SPEECH BY HON. WILLIAM M. NGELEJA (MP), MINISTER FOR ENERGY
AND MINERALS DURING THE SIGNING CEREMONY OF PETROBRAS, HERITAGE AND MOTHERLAND PRODUCTION SHARING AGREEMENTS
ON 24TH JANUARY, 2012
Your Excellency Ambassador of Brazil, Francisco Carlos Soares Luz;
The Chairman of the TPDC Board of Directors, Michael P. Mwanda;
The Managing Director of TPDC, Mr. Yona S. M. Killagane;
The General Manager of Petrobras Tanzania Limited, Mr. Samuel Miranda;
The General Manager of Heritage Rukwa (Tz) Ltd Tanzania Limited, Mr. Julian Heawood;
The General Manager of Motherland Industries Ltd, Mr. V.K. Sood;
The Acting Commissioner for Energy and Petroleum Affairs, Mr. Theophilo Bwakea;
Ladies and Gentlemen,
Today the Government of the United Republic of Tanzania through the Ministry of Energy & Minerals and TPDC is signing three Production Sharing Agreements (PSAs) with three Oil Exploration Companies, namely Petrobras Tanzania Ltd (Petrobras), Heritage Rukwa (TZ) Limited (Heritage) and Motherland Industries Ltd (Motherland). This is a testimony to the fact that TPDC and the Ministry continue to successfully attract further investment in petroleum upstream which is important in the development of the energy sector and our economy as a whole.
The term of the PSAs is eleven (11) years divided into three sub-periods namely: Initial Exploration Period of 4 Years; First Extension Period of 4 Years and the Second Extension Period of 3 Years. The PSAs provide an option for back-off at each stage and a mandatory surrender of 50% at the end of each period.
Today’s occasion of signing three PSAs is an important milestone towards exploration of hydrocarbons in Tanzania and East Africa at large. The Petrobras PSA is for hydrocarbon exploration in Block-8 deep offshore Tanzania, the Heritage PSA is for exploration in the Kyela Basin (northern and onshore portion of Lake Nyasa) and the Motherland PSA is for exploration in the Malagarasi Basin North West part of the country.
For Petrobas and Tanzania this is the beginning of another opportunity to explore the under-explored deep sea basins offshore Tanzania. For Heritage, Motherland and Tanzania, this opens another Chapter of exploration for hydrocarbons in the Inland Rift Basins. May I remind you of recent hydrocarbon discoveries made in analog deep-sea and inland rift basins in Angola, Mozambique, Ghana, Uganda and Sudan. These results have brought high optimism to our countries that have similar geology. The PSAs we are going to sign today is a testimony to that effect.
I have been informed that all three PSAs have been negotiated in good faith. In case of discovery, the Agreements offer a win-win situation for all parties. This is a very important aspect for Tanzania and exploration companies as well. A balanced Agreement to all Parties, the Nation and investors, rewards and smoothens operations throughout the life of exploitation, development and exploitation of the field in the case of a discovery.
In the PSA, each Party that is signing today has obligations to fulfill. I wish to assure all of you that the Government and TPDC are committed to fully cooperate with all parties in fulfilling the agreed terms of these PSAs. The Government of Tanzania adheres to the rule of law and operates in a transparent manner. Therefore, feel free to consult TPDC and other respective authorities including my office for advice and facilitation. In the same manner the Government and TPDC expect you to fulfill your Work Program and Budget commitments as per PSA.
Ladies and Gentlemen, at this point I would like to stress the importance of local contents in the Oil Exploration and Production as stated in the Agreements. By Local contents implies use of Tanzanian goods and services as well as human resources. I wish to commend Petrobras and Heritage who have employed a good number of Tanzanians in their offices. However, in the rig operations the employment to indigenous is still to pick-up. I request all of us present here today to observe this and work together to change this trend. We would like to have a good number of Tanzanians working in the rigs as well.
I request the three companies signing today to give preference to the purchase of Tanzanian goods, services and materials provided such goods, services and materials are available with the right quantity and quality. This will be in line with the Government’s efforts of job creation and empowerment.
Ladies and Gentlemen, may I mention a little bit about environment and Mother Nature. We all know that poorly planned petroleum exploration and production activities may turn out to be detrimental to the land, water, animals and plants through pollution. Some of the negative effects of pollution are irreversible. We also know that Petroleum Resources are non renewable. It will be to our disadvantage and disadvantage of our future generations if we undertake poorly planned exploration activities that will pollute the environment and probably halt other economic activities. I insist that every one of us has a responsibility of ensuring that Petroleum activities are carried out in a sustainable and environmentally friendly manner. In addition we need to have contingent plans ahead in case of oil spills.
Ladies and Gentlemen, exploration for oil and gas is capital intensive, risky and takes a long time. Attracting risky capital is not an easy task. Delivery of such capital is not an easy task too. I am therefore delighted to witness signing of these three agreements with Petrobas, Heritage and Motherland today. These three PSAs bring the number of exploration licenses in Tanzania to twenty (28) and number of exploration companies operating in Tanzania to 18, the highest number since exploration of oil and gas started in the country in the 1950s and indeed in the whole of eastern African countries. Other companies that are currently exploring in Tanzania include:-
- Maurel et Prom of France exploring in Bigwa and Mafia;
- Ndovu Resources of Australia exploring in Nyuni, East of SongoSongo and Ruvuma Basin located in Mtwara and Lindi Regions;
- Pan African Energy of UK producing gas at the SongoSongo Island;
- Dominion Oil and Gas of UK exploring in Block No. 7 in the deep water;
- Petrodel Oil and Gas of UK exploring in Dar es Salaam platform and Latham;
- Afren of UK exploring in Tanga;
- Petrobras of Brazil exploring in the deep water Block 5 and 6;
- BG of UK and Ophir Energy Company of Australia exploring in the deep water blocks 1, 3 and 4;
- Statoil of Norway exploring in the deep water Block 2;
- Dodsal Resources of UAE exploring in the Ruvu Block;
- RAK GAS of UAE exploring at Pande, East of Kilwa;
- Beach Petroleum of Australia exploring in south Lake Tanganyika; and
- Hydrotanz of Mauritius exploring in North of Mnazi Bay.
Apart from the aforementioned companies, there are a number of companies inquiring to explore in the open acreages available in the country. The Government is committed to continue promoting exploration for oil and gas in the country. This being one of the main objectives of our National Energy Policy which aims at ensuring that the country taps a reliable supply of energy and energy services to all parts of the country at a least cost and with due regard to the environment.
In promoting exploration for oil and natural gas, the Government will ensure that the Production Sharing Terms are competitive enough to secure the Nation’s interests and provide adequate incentives to investors.
I therefore wish to take this opportunity to invite more companies both local and foreign to invest more in exploration for oil and natural gas, and establish service companies in the country as well as invest in other areas in the energy sector.
Ladies and Gentlemen, I would like to commend Petrobras, Heritage and Motherland for their decision to come to Tanzania as their destination of choice for investing in petroleum upstream activities. It is our hope that you will be good corporate citizens and that you will carry out your activities in accordance with good industry practice. We do expect that as part of your corporate responsibility you will assist the communities in your various Contract Areas whenever possible within manageable limits.
Once again, let me thank you all for taking your time to come to this great occasion.