Tanzania: Why Perceptions Audit On Mining Is Timely

April 23, 2012 (allAfrica) -- A NEW audit designed to gauge how the public perceives the contribution of the mining sector to the economy, launched by the Tanzanian Chamber of Minerals and Energy (TCME) is timely.

Joseph Kahama

It will seek for the opinions of key groups and individuals on the Tanzanian mining industry and its impact on the economy, communities and the environment.

The first perception audit is amongst its members, industry stakeholders and other interested parties and the information collected will be used to shape the Chamber future communication and engagement activities. The Chairman of the TCME, Mr Joseph Kahama said the perception audit is essential because the mining sector is an integral part of the Tanzanian economy and will continue to be for a considerable period of time.

"By regularly interacting with key stakeholders like politicians, civilsociety groups, industry players and the general public, through tools such as this perception audit, the TCME is ensuring it plays its part in creating a sustainable mining industry in Tanzania," said Mr Kahama.

The audit comes following statistics showing that foreign firms have invested a total of $5 billion between 1997 and 2010, minerals exports between 2009 and 2011 reaching $4.55 billion, and the government earning $196 million in taxes and royalties. However, total mineral exports between 2000 and 2011 are twice the total investments in the mining sector. The straightforward questionnaire covers a number of key areas which are affected by, and have an effect on the mining industry. He said anyone interested in sharing their views can easily do so via www. tcme.or.tz/questionaire on the TCME website, while Stakeholders can also share an offline version of the questionnaire, which is available from the TCME website.

Established in 1994, the TCME represents the interests of its members in the Tanzanian minerals sector. Acting as a voice for the industry the Chamber plays a pivotal role within the sector as a mediator between the mining investment community and key stakeholders, most notably the Government of Tanzania and the public. With close to 60 members, the Chamber represents the broadest spectrum of relevant players in the mining industry, including small-scale miners, service providers, and international mining companies of all sizes.

The members are involved in a range of activities within the mining sector from exploration to drilling and production. In the last 15 years, the contribution of the mining sector to the economy has grown, averaging at 7 per cent but poverty is said to remain high among the people living around minerals areas, despite the surge in mineral exports amounting to $10 billion in the last one and half a decade. This audit comes at a time when the country has also found vast cases of gas as a resource.

Already, the process towards a Gas law has scaled up with a Gas Act draft now already submitted to the chief Parliamentary draftsman (CPD) office. Documents seen by 'Sunday News' show that after this stage, it will be forwarded to Parliament for discussion in a move that signals preparing of the economy for recent more discoveries of the resource. In a Joint energy sector review document, it shows that in government efforts "to prepare the economy to handle huge foreign investment inflow" in gas production projects, the Ministry of Energy was asked to oversee drafting the law and strategy in their immediate action plans.

It also shows that by July this year, the ministry of energy and minerals, TANESCO, Rural Electrification Agency, and Tanzania Petroleum Development Corporation (TPDC) will formulate the natural gas strategy which will also involve the regulator in strategy formulation and preparation of master plan recommended. Responding to the government's move to legislate the sector, a university of Dar es Salaam energy economist Dr Lenny Kasonga hailed it yesterday, noting that the law would create a system in which competitive forces and independent regulation by EWURA would ensure that Tanzania's natural gas resources were developed in the most efficient manner possible.

"The central feature of such a law should be to identify those aspects of the natural gas sub-sector for competition, and introduce market forces to those aspects of the sub-sector," he said. Dr Kasonga said the Gas Act would stimulate investment in the sub-sector, which would in turn produce lower prices. It is understood the Gas Act draft calls for competition where feasible, primarily in the production and supply of natural gas as a commodity and also promotes third party access to essential infrastructure.

In a letter he sent to the International Monetary Fund (IMF) in December, the minister for Finance Mustafa Mkulo said that to prepare the economy for major gas investments, the government was drafting a natural gas master plan as well as a gas and petroleum revenue management Bill. The Bill would cover the budget treatment of gas revenue. Also the tax regime would be reviewed to ensure adequate cover for the gas sector.

This would go hand in hand with the development of staff expertise in the TRA on tax issues associated with the development and exploitation of gas. And recently, a principal geologist at the staterun Tanzania Petroleum Development Corporation Meshack Kagya said the country will hold an oil exploration licensing round for 16 offshore blocks starting in September this year. Norwegian oil firm Statoil has said its gas discovery announced in February, the biggest ever made in the country, held up to 5 trillion cubic feet of gas, or about 891 million barrels of oil equivalent (boe) in proven reserves.

Preliminary exploration reports have also indicated the presence of oil in Mozambique. Similar results are expected in Tanzania soon.

Activities are increasing whereby this year about 23 wells will be drilled off Tanzania, Mozambique and Kenya almost double the number in 2011, according to research from Morgan Stanley. The reports for huge gas deposits have drawn the interest of the world's largest oil and gas exploration companies such as BP, Petrobras, Statoil, Exxon Mobil and Shell. Experts say Tanzania will be a focus of drilling this year.

Shell teamed up with Petrobras last October to explore Tanzania's coast. BP had been in talks on East Africa projects with Ophir. Ophir and its partner BG Group Plc have so far found about 4 trillion cubic feet of gas in Tanzania. Ophir, which is buying Dominion Petroleum Ltd, will be joined by Mubadala Oil & Gas of Abu Dhabi to explore Block 7 in Tanzania. The company plans to import LNG to meet the Persian Gulf nation's growing demand for gas. Statoil ASA, Norway's largest oil company plans to drill a well this year at an exploration block in Tanzania in partnership with Exxon Mobil.

Analysts say the amount of investment in gas exploration and infrastructure will run into billions of dollars. Petrobas and Ophir Energy Plc alone are spending close to $2 million (Sh3.1 billion) per day in Tanzania. Incentives Tanzanian government last June abolished the Value Added Tax on petroleum products imported to be used as fuel by gas and oil exploration companies.

Mozambique and Tanzania may eventually rival Qatar and Australia as the world's biggest suppliers of liquefied natural gas (LNG). The East African deposits found so far are large enough to justify construction of at least eight LNG production trains, according to estimates by the companies.