When the latest National Energy Policy was issued in 2015, it highlighted—more than ever—the need to refine and clarify regulation supporting energy projects in Tanzania. For better resource utilization, infrastructure improvement, human capital development, and cross-sectorial coordination in the execution of projects—all identified as critical for ensuring a successful future for Tanzania's natural gas sector—it was commonly acknowledged that a more robust framework was of paramount necessity. Following this, a defining piece of legislation, the Natural Gas Utilization Master Plan (NGUMP) 2016-2045, was drafted in collaboration with key development partners.
The initiative was spearheaded by the Ministry of Energy and Minerals (MEM), but will also receive inputs from the Japan International Cooperation Agency (JICA), the Energy and Water Utilities Regulatory Authority (EWURA), the Ministry of Investment, Trade and Industry, the Tanzania Petroleum Development Corporation (TPDC), and key parties from Trinidad and Tobago.
However, finalizing this document has proven easier said than done. While phase one was completed last year, the data presented was based on estimates, and—especially given that gas supply and demand are both highly price sensitive— therefore cannot be used reliably. Developers have been feeling the lack of a workable document. Originally, the 30-year plan was expected to become effective by YE2017. But with the consulting contract for NGUMP phase two, also with JICA, still waiting to be signed, this looks unlikely to happen.
What is more, with the government's announcement in July 2017 that all upstream investors are to renegotiate the terms of contracts and concessions, there is concern that this leaves involved parties even further away from coming to an agreement on the management of these resources.
The NGUMP's drafting runs parallel to discussions between the Tanzanian government and a consortium of oil and gas companies, including lead investors Shell and Statoil, to build a USD30-billion LNG plant and export terminal in the southern region. Tanzania is expecting an initial decision regarding investment in 2020. This plant and export terminal will help address Tanzania's lacking infrastructure and underdeveloped supporting industries to better implement gas development projects, further developing GDP.
Among the key objectives of NGUMP is to identify local and international demand for natural gas. Although energy policy in Tanzania requires the allocation of gas for domestic consumption, the quantities of available gas currently far exceed any conceivable national demand. Indeed, according to the predictions in the NGUMP draft, local consumption between 2016-2045 is placed at around 19.1 trillion cubic feet (541 billion cbm), while available reserves, based on estimated technically recoverable gas figures, will be approximately 38.6 trillion cubic feet (1.1 trillion cbm). Thus, there is the need to develop a strong gas export project to maximize this excess.
The NGUMP singles out Asian markets–in particular Japan, China, South Korea, and India—as potential export partners. There is also a focus on regional markets, with acknowledgement of the need to construct pipelines connecting resources in Tanzania with parts of the Southern African Development Community (SADC) and the East African Community (EAC). Challenges surrounding the long distances involved, and relatively small gas volumes, will need to be faced first, however.
Nevertheless, it should be remembered that NGUMP's supply and demand figures are only estimates, and again, do not take into account the volatility of gas prices, which will have a serious impact on the economic viability of LNG projects that come to fruition. Also, investors are looking to the Tanzanian government to minimize all other kinds of volatility: the major criterion of any natural gas master plan for the private sector is consistency. Stable policy is vital for building a strong, long-term partnership between the government and investors.
And, while consultation with different parties and stakeholders is a step in the right direction, there are still calls for more dialog between the various public sector stakeholders and the private companies working on development of Tanzania's gas assets.