The government of Tanzania is readying to amend the Model Production Sharing Agreements (MPSAs) of 2013 to loosen conditions in the oil and gas sector after Tanzania failed to sell any exploration block during the past 9 years.
The changes will take into consideration the global trends in trade, fuel prices over the past decade and estimates for the next decade, the institutional changes in Tanzania and current legal system, including the Petroleum Act of 2015, which is said to be unfavourable to investors.
MPSAs give a clear picture of what the terms and conditions offered by a particular government, especially how the oil and gas investor will share revenue with the government.
They play a key role in either convincing the investors to enter into Production Sharing Agreements (PSAs) for exploring and developing the gas blocks, or disappointing the prospective investors.
During the 9 years of the current MPSAs, Tanzania has not sold any block even as the government put 8 blocks in the deep sea and Lake Tanganyika up for auction.
The director general of the Petroleum Upstream Regulatory Authority (PURA), Mr Charles Sangweni, said the government was conducting reviews under a consultant who was expected to start work this June, and complete the work in February 2023, before announcing the intention to auction more than 20 blocks.
“We are reviewing the MPSAs of 2013 because they had stringent conditions for investors,” said Mr Sangweni.
“The consultant has been found, although contract is not yet signed. We hope the consultant will start working towards the end of this June and he will do that within six months,” he said.
According to the Tanzania Petroleum Development Corporation (TPDC), oil and gas exploration activities in the country began in 1952 when the British Petroleum (BP) and the Royal Dutch Shell launched an oil exploration in all the coastal areas.
From that period to date, a total of 96 wells have been drilled, while 44 of them were discovered to have gas and 52 wells had no gas.
According to PURA, MPSAs are amended in accordance with changes in the sector. In 1989 the government saw the 1st use of MPSA, followed by others in 1995, 2004, 2008 and the 2013 MPSA which will be amended in 2023.
Tanzania has discovered natural gas reserve estimated at 57.54 trillion cubic feet, with the government feeling pride to save more than Sh16 trillion in foreign exchange through the use of natural gas to produce electricity and in factories between 2004 and 2020.