Tanzania Outlines New Oil and Gas Production Terms

Tanzania Outlines New Oil and Gas Production Terms


NAIROBI, Nov 4 (Reuters) - Tanzania has introduced new production sharing agreement (PSA) terms that experts said toughen some of the conditions for energy firms seeking to explore and develop the east African nation's big gas prospects.

The "Model Production Sharing Agreement" document, published on Monday, detailed the bonus to be paid by firms to the state on signing a contract, specified capital gains tax obligations and outlined a new royalty structure that one expert said meant higher fees by contractors in some offshore areas.

East Africa has become one of the world's hottest new oil and gas provinces after a string of discoveries, and which producers hope to exploit to supply energy-hungry Asian markets. In Tanzania, several majors such as BG Group, Ophir Energy, Exxon Mobil and Statoil are at work.

Tanzania estimates it has more than 40 trillion cubic feet of gas and says this could rise five-fold over the next five years, putting it on a level with some Middle East producers.

But like other east African states, it is under pressure from its poor population to maximise returns and deliver benefits fast. It currently produces modest quantities mainly for use in power generation and industry.

"It's a significant toughening of the fiscal terms," Bill Page, energy and resources leader at Deloitte Consulting Tanzania, told Reuters of the new model agreement.

"They have also indicated that they will expect to see more extensive exploration work obligations in the initial periods of the PSA," he said.


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