Tanzania New Natural Gas Contract Ups Government Benefit

The government and an oil and gas company in November signed a new natural gas agreement which will see the government taking up to 75 % of the economic benefits.

Production Sharing Agreement, (PAS) involves the development of Ruvuma block where the operator, ARA Petroleum Tanzania Ltd that originates from Oman has discovered natural gas.

Energy minister January Makamba described the contract as historic considering the fact that it’s the 1st in 12 years, and has increased government benefits to 75% from 68%.

Tanzania Petroleum Development Corporation’s (TPDC) national oil company holds 15% participating interest.

Mr Makamba said the participating interest, profit share, royalty and taxes, as well as levies will constitute the 75% economic benefits.

“This is a historic moment after 12 years of silence. What I am asking, is for the TPDC and investors to ensure that the implementation of the gas project goes at high speed because all the exploration activities are already done. We want at least after 12-18 months, the gas should start flowing,” said Mr Makamba.

Tanzania has so far discovered over 57 trillion cubic feet of natural gas in both offshore and onshore. This block has the confirmed resource of 1.6 trillion cubic feet but up to now, 466 billion cubic feet were discovered.

Mr January Makamba said that during the signing ceremony between the government, TPDC and the ARA Petroleum Tanzania Ltd that the move provided confidence to other investors that the oil/gas exploration has started again.

Furthermore, he said for the 1st time under PSA, the government will earn huge as compared to previous contracts, adding it will also provide huge employment opportunities to Tanzanians.

“This project goes in line with plans of the government to revive the Liquefied Natural Gas (LNG) negotiation which is ongoing in Arusha, which will soon be concluded,” he noted.

Briefing the history, TPDC Director General Dr James Mataragio said the Ruvuma PSA goes back to 2005 when the agreement was signed by 3 parties, the government, and TPDC and Ndovu resources. In 2020 the company farmed out its 50% share to ARA petroleum limited. He said at that time the consortium drilled 2 exploration wells, Ntorya1 and Ntorya 2 and discovered 466 billion cubic feet of natural gas.

“This company is now planning to drill at least 8 exploration and the development of the wells is anticipated to start next year,” he said Dr Mataragio added that the Ruvuma shareholders are expecting to invest approximately $500 million for the development and production of the Ntorya gas field, adding that as of this year, the Oman company ARA petroleum has invested an audited amount of $52 million in the project.

In addition to that, he said the current production of the natural gas from onshore fields stands at 230 mmscfd, whereby over 80 % of it goes into power generation, and the rest is consumed in industries, household and Compressed Natural Gas for vehicles.

“We will continue to work together with the company to complete the work obligations including acquisition of way leave, construction of a 35km pipeline from Ntorya to Madimba gas plant with the aim of accomplishing the development of gas as soon as possible,” he stressed.

For his part, ARA Petroleum Tanzania Ltd, general manager Mr Erhan Saygi said the agreement is the first step of a long way journey in the development of the Ruvuma block as a gas field. “While we are continuing our efforts to further explore and appraise the gas discovery, we are mentally preparing ourselves for the next stage project which is the development of this field in a safe, cost effective, but in a rapid fashion,” he said.

According to him, Tanzania has a growing demand for energy and the Ruvuma block will fuel the growth of the country’s economy.
Not only providing energy providing jobs and significant economic activity adding wealth to the nation and the people of Tanzania.”

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