwara Region) in 1982. The
Songo Songo natural gas was commercialized in 2004 and that of the Mnazi Bay in
2006. The commercialization of the two discoveries propelled further
exploration both on- and off-shore.
In 1999
petroleum exploration in the deep sea commenced with the shooting of
speculative seismic survey along the entire East African coastal area after
which the deep-sea Tanzania was divided into blocks. In 2005 the first
exploration licence in the deep-sea was awarded. In 2010, these exploration endeavors
culminated in large quantities of natural gas discoveries. Exploration continues
and more gas discoveries are anticipated. Over all these years, petroleum
exploration and production has been guided by the Petroleum (Exploration and
Production) Act of 1980 using the National Energy Policy of 2003 which cater
for upstream activities. This Natural Gas Policy has been formulated to rectify
the shortcomings in the above mentioned documents and provide guidance to the
increasing mid- and down-stream activities in the natural gas industry in
Tanzania.
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 December 2012, there were 25 Production
Sharing Agreements signed with 18 oil exploration companies. Over 110,000 km of 2D seismic data have been
acquired onshore, shelf, offshore as well as from inland rift basins. As of February,
2013 total of 21,632 square kilometres of 3D seismic data have been acquired from
the deep sea. A total
of 67 wells for both exploration and development have been drilled between l952
and 2013, of which 53 wells are in onshore basins and 14 in the
offshore basins.
Natural Gas Discoveries
Natural gas
discoveries of totalling 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 March, 2013 natural gas
discoveries of about 40 TCF (7.2 billion barrels of oil equivalent – BoE) have been made from both on- and off-shore basins. The deep sea
discoveries have brought about new exploration targets for hydrocarbons in
Tanzania and the whole of Western Indian Ocean Region. Despite these registered developments, the infant gas industry in
Tanzania is facing a number of challenges that call for:
(i)
Building of an effective institutional and legal frameworks to
administer the industry;
(ii)
Availability of human resource with the requisite skills, attitude,
discipline and knowledge of the natural gas industry;
(iii)
Creation of an environment to attract
local and foreign investment in the natural gas industry;
(iv)
Development of natural gas infrastructure and ensure security and safety;
(v)
Development of a competitive and efficient domestic market for natural
gas;
(vi)
Availability of a trusted and a transparent mechanism (and its facility)
for the sound management of the natural gas revenues;
(vii)
Compliance with health, safety and environmental standards; and
(viii)
Management of high public expectations and conflicting views of
stakeholders.
2.1. JUSTIFICATION FOR NATURAL GAS POLICY
This
Natural Gas Policy document provides a comprehensive framework for addressing
challenges that have been indicated in Chapter One. It also focuses on mid- and down-stream
segments to address challenges in the natural gas industry.
The Policy
provides guidelines for the development of the natural gas industry to ensure
optimal benefits to Tanzanians and 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 mid-and down-stream activities. The
formulation of this Policy was aligned with the National Development Vision
2025, the National Energy Policy of 2003, the Five Year Development Plan
(2011/12-15/16) and the National Strategy for Growth and Reduction of Poverty 2010-15
phase II (NSGRP/MKUKUTA II), and other sectoral and cross-sectoral policies.
In addressing
the challenges facing the natural gas industry, the Policy encompasses five (5)
pillars which form basis for the Policy objectives. These pillars clarify
requirements to ensure natural gas activities would benefit the entire Nation.
2.2. PILLARS OF THE NATURAL GAS POLICY
Following
are the five pillars which underpin Tanzania’s Natural Gas Policy:
a) That
benefits to the Government and the people of Tanzania through strategic participation,
interventions and equitable benefit sharing optimized;
b) That human capacity development as well as
institutional, legal and regulatory frameworks are developed and strengthened
to ensure efficient and sustainable natural gas industry development;
c) That
transparent and accountable system is in place towards management and development
of the natural gas industry;
d) That
all activities in the natural gas value chain consider disaster management
systems to mitigate the adverse impact and protects people's health, safety and
environment; and
e) That the integration of the natural gas industry and
other economic sectors of the country are promoted and facilitated in order to
accelerate growth and socio-economic transformation.
2.3. VISION AND MISSION
Vision
A vibrant natural
gas industry contributing significantly to growth and socio-economic
transformation of Tanzania.
To create enabling
conditions for the supply and effective utilization of natural gas to all
market segments in a reliable, transparent, effective, safe, sustainable and environmentally
friendly manner.
2.4. OBJECTIVES OF THE natural gas POLICY
This Policy
recognizes that natural gas resource belongs to the people of the United
Republic of Tanzania, and must be managed in a way that benefits the entire
Tanzanian society.
2.4.1. Main Objective
The main
objective of the Policy is to provide guidance for the development and
utilization of the natural gas resources and maximization of the benefits therefrom
and contribute to the transformation of the Tanzanian economy and its citizens as
aspired in the National Development Vision 2025.
The natural
gas resource should also contribute to improving the quality of life in
Tanzania for many decades 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 and broader long-term development linkages.
This grand
objective is supported by 17 specific objectives mentioned under 2.4.2 below and
further elaborated under Chapter Three. The specific objectives arising from
the five pillars address issues emanating from the present and future
challenges and forecasts in the natural gas sub-sector.
2.4.2. Specific Objectives
a)
To develop facilities for natural gas processing,
liquefaction, transportation, storage and distribution;
b)
To develop a competitive and efficient domestic market for natural gas;
c)
To ensure that the Government and
Tanzanians participate effectively in the natural gas Export business;
d)
Natural gas revenue
managed transparently, effectively and efficiently;
e)
To institute appropriate
pricing structure to sustain supply and demand sides;
f)
To ensure the reliability
of natural gas supply;
g)
To promote linkages between the natural gas industry with other
strategic sectors of the economy;
h)
To develop the capacity
of Tanzanians to participate strategically in the natural gas value chain;
i)
To substantially improve Corporate
Social Responsibility in communities neighboring natural gas facilities and
operations;
j)
To promote rational use of natural gas in all
sectors of the economy;
k)
To promote, monitor and evaluate transparency
and accountability in the natural gas industry;
l)
To ensure compliance with Health, Safety and
Environment standards in the natural gas value chain;
m) To ensure that development of
natural gas industry regionally and internationally benefits Tanzania;
n)
To support activities in the natural gas
industry based on gender issues;
o)
To support activities in the natural gas
industry based on issues addressing HIV/AIDS and other infectious diseases;
p)
To sufficiently and effectively manage public
expectations on benefits emanating from the natural gas industry; and
q)
To ensure
maximization of benefits from the natural gas industry through PPP projects.
3.1. FUNDAMENTAL POLICY ISSUES AND STATEMENTS
The natural gas industry involves up-, mid-
and downstream segments. Upstream activities include exploration, appraisal, development and
production stages of oil and gas. The mid- and down-stream activities of the
industry involve gas processing, liquefaction, transportation, storage,
regasification, distribution and other auxiliary services. This Policy document
only covers mid- and down-stream segments. While
upstream activities will be guided by separate Policy document, this Policy
recognizes the important linkages between activities in the entire gas value
chain. Thus the Government will promote efficient and effective exploration and
development of hydrocarbons and will continue to participate and manage data on
hydrocarbons and establish mechanisms for natural gas exploration programs and
targets for managing license holders.
In addition, the Government will retain unrestricted right
of ownership of all geological data and use of such data to promote investment
in oil and natural gas resources in keeping with standard industry practice. It
will also strive to maximize the country and physical and non-physical benefits
from natural gas exploration and production operations.
3.1.1. Development of Natural Gas Infrastructure
Issue: Optimizing investment for natural gas
infrastructure to serve the domestic, regional and international 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 the national economy. There is therefore a need to ensure
that adequate investment into such facilities is achieved, so that gas
utilisation is not constrained by inadequate supply of relevant infrastructure.
The
provision of service by monopoly entities raises challenges of access to common
facilities and services by third parties. Ensuring non-discriminatory access is
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. Moreover, facility sharing requires
investment coordination as regards capacity, location, and cost recovery.
The Government aims to promote investment in the
mid- and down-stream gas infrastructure to ensure onshore gas processing and
sharing of gas facilities to achieve economies of scale and sustainability.
Towards this objective, it is envisaged that the Government will participate
strategically through its National Companies to develop and
operate major infrastructure for natural gas.
Objective: To develop facilities for natural gas processing,
liquefaction, transportation, storage and distribution.
Policy Statements:
|
The Government shall:
(i)
Participate strategically through its National
companies (i.e. through PPP) to develop and operate major
infrastructure for natural gas;
(ii)
Ensure all natural gas processing
activities are undertaken in common facilities onshore in the most cost
effective manner;
(iii)
Establish a licensing regime for gas
suppliers, distributors and marketers; and
(iv)
Ensure transparent and non-discriminatory
terms and conditions are developed and enforced to promote access to gas
infrastructure service by third parties.
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3.1.2. Natural Gas for the Domestic Market
Issue: Supply and utilization
of natural gas for local consumption.
Natural gas
is a country’s natural resource with various uses including thermal
applications in industries, transportation, institutions, and households;
electric power generation and gas to liquids (GTL) conversions; and as a raw
material for other products (like fertilizer, methanol and ethanol). In this
regard, the Government considers facilitating wide domestic utilization of this
indigenous resource as an important element of the country’s strategies for
achieving rapid growth and socio-economic transformation. Such facilitation
includes promoting production of natural gas based Liquefied Petroleum
Gas (LPG), Liquefied Natural Gas (LNG), and Natural Gas Liquids (NGL) for the
domestic market; and promoting the establishment of industrial parks for
natural gas industries. In order to ensure efficiency and reliable supply of natural gas, the Policy
envisages establishing an aggregator.
Objective: To develop a
competitive and efficient domestic market for natural gas.
Policy Statements:
|
The Government shall:
(i)
Facilitate reliability in efficient production,
utilization and value addition to the country’s natural gas resource;
(ii)
Promote and facilitate the establishment and
the sound growth of industrial parks utilizing natural gas; and
(iii)
Establish a natural gas aggregator to
facilitate efficiency
and reliable supply of natural gas.
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3.1.3. Natural Gas for the Export Market
Issue: Maximizing gains from value added natural gas products (Gas To Liquids – GTL, LNG and other
products).
Whereas
the main incentive for international oil and gas companies to develop natural
gas reserves is for export market, Tanzania aims to have a reasonable share of
the resource for domestic applications as a necessary measure to ensure
diversification of the gas economy before export market. The Government
envisages coordinated utilization of gas on the basis of a National Gas Utilization
Master Plan, and that to the extent possible, detailed technical and economic
analysis should guide selection of the best project for implementation that
will address mutual interest of investors and the nation. The Government,
through its entities, intends to participate in the selected investment
projects including GTL and LNG value chain.
Objective: To ensure that the Government and
Tanzanians participate effectively in the natural gas Export business.
Policy Statements:
|
The Government shall:
(i)
Ensure that domestic market is given
first priority over the export market in gas supply;
(ii)
Strategically invest, through its
entities, in the GTL, LNG value chain and other natural gas projects;
(iii)
Ensure that all LNG and other processing facilities
are located onshore through common facilities; and
(iv)
Ensure profit maximization and efficient trading
of the gas products for regional and international market.
|
3.1.4. Management of Natural Gas Revenue
Issue: Managing revenue arising from natural gas with a view to benefit the present and
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. In addition to
maximization of the retained share, revenues from exploitation of the natural gas resource must be invested
strategically in order to generate sustainable returns beyond exhaustion of the
natural gas reserves.
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 minimize 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.
A Natural Gas Revenue Fund will be
established and managed to ensure transparency and accountability over
collection, allocation, expenditure and management of all natural gas revenues.
Clear guidelines shall be developed transparently or through national dialogue
on the optimum short-term and long-term use of the fund. In addition, transparent
and sound fiscal management of the natural gas revenue spending shall be in
accordance with national development plans and strategies.
Objective: Natural gas revenue
managed transparently, effectively and efficiently.
Policy Statements:
|
The Government shall:
(i)
Establish Natural Gas Revenue Fund for
development and growth of natural gas industry and for the national strategic
projects;
(ii)
Ensure that natural gas revenue is used
appropriately for the benefits of the present and the future generations;
(iii)
Ensure that the local communities benefit
from revenue emanating from the natural gas activities in their respective localities;
and
(iv)
Ensure that guidelines
endorsed by the public to manage the fund are in place.
|
3.1.5. Natural Gas Pricing
Issue: Instituting 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 institute appropriate pricing structure to
sustain supply and demand sides.
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 while
sustaining supply and demand for natural gas; and
(iii)
Ensure natural gas prices to strategic industries and
households are affordable and predictable.
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3.1.6. Security of Natural Gas Infrastructure and Supply
Issue: Security of natural gas infrastructure and 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 ensure the
reliability of natural gas supply.
Policy Statements:
|
The Government shall:
(i)
Ensure sufficient production and rational
utilization of natural gas to sustain supply to the domestic market;
(ii)
Ensure optimal investment for the
national natural gas infrastructure to ensure reliability of energy supply to
the country; and
(iii)
Ensure safety and security of natural gas
infrastructure.
|
3.1.7. Linkages with Other Strategic Sectors
Issue: Mainstreaming natural gas resource utilization in
other strategic socio-economic sectors.
Natural gas can be used to stimulate development
and growth of other sectors and sub-sectors of the economy such as agriculture,
transport, education, health, mining, commerce, manufacturing, household and
electricity. In addition, activities in the natural gas industry, such as exploration, construction and system operations
will further create demand for labour, goods and services. The use of natural
gas also as an alternative to woodfuel for cooking will contribute to the
reduction of deforestation rate.
Objective: To promote linkages between the natural gas industry with other
strategic sectors of the economy.
Policy Statements:
|
The Government shall:
(i)
Ensure growth of the natural gas industry
supports strategic investments in other sectors of the economy; and
(ii)
Support private sector participation for
rapid development of strategic industries such as petrochemicals, steel and
other energy intensive industries.
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3.1.8. Local Content and Capacity Building
Issue: Empowering Tanzanians to benefit from the natural
gas industry.
Local
content in the Tanzanian context refers to added value brought to Tanzanians
through activities of the natural gas industry. These may be measured and
undertaken through employment and training of local workforce; investments in
developing supplies and services locally; and procuring supplies of services
locally. Currently, most of 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 the industry’s stability, integration into local economies and
poverty reduction.
The country
may maximize these benefits through strategic participation in the natural gas
value chain. Successful maximization of local content benefits require implementation
of sound policies, strategies, action plans, continuous consultation amongst
key stakeholders and strengthening capacity of various institutions such as
Local Government Authorities (LGAs) and Community Based Organizations (CBOs).
Developing
local capacity to service the industry, starting from the very low initial
condition, requires strategic interventions by various players, including the
Government and its agencies, international oil and gas companies, the local
private sector, education and research institutions, and the community based organizations.
Among others, the strategies should ensure that opportunities to provide
services to the industry are eventually made available to Tanzanian entities to
commensurate to their growing capacity to deliver, promote joint ventures
between Tanzanian and international investors, encouraging wide ownership of
oil and gas companies through ownership of the issued stock of relevant
companies. The design and implementation
of such strategies must be participatory, inclusive, monitorable, and backed by
appropriate regulation-based incentives.
Objective: To develop
the capacity of Tanzanians to participate strategically
in the natural
gas value chain.
Policy Statements:
|
The Government shall:
(i)
Ensure opportunities for supply of goods
and services, employment and investments are made available to Tanzanians;
(ii)
Ensure the capacity of Tanzanians is
developed in the natural gas value chain through skills development, transfer
of technology and applied research;
(iii)
Strengthen the capacity of national
companies to participate strategically in the natural gas industry;
(iv)
Ensure companies participating in natural
gas value chain are listed on the Dar es Salaam Stock Exchange; and
(v)
Establish oil and natural gas centre of
excellence and strengthen capacity of the training institutions to impart
requisite knowledge skills and innovations to Tanzanians.
|
3.1.9. Corporate Social Responsibility
Issue: Addressing needs of local communities
Corporate
Social Responsibility (CRS) refers to the commitment by the business to share
benefits arising from the business with the community in which it operates.
Beyond the ‘feel good’ outcome of such practice, CSR is instrumental in
developing and maintaining sound and trustworth relations between business and
the community. To achieve harmony, both parties must demonstrate respect for
each other, and cooperate in addressing the needs of each other. It is in the
interest of both parties to address or mitigate the negative perceptions and
maximize the positive effects. The economically stronger companies implementing
projects and activities in the natural gas industry are therefore expected to
contribute positively to the development process of the local communities
(preferably through respective Local Government Authorities and Community Based
Organisations), focusing their CRS activities to address the most pressing
needs of the neighboring communities.
The
Government will encourage all parties to jointly prepare and implement CRS
programmes for their mutual benefit, and ensure maintenance of harmony and good
relations between them.
Objective: To substantially improve Corporate
Social Responsibility in communities neighboring natural gas facilities and
operations.
Policy Statements:
|
The Government shall:
(i)
Ensure there is a contractual obligation
to all investors and contractors in the natural gas activities to undertake
community development programmes; and
(ii)
Ensure companies in the natural gas
industry submit credible Corporate Social Responsibility action plans to the
appropriate authority.
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3.2. CROSS CUTTING 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 should be used prudently. In order to
ensure sustainable supply of natural gas and its future availability, there is
a need to utilize it efficiently in many applications for instance, in
households, transport, manufacturing industries, commerce and power generation.
In the medium and long terms, other sources of energy such as coal, hydro and
renewables (e.g. solar, wind, geothermal and bio-energies) will be utilized to
supplement power generation using natural gas.
Objective: To promote rational
use of natural gas in all sectors of the economy.
Policy Statements:
|
The Government shall:
(i)
Establish Gas Utilization Master Plan;
and
(ii)
Ensure efficient natural gas supply from
wellheads to the end-use systems, consistent with the Gas Utilisation Master
Plan.
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3.2.2. Transparency and Accountability
Issue: Increasing
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. The
Government and stakeholders have important roles to play in order to achieve
transparency and accountability to the public as well as eliminating possible
elements of corruption in the natural gas industry.
Related to
this, the Government has joined the Extractive Industry Transparency Initiative (EITI) to improve transparency and accountability
as well as accessing information in relation to revenue accrued from extractive
industries. Except for national companies specifically given such mandates, there shall be
separation (unbundling of operations) of value chain activities in order to
promote accountability and efficiency.
Objective: To promote, monitor and evaluate transparency
and accountability in the natural gas industry.
Policy statements:
|
The Government shall:
(i)
Develop transparency and accountability
guidelines in natural gas industry; and
(ii)
Enforce transparency and accountability to
all stakeholders involved in the natural gas industry.
|
3.2.3. Management of the Environment, Health and Safety
Issue: Enforcing sound practices in environmental, health and safety management.
Natural gas
operations may have adverse effects on the environment, health and safety of
people. For instance, construction of marine pipeline can negatively impact
marine ecology including disturbance of fish habitat. Gas flaring in the
natural gas processing plants emits carbon dioxide to the atmosphere.
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. Regulations of these operations are
necessary to ensure that natural gas activities are conducted taking environment,
health and safety issues into serious consideration.
Objective: To ensure compliance with
Health, Safety and Environment standards in the natural gas value chain.
Policy Statements:
|
The Government shall:
(i)
Ensure that health, safety and environmental
issues are mainstreamed into all operations of the natural gas value chain; and
(ii)
Ensure compliance to health, safety and
environmental protection and best practice in the industry.
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3.2.4. Regional and International Cooperation
Issue: Seizing opportunities from regional and international cooperation.
Cooperation
with regional and international economic partners is important for development
of the natural gas industry. The gas industry in Tanzania stands to
particularly benefits from the country’s membership in regional economic blocks
such as EAC and SADC. There is also a need to strengthen cooperation with
international partners to share best practice and experiences in the
management of natural gas industry, and take advantage of the facilities, resources, experience and information
they provide.
Objective: To ensure that development of
natural gas industry regionally and internationally benefits Tanzania.
Policy Statements:
|
The Government shall:
(i)
Support cross
border projects and investments within EAC, SADC and AU Partner States to
maximize benefits accruing from
natural gas exploitation; and
(ii)
Facilitate international collaboration in
education, research, exchange of data and information in natural gas industry.
|
3.2.5. Gender Mainstreaming
Issue: Mainstreaming gender issues
in the natural gas industry.
The Government provides equal
opportunities to all citizens of the country. However, most of such
opportunities are usually dominated by men. Active participation of female in
the natural gas industry is thus encouraged. Natural gas industry development
is likely to have different impacts on women, men, children and vulnerable
groups. The use of natural gas for cooking in households relieves female from
wasting time searching for firewood and indirectly improves health due to
better kitchen environment that is free from smoke and soot.
Objective: To support activities in
the natural gas industry based on gender issues.
Policy statements:
|
The Government
shall:
(i)
Ensure that all programmes related to
natural gas value chain including education and training opportunities are
based on gender equality and equity.
|
3.2.6. HIV and AIDS and other infectious diseases
HIV and AIDS are 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 on communities surrounding such projects.
Objective: To support activities in the natural gas
industry based on issues addressing HIV and AIDS and other infectious diseases.
Policy statements:
|
The Government
shall:
(i)
Facilitate provision of education on HIV and AIDS and
other infectious diseases to stakeholders in the natural gas industry.
|
3.2.7. Public Private Partnership (PPP)
Issue: Enhancing private sector
participation.
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 and the PPP Act of 2010. Like other sectors of the economy,
projects under PPP arrangements have been implemented in the petroleum and
natural gas-sub sectors. However, the Government has experienced problems in
such projects including risks sharing mechanisms and insignificant benefits. In
order to address these problems, proper mechanism for risk sharing in natural
gas PPPs investments needs to be put in place to ensure mutual benefits for
both parties involved.
Objective: To ensure maximization
of benefits from the natural gas industry through PPP projects.
Policy statements:
|
The Government
shall:
(i)
Promote and facilitate PPPs arrangements
to enhance investments in the natural gas industry.
|
3.2.8. Public Awareness and Expectations from the Natural Gas 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 significant discoveries of natural gas
in the country, public expectations have increased based on the perception that
discoveries are likely to yield immediate benefits. Key stakeholders include
company employees, NGOs, community groups, activists, media and the general public. The expectations have to be moderated within
realism and feasibility, lest they become a source of public discontent and
disagreements. The expectations have to be managed since such benefits may take
time to be realized.
This
situation calls for the need to increase awareness on natural gas operations to
the general public and stakeholders, particularly local communities where
natural gas projects and activities are undertaken. It is in everyone’s
interest that communication and flow of information about the natural gas
industry to the public is maintained in a satisfactory condition at all times.
Objective: To sufficiently and effectively manage public
expectations on benefits emanating from the natural gas industry.
Policy statements:
|
The Government
shall:
(i)
Improve communication mechanism to provide
accurate and timely information to the public on activities implemented
throughout the natural gas industry; and
(ii)
Involve the public on all natural gas
development activities at all stages in order to inculcate a sense of
ownership of the country’s natural gas.
|
4.1. LEGAL AND REGULATORY FRAMEWORK
Following significant discoveries of natural gas in
Tanzania, natural gas industry is set to grow rapidly. As a result, there will
be tremendous increase of up-, mid- and down-stream activities. This requires
strengthening of legal and regulatory framework to comprehensively address the
governance of the natural gas industry. Therefore, enactment of specific
legislations to address the situation is inevitable.
4.2. LEGAL AND REGULATORY FRAMEWORK FOR MID- AND DOWN-STREAM
Legal and Regulatory Framework for mid- and down-stream
industry will, among others, comprise of licensing, tariff structure, rates and
charges, quality and standards, health and safety issues, third part access to
common infrastructure and services, revenue management and related aspects of
natural gas industry administration and regulation. Therefore, the role of the 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
mid- and down-stream activities to maximize benefits accrued from natural gas
resource;
(ii)
Establish proper mechanisms to provide for reliable and affordable supply
to domestic market;
(iii)
Ensure that the regulatory authority for
natural gas industry is strengthened;
(iv)
Ensure compliance with generally accepted international
standards for natural gas industry; and
(v)
Ensure stable, robust and sound legal
framework for natural gas industry.
5.1. INSTITUTIONAL FRAMEWORK
The successful implementation of Natural Gas Policy
and other national development policies depends crucially on the institutional
framework that is in place to develop tools for operationalizing, enforcing and
monitoring to ensure desired outcomes. The institutional framework articulates
major roles of key institutions and direction towards a transformed economy and
sustainable growth and development.
5.1.1. The Role of the Government
The rapid
growth in the natural gas industry in Tanzania requires the involvement of the
Government in directing resources and leading other players towards a desired
development direction. Therefore, in addition to traditional roles of
facilitation and regulation, the Government shalll also participate in
investment and ownership of strategic infrastructure. The role of the
Government shall therefore be:-
(i)
To administer and enforce the Acts and Regulations;
(ii)
To attract foreign direct investment in capital intensive and
technologically demanding natural gas projects;
(iii)
To acquire, analyse and disseminate information or issues regarding the
natural gas industry;
(iv)
To participate strategically in natural gas investments;
(v)
To support national enterprises and Tanzanians to participate actively
in the natural gas industry;
(vi)
To strengthen the capacity of Government’s institutions responsible for
the monitoring, evaluating and reviewing of the natural gas industry; and
(vii)
To set targets and monitor results of natural gas projects and
programmes.
5.1.2. National Oil and Gas Company
The designated
National Oil and Gas Company will have to take new roles and responsibilities
in the light of natural gas discoveries and the need for development of the
industry. Oil and gas activities including commercial and regulatory roles
shall be carried out separately by relevant entities.
In addition
to participating in upstream activities, the role of National Oil and Gas
Company in the mid - and down-stream natural gas activities shall be:
(i)
To safeguard the national interest in the natural gas industry;
(ii)
To advise the Government on Policy issues pertaining to mid - and down-stream
natural gas activities;
(iii)
To participate in development and own strategic natural gas projects and
businesses on behalf of the Government;
(iv)
To carry out specialized operations in the natural gas value chain using
subsidiary Companies; and
(v)
To establish and enable an Aggregator who will develop, own and manage
the major infrastructures for mid- and down-stream natural gas sector,
including but not limited to the following:-
·
The pipeline network from central gathering stations to wholesale
distribution and end users;
·
The gas processing facilities and gas products; and
·
The central gathering stations – either jointly with the producers or on
its own.
5.1.3. Regulatory Authority
The current regulatory authority (EWURA)
has the mandate to regulate downstream activities, while the upstream
activities are regulated by the Government (i.e. Ministry of Energy and
Minerals). The potential size of the natural gas resources in the country and
its expected multiple uses require a robust regulatory authority. The role of
regulator for natural gas shall be:
(i)
To perform the functions conferred to it by the gas legislation;
(ii)
To grant, renew,
suspend and cancel licenses;
(iii)
To establish standards for goods and services in the natural gas
industry;
(iv)
To regulate rates and charges in the natural gas industry;
(v)
To monitor and evaluate performance of natural gas activities
including levels of investment, cost of services and availability of gas
supply; and
(vi)
To facilitate the resolution of complaints and disputes.
5.1.4. Private Sector Participation
Private sector players are important
in providing substantial capital investment and technologies needed for
exploration and development of the natural gas resources. The Government will
continue to promote and facilitate the private sector participation through PPP
or other arrangements in the natural gas value chain.
5.1.5. Academic and Research Institutions
Academic
and Research Institutions are important for
development of the natural gas industry. Development of the industry has
increased demand for knowledge and skills in Tanzania. In order to meet the
demand, the Government has taken measures to introduce and expand training in
relevant fields in the oil and gas industry. The Government will also promote
education, training and research in the natural gas industry, recruitment and
retention of the human resources required in the industry.
5.1.6. NGOs and Civil Societies
This Policy recognizes the role of
NGOs and other civil society organisations in enhancing advocacy, mobilization
and dialogue with communities, investors and the Government. These entities
will contribute by holding the different players accountable with regard to
natural gas activities and collaborate with Government in designing, monitoring
and implementation of socio-economic programmes related with the natural gas
industry.
5.1.7. Media
The role of
the media in providing accurate and balanced information on the natural gas
industry issues to the public is very important. In this regard, the Government
will strengthen collaboration with media to ensure that information is
delivered accurately and timely. This will increase public awareness,
transparency and accountability on matters pertaining to the natural gas
industry.
5.2. MONITORING AND EVALUATION FRAMEWORK
The impending incipience of a large natural gas
industry presents a multitude of opportunities and challenges for Tanzania.
This Policy addresses some of the multifaceted issues arising from this
development, and recognises that adjustments will be needed in many sectors to
accommodate the demands and impacts of a growing natural gas industry in the
country. To the extent that separate programmes, projects, or institutions take
on board issues resulting from the natural gas industry, such issues will be
integrated in the relevant programme, project, or institution’s Monitoring and Evaluation
(M&E) framework. It is also noteworthy that the different stakeholders to
the gas industry may develop separate M&E frameworks to suit their specific
expectations and interests.
The Natural Gas Policy M & E Plan shall be
developed through a consultative process as part of the Policy Implementation
Strategy, and outline milestones and key performance indicators under each of
the five pillars of the Policy. Specifically, the Plan shall be a tool to
manage the process of monitoring, evaluating and reporting progress towards the
objectives, and serve the following main functions:
(i)
Explain
in detail how and what the Ministry and
other Government institution will (a) monitor to determine whether
implementation is on track to achieve the intended Policy objectives, and (b)
evaluate / assess the adequacy of implementation strategies, provide lessons
learned, determine cost effectiveness and estimate the impact of individual
interventions;
(ii)
Provide
all indicators that must be reported to the stakeholders on regular basis;
(iii)
Provide
early warning signals about the required development and subsequent change
and/or review; and
(iv)
Serve
as a communication tool, so that all stakeholders clearly understand the
objectives being sought through this Policy and Government’s actions emanating
thereunder.
5.2.1. Institutional Arrangement for Monitoring and Evaluation System
The institutional framework for
monitoring and evaluation consists of the institutional organizational set-up
and its environment of operation. It covers the framework for reporting,
supporting and coordination systems for monitoring and evaluation.
This Policy has been developed with a
primary focus on one main objective: providing guidance for the development and
utilization of the natural gas resources to maximize the benefits ensuing
therefrom and contribute to growth and the transformation of the Tanzania’s
economy and the standard of living of her people. Its implementation is
therefore expected to generate impacts over and beyond those emanating from
existing programmes and projects. It is this understanding that underpins the
need for a distinct Monitoring and Evaluation (M & E) Framework to be
applied in conjunction with this Policy. The framework shall seek to answer the
question, “has implementation of the Natural Gas Policy met the objectives and benchmarks as outlined in
this Policy document?”
The multi-dimensional
challenges and opportunities from the emerging natural gas industry require
systematic monitoring and evaluation framework for Policy implementation and
performance assessment. The monitoring process will generate and supply data
and information on the progress made in the implementation processes while
evaluation will determine the relevance, effectiveness, efficiency,
sustainability and impact of the Policy.
While the
main responsibility for monitoring and evaluation framework will be vested in
the Ministry responsible for natural gas, a coordination mechanism will be
established to allow for
multi-stakeholder consultations involving key stakeholders including
MDAs (including Ministries responsible for finance, law, security, safety and
environment), LGAs, Members of Parliament, the Private Sector, NGOs, FBOs,
CSOs, CBOs, Media and DPs.
5.2.2. Monitoring and Evaluation Indicators
A list of
indicators will be developed to meet information needs of different
stakeholders at all levels. They will include
measurable, qualitative and process indicators. They will be reviewed from time
to time to meet additional information requirements necessitated by the new
developments. More specifically, baseline data will be collected as benchmark
of the Policy implementation tracking.
At each particular implementation
period, monitoring and evaluation will be undertaken to review the
implementation of the strategy. The general objective of evaluation is to
determine the relevance, effectiveness and impact of Policy on the social,
political and economic development of the country. Both qualitative and
quantitative indicators will be analyzed.
5.2.3. Monitoring and Evaluation Tools and Deliverables
The output and deliverables of the
Natural Gas Policy 2013 will be:
- Natural Gas Act and Regulations;
- Natural Gas Utilization Master Plan;
- National Gas Company and its subsidiary companies;
- Natural Gas Revenue Fund;
- Communication Strategy with an interactive element to facilitate ongoing feedback from stakeholders;
- Progress Report, using Monitoring and Evaluation System output to both indicate progress and update on implementation of the Natural Gas Policy;
- Analytical report of different studies (including feasibility and researches) undertaken; and
- Client Service Charter.
This Policy
document provides guidance for ensuring that the benefits to Tanzania and
Tanzanians from the natural gas value chain are maximized and contribute to the
accelerated growth and socio-economic transformation of the country and its
citizens. It also forms a comprehensive framework for guiding development of
the natural gas industry.
The
Government is determined to ensure timely implementation of the Policy with an
ultimate goal of improving the quality of life of Tanzanians for many decades to
come. This would be achieved through engagement of mechanisms which address both
domestic and export markets of natural gas. In the course of implementing the Policy,
an integration of the natural gas industry with other socio-economic sectors is
considered to be of paramount importance.
This Policy
document will be effected through the following undertakings:
- Implementation Strategy document, which is detailed to reflect underlying objectives and corresponding strategies as well as roles of key actors to ensure effective implementation;
- Enactment of laws and regulations;
- Amendment of existing laws and regulations; and
- Restructuring of existing institutions and public companies, establishment of new ones to implement the Policy.
The
successful implementation of this Policy calls for participation of all stakeholders
including, the Government and its public institutions, companies; the private
sector (including oil and gas companies), local communities and the public as a
whole. The country’s natural gas resource must contribute significantly to the
realization of the objectives of our National Development Vision 2025 whose
ultimate goal is to ensure that Tanzania becomes a middle-income country by
2025.
This Policy
will be reviewed when need arises.
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