SOLID PROSPECTS

Tanzania 2015 | ENERGY | INTERVIEW

TBY talks to Patrick Rutabanzibwa, Country Chairman of PanAfrican Energy Tanzania (PAE), on being a pioneer in the natural gas sector and its future.

Patrick Rutabanzibwa
BIOGRAPHY
Patrick Rutabanzibwa was born in 1956 and studied Chemical Engineering at Loughborough University. He is currently the Country Chairman of PanAfrican Energy, and former positions have included several ministerial posts, the last being Permanent Secretary at the Ministry of Lands, Housing, and Human Settlements Development between 2009 and 2013. As well as his current post, he is a Member of the Board of Directors of the National Housing Corporation.

How would you describe the current environment for foreign energy companies trying to operate in Tanzania?

If you consider the basics, Tanzania is in a relatively unexplored and underdeveloped region. It has considerable petroleum potential, as is evident from the gas that has already been discovered, and it has one of the fastest growing economies in Africa. At the same time, the strategic location of Tanzania is a huge bonus, and with adequate infrastructure it could become an economic gateway to Southern and Central Africa. That being said, we are of course in a tough neighborhood, as the past 50 years of the region's history have shown. But Tanzania stands out as being stable, which is of course a very positive attribute. The overall environment is therefore attractive in terms of the investment opportunities that exist, but it is challenging when it comes to dealing with the complicated processes for negotiating with the government and other local partners, obtaining the necessary permits and approvals, and dealing with the commercial and taxation issues and stakeholder relations once projects are up and running. A particularly challenging aspect of the investment environment recently has been TANESCO's inability to meet its payment obligations to private energy suppliers. This issue will hopefully be addressed by the government through the extensive restructuring and commercialization of the power sector that it has just launched. Another challenge is that even though the basic terms of petroleum exploration and development agreements are clear, the policy environment is still being defined. This makes the future value of oil and gas development investments difficult to project and thus enhances perceptions of risk. For example, the new Gas Act is expected to prescribe a gas industry structure that was not envisaged under the existing production sharing agreements.

How confident are you that the Gas Act, currently in its draft stage, will address most of the sector's major framework concerns?

It is difficult to describe how a shoe fits without wearing it first. Issues will definitely arise during the anticipated discussions about the Gas Act, in which stakeholders will seek to further safeguard their interests. Although the stakeholders have an overriding common interest, they nevertheless will have competing sub-interests. No doubt we will see stakeholders attempting to have the Gas Act crafted so that their interests and concerns are addressed. It will be difficult to completely satisfy any stakeholder or group. The key will be to strike a balance that everyone can live with, the overriding consideration being to facilitate the optimal, efficient development of the gas industry within the boundaries set by natural gas policy. Once we start implementing the Act, issues that the stakeholders had not foreseen will probably emerge, and that may require amendments to legislation or new regulations to iron those issues out.

How would you characterize PanAfrican Energy's (PAE's) role in the NNGIP?

The company's involvement will be simply as a supplier of some of the gas that will be needed in order to bring the new NNGIP pipeline into operation. PAE is expected to provide up to 100 million cubic feet per day to the NNGIP. However, production will have to be doubled to 200 million cubic feet per day. As I mentioned earlier, we are currently in negotiations with the Ministry of Energy and Minerals and TPDC about the gas price and other terms that will enable PAE to secure financing from the International Finance Corporation (IFC) to double gas production. We are talking about an initial investment of about $150 million in order to drill new wells, service some of the existing ones, and install additional infrastructure.

What is PAE's long-term future in the country?

Tanzania has and will continue to have many opportunities for energy sector investors. As long as those opportunities are assessed to make business sense, PAE's will consider pursuing them. The company took nearly a decade of hard work to earn the government's final approval to invest in Tanzania, and it has now been here for a decade producing gas reliably, with no major problems or incidents, generating most of the power in the national grid and for the largest industries in Dar es Salaam. We would obviously want to continue that way indefinitely.