- Mining contracts to be made public.
- Oil and gas production-sharing agreements to be made public.
The secretive gold-mining contracts, oil and gas production-sharing agreements between the Tanzania government and multinationals will now be made public, the permanent secretary in the ministry of Energy and Minerals, Eliakim Maswi recently told a team of journalists in Dar Es Salaam .
He however said the contracts to be made public would be those made from now on, while those made in the past will continue to be confidential. The remarks were made as the nation, and prospective investors in the oil and gas industry in Tanzania, await the opening of tenders for allocation of exploration blocks this [last] October.
Tanzania is a member of the international Extractive Industry Transparency Initiative (EITI) and was obliged to make mining contracts and production sharing agreements public, but the government was also bound by the law to keep its word on past contracts, the Permanent Secretary said. A journalist had asked whether by becoming EITI compliant Tanzania was now duty bound to expose all mining contracts as well as oil and gas production sharing agreements. Maswi agreed with the view but insisted effects of this decision would not be backdated to include past contracts and agreements.
The permanent secretary made the remarks when he talked to journalists on a special project to study and report on the so-called extractive industry in Tanzania. The special project is funded by Tanzania Media Fund. Journalists had been granted a special get together with Ministry officials as part of the study program. The extractive industry encompasses all minerals, oil and gas, where mining contracts and production-sharing agreements have been very secretive in the past.
Oil and gas exploration in Tanzania began in 1952. An Indian company discovered gas at Songo Songo in Mtwara in 1974 but the company decided the find was not profitable. More gas was discovered at Mnazi Bay in the same neighbourhood in the south eastern Tanzanian coast, but this find was also declared un-economic.The odds changed in 2004, however, when Songas, a Canadian company that operates in Tanzania decided the Songo songo gas field was economic and started pumping the gas to Dar es Salaam for industrial use in the production of electricity. More gas has since been discovered in Tanzania’s off-shore blocks.
Tanzania is currently on the verge of a minerals boom, and an oil and gas boom, But it faces serious challenges in the area of transparency. The Permanent Secretary also identified the lack of local expertise to manage the boom as another major challenge in the industry.Tanzania began the liberalisation of the mining sector in the 1980s. At this time the substantial economic potential of the industry became apparent. Two key policy decisions set off a mining boom. One was the decision in the late 1980s to end the State Mining Company (STAMICO) monopoly of the sector, which allowed any Tanzanian to register a claim and sell minerals.
The second key policy became the liberalisation of currency controls, which gave permission to exporters to use their export proceeds as they wished—a decision which culminated in the floating of the currency in 1994. Foreign exchange proceeds could thus be used to finance imported consumer goods, equipment and spare parts, which had long been scarce. An immediate artisanal mining boom ensued, according to a USAID funded research report quoted in a Tanzania mining industry case study by the International Council on Mininig and Metals (ICM&M).
Two sub-groups responded to the liberalisation; one of local, artisanal and small-scale miners, the other of large multinationals. Artisanal and small-scale mining took off immediately. Large scale mining began with an exploration boom, which is still underway, according to ICM&M. The first new formal gold mine began production in late 1998, while another ten large gold mines became operational after 2002.
But the liberalized mining industry got immersed in a scandal in the mid-2000s when a mining agreement between the Tanzania government and the Canadian Gold mining multinational Barrick Gold signed a mining contract in a hotel in Europe. Critics lamented the contract should have been signed in a government office, arguing that contracts signed in strange places created room for corruption.
Gold mining in Tanzania is concentrated in three major areas which include the Lake zone gold fields (the south and eastern sides of Lake Victoria, up to the Kenya border). The most active sites in this area Geita, Bulyanhulu near Kahama, Irambe, Sekenke, Kilima Fedha, Serengeti, Nyabegena, Buzroba, Matinje, Musoma and Tarime (north Mara). There is also gold in the LupaTinga-Tinga area in Chunya District of Mbeya Region and an area near the Zambia border. The most active mining sites in Chunya are Saza, Makongolosi, Ntumbi, Chunya, Lupa-Sira, Sengambi, Mabadaga and Iyai. Mpanda district has six active mining areas: D-reef, Magamba, Kapanda, Kitisunga, Ibindi, and Sikitiko. New sites have been found at Lukalasi in Mbinga district, Kitowero in Liwale district and Iluma in Manyoni district.
A lecturer on resource management from Accra, Ghana, Dr. Mohammed Amin Adam visited Dar es Salaam last week. Talking to journalists at the Tanzania Media Fund conference hall last Tuesday, the lecturer said a resource rich country such as Tanzania needed to be very transparent in itsminerals extraction contracts to avert political chaos in what is called a resource curse. Mineral resources are finite. When they are taken out of the ground, they do not go back. They get depleted, and so proper management plans must be put in place to show how future generations will benefit from the resources a nation has decided to extract. Those responsible for the extraction of the resources must therefore be transparent and held responsible for decisions they make.
Tanzania is also endowed with huge gas deposits while oil is still being sought with indications it may be found. Other deposits include diamonds and gem stones. Major diamond mining areas are in northern Tanzania, around Shinyanga, Mwananga, Mabuki and Mwanza, but the Williamson Diamond Mine at Mwadui is the only formal mining operation, with exports of $17 million in 1998. Diamonds worth an estimated $13 million to $16 million per year are produced by artisanal miners and exported, mostly through informal channels. Commercially exploitable deposits of coloured gems tend to be found on the eastern side of the Rift Valley. They were originally discovered and exploited by individuals and small companies. They are now the subject of a mining rush comparable only to that of Brazil in the 1980s.
Tanzania also hosts two gemstones unique in the world, Tanzanite and green garnet. The only known deposit of Tanzanite in the world is near Merelani, in northern Tanzania between Arusha and Moshi. Tanzanite is a brilliant but slightly brittle gemstone ranging in colour from pale violet to deep blue-violet.
The oil and gas sector is even more bullish. “It is expected that Tanzania’s natural gas resources will rise to 200 trillion cubic feet after the next two years,” the ministry of energy and minerals recently said in a statement. Discoveries in offshore Tanzania and Mozambique’s waters have led to predictions the region could become the world’s third-largest exporter of natural gas, with the country strategically located for exports to Asia.
Tanzania had previously estimated to have 43.1 trillion cubic feet of recoverable natural gas reserves, most of it found offshore south-east of the country. The minister for energy and minerals, Sospeter Muhongo, announced in May exploration companies planned to drill 17 new wells in the country during the 2013/14 (July-June) fiscal year at a cost of some $680 million. Tanzania has so far licensed 16 international energy companies to search for oil and gas. These include the British gas company, BG Group, Norway’s state owned corporation Statoil, Brazil’s Petrobras, and Royal Dutch Shell and Exxon Mobil Corp.
The government is this October offering another seven deep offshore blocks and one onshore block for oil and gas exploration, with the potential of making more high-impact gas finds. The state owned Tanzania Petroleum Development Corpoation (TPDC) has in the past distributed to potential investors in the oil and gas sector a map which shows four areas of the country producing oil seeps.
A rock engineer with TPDC, Dr.Nico Mliga had told this reporter at one time, that oil seeps were usually a good sign there may be oil somewhere in the neighbourhood of the seeps. Oil seeps have been seen at the areas of Msimbati in Mtwara, an Area known as Wingayongo south of Dar es Salaam, at an area north of Lake Tanganyika, and on the island of Pemba. Earlier drills brought positive indications from holes at Mandawa in Lindi, Makarawe in Tanga, at hole number 5 in Pemba and at hole number 1 on Mafia island. Experts say oil migrates underground. A seep may be seen at point A, but the oil may have migrated to another location in the neighbourhood.
But Tanzania has one other problem: “The experts we have in this area (oil and gas) are very few,” the permanent secretary told journalists at the Ministry of Energy and Minerals last Tuesday. “I have only one engineer here at the ministry,” he said. “And there are only two others at TPDC.” To reduce the magnitude of this problem, Tanzania has embarked on a massive training compaign, some of which is being done with the help of companies active in Tanzania, the Permanent Secretary said.
The Chinese company building the pipeline from Mtwara to Dar es Salaam has agreed to train 180 Tanzanians to prepare them for the management of the pipeline when Chinese experts leave in two years, Maswi said. He was now only waiting for a permit from the Public service department to issue the Chinese scholarships to diserving young people. The ministry will pick only the young and fresh who have not been polluted by corruption, he said. The Brazilian Company Petro Bras has agreed to train 20 Tanzanians. Another 30 Tanzanians are already in Norway to study oil and gas while 10 are studying Petroleum Engineering at the University of Dodoma in central Tanzania. Two people from the Attorney General’s chambers and five others from his ministry have already been sent away to study oil and Gas Law.