Page 57: of Offshore Engineer Magazine (Jul/Aug 2014)

56 58

East Africa taxation law. Tanzania also developed a LNG train development … and provides natural gas policy, and is developing a encouragement for a potential third LNG natural gas bill. train.” “The natural gas bill will also likely June’s activity alone might make a case refect Tanzania’s desire to derive more for the third train. On 5 June, BG Group’s revenue and beneft from its gas resource. Taachui-1 STI1 well in Block 1 discov-

This can be done through increased ered 1Tcf mean recoverable resources. state participation in gas projects, higher On 18 June, Statoil struck gas in its Piri taxation rates and more stringent local 1 wildcat well in Block 2, discovering an content policies,” Okwi said. additional 2-3Tcf. Statoil now has six dis-

There is another consideration beyond coveries to date ranging up to 20Tcf. IHS whether the new model PSA is too strin- estimates Block 2’s recoverable reserves gent, Olsen says. Gas takes much longer at 13.6Tcf. to monetize than oil, and companies are A spokesperson for Statoil said that cutting costs across the board. And, in the potential LNG development would general, the deeper the water, the deeper be onshore, and that all companies in the impact on a budget. blocks 1 through 4 – meaning Statoil, “I do not believe the PSA itself fright- ExxonMobil, BG Group, Ophir Energy, ens off potential frms, but the terms may and Pavilion Energy – submitted a joint have become too ambitious, [for example] proposal to the Tanzanian government. to the limited response to the last bidding “The fve international oil compa- round. Gas is a long term play,” Olsen nies have been working closely with said. “The economics of gas are differ- TPDC and the Ministry of Energy and

Minerals on various steps and processes that are needed before the site is announced,” Statoil’s spokesperson said.

The government, with its eyes set on exports, model PSA 2013, fscally is striving to work with tightened up the terms in an operators and place infra- to 5Tcf in 2011, culminating in the attempt to capitalize on per- structure as quickly as 31.6Tcf the country is estimated to have ceived boom money. Harriet possible – a tough propo- today. IHS placed deepwater recoverable Okwi, IHS senior analyst sition when the country reserves at an estimated 29.7Tcf. and consultant – Africa oil has its own energy needs and gas points to a lack of to worry about. The

Regulations exploration history, limited 180MMcf/d produced by

According to the TPDC, it incorporated available data for Blocks Tanzania’s two existing in 1969, when the country had one lone 5A and 5B, and the fact that felds, Mnazi Bay and concession holder – Italy’s Agip (now a Blocks 4A and 4B were areas Songo Songo, go to the subsidiary of Eni). relinquished by BG and country’s own domestic

Drillship ofshore Tanzania. Discoverer Americas “The Italian company, then a national Ophir as contributing factors needs, which Kolly calls a

Photo from Paul Joynson-Hicks / AP / Statoil oil company, walked away. It did not to this “muted” response. “huge defciency in power see the economic potential,” said Willy “I believe the terms that came with the ent from oil and it may keep companies generation and power access.” The World

Olsen, INTSOK senior advisor and licensing round largely contributed to away. It can take years to realize value. Bank states that only 15% of the local former advisor to the CEO of Statoil. the limited investor interest. The 2013 “Tanzania is unlikely to see LNG from population has access to electricity.

“Today’s major players are less likely to MPSA reduced the contractor share of the deepwater before 2020-2022. It could Like most countries with newly-dis- walk away, but they will need terms that proft, raised the royalty rate and lowered be even later…The world has been full of covered resources, Tanzania is rushing to are globally competitive to make the fnal the cost recovery ceiling. The MPSA ‘stranded gas.’ Let’s hope East Africa can get its regulations and infrastructure up investment decisions.” also introduced signature and production get its gas to the markets.” to speed with the pace of new discover-

While the Tanzanian government tried bonuses, stricter exploration, and local In addition, these factors could inhibit ies. Kolly acknowledged that Tanzania to push legislation through at the speed content requirements and capital gains smaller players from participating. was years away from exporting but of exploration, the model PSA might have taxes on transactions.” Tanzania still requires signifcant invest- remained optimistic. hindered the licensing round rather than Offshore royalty rates were raised 2% ment in infrastructure, and this is only “Activity is really booming and they bolstered it. from the 2008 model PSA to 7.5%. There beginning to be addressed. Statoil and BG (the government) are working hard,” he “It signifcantly degraded its attractive- is a minimum signature bonus payment Group announced plans in March 2013 to said. “They want to do well, not repro- ness through its new terms,” Kolly said, of US$2.5 million and a production construct a US$10 billion, two-train LNG ducing errors done in the past by more calling the model PSA “too aggressive.” bonus of at least $5 million, payable plant. In its YE 2013 results statement, mature countries like Nigeria – espe-

Kolly said that the government made when production commences. In regards released March 2014, Ophir said its most cially, they want to maximize returns for exploration and production fnancially to taxation, any assignment or transfer recent discoveries, which totaled 15.7Tcf, local people and push for local content,” appealing in 2004, and now, with this under the PSA is subject to the relevant “will underpin a minimum two 5mtpa he said. oedigital.com July 2014 | OE 59 058_OE0714_Tanzania.indd 59 6/20/14 12:54 PM