GOING FOR IT

Tanzania 2015 | ENERGY | INTERVIEW

TBY talks to Yona Killagane, Director General of Tanzania Petroleum Development Corporation (TPDC), on new legislative changes, exploration blocks, and local content.

Yona Killagane
BIOGRAPHY
Yona Killagane is the Director General of Tanzania Petroleum Development Corporation (TPDC), a position he has held since 1992. He joined TPDC in 1976, and worked in various capacities ranging from accounting and finance to general management. He is a professional accountant, having qualified with the Chartered Association of Certified Accountants (ACCA) in the UK in 1975. He also obtained a Master’s degree in Finance from Strathclyde University in Scotland in 1979. He taught briefly at the Institute of Development Management Mzumbe, in Tanzania, today’s Mzumbe University. Killagane has published a number of books on accounting and finance, and authored several papers.

How will the Tanzania Petroleum Development Corporation's (TPDC's) role evolve in light of new legislative changes?

The role of TPDC is set to change significantly and the institutional change has already begun. The TPDC was formerly the regulator, monitoring companies as well as participating in exploration and licensing. This will no longer be the case, as the role of the TPDC will now involve actual exploration. The government has already allocated two blocks to TPDC and we plan to undertake exploration on our own, which is a major step for us. We cannot continue the previous role of regulator, as we cannot be both stakeholder and regulator simultaneously. The other significant change will involve the promotion and participation in the downstream segment. Given that there will be significant gas discoveries, we need to consider how best to commercialize them.

What type of sharing arrangement will the TPDC have at its two new blocks?

We will complete most of the basic work ourselves. We have already acquired the 2D study and are now completing the interpretation. We will close the 2D component, confirm the relevant structures, and then move into 3D scanning. The work we are doing is geared at reducing risk at the blocks, and we will eventually look for a strategic partner for the drilling stage. It will not be a PSA, but a strategic partner. In the near future, we are mobilizing a seismic acquisition group, which we are doing jointly with INP Mozambique. We will run seismic surveys on those two blocks, in addition to the ones on the grid. The 3D will be ready in the 4Q2014 or 1Q2015. We should undertake the actual drilling of the wells in those two blocks in 2015.

Six international companies recently submitted bids for four exploration blocks. What factors are you looking for to determine the winning bid?

We are looking at technical capabilities, financial capabilities, and the amount that the government will get from the PSA. Those are the three main factors that we take onboard. With regard to the government share, we had set some thresholds in the bidding documents, and it will be the companies' decision to move beyond those thresholds. If a company bids below the level, it will be out of the running. Currently, it is difficult to speculate on why companies are not bidding for the other blocks. It could be the water depth, or maybe there is the possibility that the acquired data did not emerge clearly. This is something we will have to think about once we have the evaluation.

What sets Tanzania apart from countries with similar exploration opportunities?

The terms we are offering are competitive for investors, in addition to which is the sense of security Tanzania instills. Ours is a reasonably stable country, with strong economic growth.

How is TPDC involved in the development of LNG capabilities?

TPDC fully participates in the development of LNG, and our objective is to establish an LNG plant in Tanzania. Our participation is crucial, in what is a vital project for the country, and we need to play an active role.

What competitive advantages does Tanzania have in terms of becoming one of the world's leading LNG exporters?

Tanzania's advantage is that developers are well-experienced companies, including such firms as ExxonMobil, which operates a number of LNG plants worldwide. BG has also built up several LNG plants, while Statoil owns a number of LNG facilities in Norway. These players are already well established and boast profound experience in the field. By contrast, none of our colleagues in Mozambique has built an LNG plant to date.

What is being done to ensure that local content in these partnerships is of national benefit?

The government is drafting a local content policy. This is being discussed with stakeholders and will subsequently be released to the public for scrutiny. Eventually, it will become a policy document backed by a loan, and even now we are working closely with the international oil companies (IOCs) to ensure that we are at least implementing and ensuring a stronger focus on local content. Thirdly, there is the issue of education. We are trying to educate people on the potential opportunities that are available for people to participate in. We also have a national program to educate people for employment in the industry. National universities have launched programs devoted to oil and gas, with the idea being to produce efficient professionals to staff this sector. The education program we are undertaking seeks to inform the general public of the opportunities and how they can take part in them. In addition, the gas policy requires companies to work closely with the communities in which they are based. The policy stipulates that the community should not be told what to do, but should rather have a participatory role. Communities should devise projects and the IOCs should see how they can assist in realizing them. The ideas should be coming from the communities.

What are your priority targets for the end of 2015?

Our primary target is to ensure that all power plants that TANESCO is installing are fed with gas. We want to ensure that TANESCO receives sufficient gas for their plants. The next project will be to reduce the impact of deforestation resulting from the construction of a pipeline that we are installing around Dar es Salaam to provide gas for industries, cooking, and vehicles. The design of the project is almost complete, and the next phase is to organize a contractor and arrange for financing.

What is your outlook for the energy sector in general over the coming decade?

The energy sector is progressing well, and remains the essential engine of development. This is why the government has decided that the pipeline project is key to ensuring sufficient gas supply, primarily for power generation, and also for industry. From Mnazi Bay, where there was a major gas discovery, the pipeline is 36 inches in diameter, and will come all the way to Dar es Salaam. There is another section from Songo Songo that will connect, via a 24-inch diameter pipeline, to Dar es Salaam. In the next 10 years, we expect double-digit GDP growth. Once there is sufficient power, it will be possible to attract a range of industries to the country. We expect that exports will also grow on the basis of the fact that there will be an industrial base that is provided with relatively cheap power.