Oil & Gas Comparative Guide

• Published date: 21 January 2022
• Subject Matter: Energy and Natural Resources, Oil, Gas & Electricity
• Law Firm: Dentons EALC East African Law Chambers
• Author: Mr Thomas M. Sipemba and Corliss Kidaha

1 Legal and regulatory framework

1.1 What role does the national state play in the oil and gas industry in your jurisdiction? Are oil and gas rights owned by the state or is private ownership allowed?

The government plays a significant role in the oil and gas industry in Tanzania. Thus, the entire property in and control over oil and gas resources is vested in the public and exclusively managed by the government in trust for the people of Tanzania. It is based on this core structure that rights are protected and are indispensable from the state. Private ownership of oil and gas rights is not allowed, although private individuals may be granted rights to exploration or development.

1.2 Which national legislative and regulatory provisions govern the oil and gas industry in your jurisdiction?

The main legislation governing the oil and gas industry is the Petroleum Act, which is supplemented by regulations, rules and guidelines made thereunder. Other laws that play a significant role in regulating the oil and gas industry in Tanzania include:

• the Natural Wealth and Resources (Permanent Sovereignty) Act No. 5 of 2017;
• the Income Tax Act (Cap 332 RE 2019);
• the Environmental Management Act No. 20 of 2004;
• the Tanzania Extractive Industries (Transparency and Accountability) Act No. 23 of 2015;
• the Oil and Gas Revenue Management Act No. 22 of 2015; and
• the Energy and Water Utilities Regulatory Authority Act (Cap 414 RE 2006).

1.3 What other national legislative and regulatory provisions have relevance for oil and gas activities in your jurisdiction?

Other laws that are relevant to oil and gas activities include those relating to:

• employment matters;
• health and safety issues;
• the regulation of explosives;
• registration with professional bodies such as those regulating contractors and engineers;
• the regulation of foreign exchange;
• the establishment and regulation of subsidiaries; and
• dispute resolution.

These laws include:

• the Employment and Labour Relations Act (Cap 366 RE 2019);
• the Occupational Health and Safety Act No. 5 of 2003;
• the Explosives Act No. 56 of 1963;
• the Contractors Registration Act No. 17 of 1997;
• the Engineers Registration Act No. 15 of 1997;
• the Foreign Exchange Act No. 1 of 1992;
• the Companies Act No. 12 of 2002; and
• the Civil Procedure Code (Cap 33 RE 2019).

1.4 Are there any regional treaties or laws that need to be taken into account?

Oil and gas in Tanzania is governed by local laws and regulations. However, Tanzania has ratified a number of treaties relating to oil and gas, including:

• the International Convention for the Prevention of Pollution from Ships of 1973;
• the International Oil Pollution Compensation Fund of 1992;
• the International Convention on Oil Pollution Preparedness, Response and Cooperation of 1990; and
• the International Convention Relating to Intervention on the High Seas in Cases of Oil Pollution Casualties of 1969.

From a regional perspective, the East African Community (EAC) continues to make efforts to harmonise a framework of regional solutions for the energy sector. The Energy Security Policy Framework of 2018 is among the instruments that assist with the EAC's vision of addressing energy security and ensuring developments aimed at addressing the energy security challenge in the region. Specifically, the Energy Security Policy Framework:

• sets out various models for energy security monitoring, evaluation and management; and
• proposes an institutional framework for a more coordinated regional approach to energy security management.

1.5 Which national regulatory bodies are responsible for enforcing the applicable laws and regulations? What powers do they have?

The ministry in charge of oil and gas resources is the Ministry of Energy (MoE). In this regard, the MoE has overarching powers to:

• formulate and review policies and plans for the sector;
• enter into agreements on behalf of the government; and
• initiate inquiries and studies on petroleum activities.

The Petroleum Upstream Regulatory Authority (PURA) regulates upstream petroleum activities; while the Electronic and Water Utilities Regulatory Authority (EWURA) regulates mid-stream and downstream petroleum activities.

PURA has a mandate to:

• negotiate arrangements;
• issue and cancel petroleum exploration licences, development licences and production permits;
• review and approve licence holder budgets;
• impose sanctions on stakeholders for non-compliance with the Petroleum Act and its regulations; and
• issue rules and guidelines on the conduct of petroleum operations.

On the other hand, EWURA is responsible for:

• issuing and cancelling licences for the construction of petroleum infrastructure and undertaking midstream and downstream activities;
• monitoring the performance of licensees;
• obtaining information or evidence; and
• holding inquiries.

Both PURA and EWURA also regulate compliance with the local content requirements.

1.6 What is the national regulators' general approach in regulating the oil and gas industry?

PURA and EWURA's general approach to regulating the oil and gas industry is to act as a facilitator.

1.7 What role do provincial, state and/or other local government regulatory bodies play in the regulation of the oil and gas industry?

In some ways, local government authorities assist with regulating operators in the oil and gas industry. The National Environment Management Council relies on local government authorities to act as environmental management officers when monitoring compliance and conducting environmental audits. Further, operators must ensure that local government authorities are notified of any significant and disruptive land developments.

2 Oil and gas industry

2.1 How mature is the oil and gas industry in your jurisdiction?

Considering that exploration endeavours have been underway for decades, the oil and gas industry in Tanzania is quite mature. Over the years, the Ministry of Energy has built on this experience to formulate legislation that befits the Tanzanian industry and establish key bodies to engage with players that conduct such activities.

2.2 What are the key oil and gas products which are produced in your jurisdiction and where are activities typically based?

As the country undergoes exploration, significant discoveries of natural gas have been made at Songo Songo in the Lindi region and Mnazi Bay near Mtwara; and oil discoveries have been made in the west coast of Pemba Island offshore and near Mafia Island. Currently, gas is being produced in Mnazi Bay within the Mtwara region and there is an ongoing liquefied natural gas project in the Lindi region.

2.3 Who are the key players in the oil and gas industry in your jurisdiction?

There are three key players which regulate the oil and gas industry in Tanzania:

• the Ministry of Energy;
• the Petroleum Upstream Regulatory Authority; and
• the Energy and Water Utilities Regulatory Authority.

The Tanzania Petroleum Development Corporation is a key player, as the national oil company that participates in upstream, midstream and downstream activities and is responsible for the government's participating interests in petroleum and gas agreements. Major players in the oil and gas industry in Tanzania from the private sector include:

• Equinor;
• Songas Ltd;
• Maurel & Prom;
• Shell Tanzania Limited;
• PanAfrican Energy Tanzania; and
• TotalEnergies.

2.4 How are the following reflected in the domestic energy mix?
(a) Oil and gas
(b) Imports and exports?

(a) Oil and gas

Despite increasing discoveries of oil and gas resources in the country, the domestic energy composition is largely made up of hydropower. The country recently commenced construction of the Julius Nyerere Hydropower Station, which will be the largest hydropower station not only in the country, but also in the region. This notwithstanding, there are a few projects where energy is produced using natural gas. These include:

• the Songas Ubungo plant;
• the Mtwara gas turbine combined power project plant; and
• the Kinyerezi gas plant.

(b) Imports and exports

For the most part, Tanzania relies on imports of petroleum as opposed to domestically sourcing it for local consumption. The government has established a government agency, the Petroleum Bulk Procurement Agency, to administer the import of all petroleum products into the country and act as a platform for tendering the importation of petroleum products.

3 Exploration and production

3.1 What rights are required to undertake exploration and production in your jurisdiction? Do these vary depending on the type or location of the activity?

The early stages of exploration are conducted with a reconnaissance permit, which allows the holder to conduct geo-scientific and geo-technical activities for preliminary evaluation, acquisition and interpretation of data and seismic data in shallow drilling in an area. Reconnaissance permits are not exclusive and thus different permits may be issued for different activities in the same area. The data and information collected by the permit holder is the property of the government of Tanzania, though the Petroleum Upstream Regulatory Authority (PURA) may authorise the permit holder to sell the data subject to the proceeds of the sale being shared with PURA. The permit is valid for a period not exceeding three years.

Exploration and production licences (and all other petroleum rights except for reconnaissance permits) are exclusively reserved for the Tanzania Petroleum Development Corporation (TPDC), the national oil company; and once granted, are not transferable. Other persons intending to undertake exploration or production activities must enter into partnership with the TPDC subject to ministerial consent and the TPDC must maintain a 25% interest in such arrangement. In order to qualify to enter into the envisaged partnership, the person intending to so must:

• be a body corporate registered in Tanzania; and
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