The signing ceremony of share sale and operation agreements for the Mnazi Bay natural gas block held on February 3, 2024, was purposed to celebrate the feats in gas extraction, where a win-win situation was attained between investors and the government. On Saturday, the Tanzania Petroleum Development Corporation (TPDC) signed an agreement with the Maurel & Prom company to operate the block in Mtwara Region jointly.
In Dodoma, at the Chamwino State House, and under the observation of President Dr Samia Suluhu Hassan, a pivotal agreement was concluded between two key stakeholders in the Mnazi Bay venture. This development followed their acquisition of additional shares from the former stakeholder, Wentworth Company.
The arrangement notably increases the TPDC’s ownership in Mnazi Bay to 40%, a significant rise from the prior 20%, leaving Maurel & Prom with a 60% stake.
The agreement outlines a commitment for the 2024 fiscal year to enhance natural gas production. This includes drilling two new wells and installing an advanced pressure system to bolster the supply to meet the country’s growing natural gas demands.
Still, the information shared left a lot of quizzes unanswered. This made me revisit the issues raised and dissect why too many loose ends were untied.
The Mnazi Bay Development Area is located onshore in the Mtwara region of Southern Tanzania, approximately 410 km south of Dar es Salaam. It covers an area of 756 km2.
The Mnazi Bay area is recognized for its substantial natural gas reserves, estimated at around 641 billion cubic feet. With a daily output and supply of about 120 million cubic feet of gas, the primary recipient of this energy resource is the Tanzania Electric Supply Company Limited (TANESCO), the largest consumer.
READ RELATED: A Strategic Approach: Is Tanzania’s Gas Reservoir the Answer to its Energy Needs?
Before the agreement, the asset was operated by Maurel & Prom, holding a 48.06% stake; the Tanzania Petroleum Development Corporation (TPDC), holding 20%; and Wentworth Resources, holding 31.94% as joint venture partners under the Mnazi Bay Production Sharing Agreement.
The disposal of Wentworth Resources to the TPDC and another investor who swooped the remaining 11.94% has raised many questions without satisfactory answers.
From the contributions of senior politicians, we learned that the Mnazi Bay cost USD 550 million to cover research and development costs. One would have expected an investor such as Wentworth Resources, who, for one reason or another, has opted to get out of that business, would at least recoup his capital costs, amounting to around USD 175 million. Still, the shares were disposed of at around USD 135 million. The investor took a loss of around USD 40 million, which raises many flags.
Usually, when a gas project generates profit like Mnazi Bay, the value of shares shoots up because of the expectation of generating profits. In this case, that common sense seemed not to have been observed. The investor was willing to absorb a loss of at least USD 40 million that failed to add up. Why should this investor develop cold feet and accept a colossal failure when the goose has begun laying golden eggs?
Could the investor run into financial distress that he chose to cut his losses, or is there another explanation? Mineral and gas extraction licences have been avenues for grand corruption, and this investment cannot escape scrutiny in that direction. If, for instance, a senior politician took a massive cut as a precondition for issuing natural gas exploration and exploitation licences, it may mean he, too, was an investor who put influence peddling as his capital.
He greased the process with his political clout that pushed the deal to the finishing line, explaining why he was apportioned 31.94% of the value of the project investment. Such a scenario, too, may explain why he is recouping the market value of his assets. Again, we must caution this is a mere speculative consideration in an attempt to understand why the official figures stated make little sense.
The actual costs of project investment can not be independently verified. So, it is the investor who says that the cost of the project was USD 550 million. The investor has a reason and a motive to gazumping the project costs. One benefit could be being issued with the status of a preferred investor pampered with tax exemptions to enjoy.
However, project costs are used to ask for bank loans. Hiked project costs justify a massive chunk of loan from a bank that may be used to service other unrelated loans and expenses. So, the departing investor may have quoted the right price since he has subtracted the lies in the project costs. This angle makes plenty of sense than the previous assessment.
Another area is why TPDC did not buy all 31.94% shares. Which criteria were used to limit to 20% of claims, and why not own 51.94% of the company shares that would have allowed Tanzanians to have a significant say in company decisions? It is a concern that was not addressed at that congratulatory party.
Why was another minor investor brought in, owning 11.94%? What was this investor bringing to the high table to justify our TPDC not keeping the whole cake home? Our politicians were least forthcoming on that, raising red flags that the undertow may be stronger than they are willing to admit.
Perhaps the area that elicited much anger and frustration is our politicians’ attitude towards locals. Their attitude was condescending and aloof at the plight of people experiencing poverty. Each politician who had an opportunity to air their views applauded a health centre that will be erected to benefit neighbouring communities.
Those in Songo Songo were told to rest assured of a boat that sounded like a pontoon to handle their marine crossing challenges. Such philanthropic gestures hardly overturn the poverty in those areas despite offering some form of relief. They are not game-changers by any stretch of the imagination.
Also Read: TPDC & TANESCO Collaboration: A Sustainable Powerhouse for Tanzania’s Future.
To add salt to the injury, politicians urged investors to offer menial jobs to the locals, raising serious questions: why do we heavily invest in education if all we can hope for is basement jobs? Are we not good enough to take top positions? Why do Asian countries trust their people despite lagging in technology and experience for many decades?
Technology and experience are acquisitions available to whoever values them; unless we perceive ourselves as giants, we shall be seen as grasshoppers in our backyard because we have a leadership that cannot dream of a better Tanzania for everybody.
There was also a talk of piping gas to neighbouring countries while our villages do not have piped gas into their homes. The conservation of forests is urged as a desired goal. Still, every effort is taken to ensure that the exploitation of trees as a chief domestic energy source goes uninterrupted. Nobody talked about removing taxes from natural gas to boost domestic consumption to wean wood and charcoal users from deforestation.
Again, no politician urged piping rural and urban houses with gas. There was an overemphasis on pipe gad to industries to boost productivity, job creation and revenue, but nobody remembered a petite guy needed to power their home with gas.
Gas tanks are not cheap and have enriched intermediaries at the expense of the dwindling incomes of the weak members of society. Gas tanks cost time, transport and storage to access them. Piped gas into our homes will do away with these economically debilitating factors.
There was a talk of powering our vehicles with gas, which is laudable, but unless there is clarity on the proliferation of natural gas stations across the country, such nobler efforts may not amount to much. What is the use of owning a natural gas-powered vehicle when gas stations are far and between? Makes no sense at all.
Unsurprisingly, no politician said anything about the implications of selling gad to the EU. What percentage of natural gas will be liquefied and packed in ships heading to Europe? The impression being cultivated was that all the extracted gas would be used to cater to African demand, which is not the gospel truth. A massive chunk of gas will power European factories and homes at our expense.
While domestic power generation was discussed, figures cited a mere 600 MW generated from natural gas. We ought to be ashamed of ourselves. For the trillions of cubic metres discovered in our lands, one should have expected at least 5 gigawatts to be generated locally, but a percentage of 60 -70% of our local demand embellished as an achievement was risible.
We deserve better. Local demand is much higher but constrained by a lack of reliable power. So, let’s stop limiting ourselves with the challenges imposed by our lack of ideas, motivation and ambition.
Last, we are concerned about placing all our cards in natural gas while we have no feasible plan to convert waste into energy and gas to power our homes and businesses. Most cities are eyesores because we have not attached commercial value to waste disposal. Countries such as Sri Lanka have waste disposal systems that generate permanent jobs and living incomes for the participants and have assisted in cleaning up their cities.
What are we waiting for to adopt friendly technologies to ensure our cities are squeaky clean while putting our youths in a secure job market? Instead of urging them to self-employ, we will be setting up tax exemptions that will attract investors to think seriously about placing their money where their mouth is.
