Muswada wa Sera ya Gesi nchini

7/30/2019 Muswada wa Sera ya Gesi nchini

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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_gas


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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%20gas


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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:


(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:


(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:


(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:


(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:


(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:


(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:


(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:


(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:


(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:


(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:


(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:


(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:


(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:


(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:


(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:


(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.

Documents

Muswada wa Sera ya Gesi nchini