Huge gas reserves have been found in Tanzania

Huge gas reserves have been found in Tanzania
The claims on Tanzanian oil and gas by different companies according to the map of Heritage Oil

Together with other natural resources the gas reserves will enable the country and its people to prosper. The realization of these dreams does, however, necessitate above all increased transparency of governance.

Gas was struck in Tanzania already in the 1970s but by that time the exploitation was not possible. Since early 2000 gas has been used for generation of electricity and today almost half of Tanzania´s modest 1000 MW generation is based on gas. The two gas repositories that are now being used could be sufficient for the growing national need: according to estimates they could triple the electricity generation for twenty years.

Increasing use of gas requires larger pipes for which China has promised to lend money. The one billion dollar gas pipe from Mtwara to Dar es Salaam should be ready by the end of this year but probably it will not be finished before spring 2013.

And much more is yet to come...
This is only a prelude to the discoveries by big international oil and gas companies.
Tansanian öljy- ja kaasuyhtiöiden omistukset Heritage Oilin mukaan.Picture: The claims on Tanzanian oil and gas by different companies according to the map of Heritage Oil

British Gas, Ophir, Petrobras, Shell, Exxon and Statoil have done off-shore test drilling in Tanzania and the preliminary discoveries are very promising. Even the most careful estimates on gas reserves show that Tanzania is one of the gas-richest countries in the world.

The production from newly found gas repositories will probably be entirely exported as the current national demand has already been satisfied. Exportation of natural gas requires building of a liquefaction plant. Building of such a plant would be the largest ever investment in Tanzania, an estimated 10–15 billion dollars, which would put even big mining investments in its shade. The investment would also produce plenty of jobs especially in the building phase. The launching of the liquefaction plant would increase Tanzania´s tax revenue annually by 3 billion USD which is 1.5 times the current donor support.

Probably several of such liquefaction plants will be built in Tanzania.

Will Tanzania become one of world´s richest countries?
Tanzania does not have only natural gas but also significant potential for hydropower. There are significant repositories of uranium, coal and a number of precious metals. At least Statoil is exploring oil in addition to gas.

Tanzania does have enough resources for developing to one of the world´s richest countries. The fatal question is nevertheless the sustainable and transparent governance of the natural resources.

Promises of natural resource wealth have given rise to well founded concerns in the press and among Non-Governmental Organizations and parliamentarians.

The common disease of natural resource rich developing countries, resource curse, is mentioned daily in the press together with the cautionary examples from Angola and Nigeria. In these countries the billions from natural resources do not benefit the life of average citizens.

Transparency is the key
Resource curse refers to the harmful consequence that natural resource revenues can have in the economic growth and societal development. In countries with plentiful natural resources the growth and public expenditure are often lower than in countries with little natural resources.

The possible causes – and consequences- include among others the overvaluation of the national currency, which can kill other production (so called Dutch disease), corruption and the lack of citizens´ interest in holding the government accountable which is caused by low taxes and scarcity of tax payers. Also indebtedness and excessive dependence on one product and its price on world market can be causes of resource curse.

The best way to avoid problems related to natural resources is the transparency in the governance of the sector, legislation that supports the transparency and national institutions that ensure the transparency. Right now the priority in Tanzania is the drafting of a national gas strategy: how are the industry and operators regulated, how many drilling permits will be granted and how will the gas and related revenues be used?

Source: - Merja Mäkelä and Juho Uusihakala

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