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Localizing Tanzania’s Gas Sector: Determining Optimal Policies for an Emerging Producer

23 August 2017
Author
Thomas Scurfield, Nicola Woodroffe, Silas Olan'g
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Localizing Tanzania’s Gas Sector: Determining Optimal Policies for an Emerging Producer (PDF 262.5 KB)
Topics
Economic diversification, Legislation and regulation, Measurement of environmental and social impacts
Countries
Tanzania
Stakeholders
Civil society actors, Government officials, Parliaments and political parties, Private sector
Precepts
P1 P5 P10 What are Natural Resource Charter precepts?
Social Sharing

This brief is one of a series analyzing the Tanzanian government’s approach to managing the country’s offshore natural gas sector. Other briefs in the series include “Negotiating Tanzania’s Gas Future” and “Uncertain Potential: Managing Tanzania’s Gas Revenues.”

Tanzania’s gas sector is at a crucial juncture. A game-changing liquefied natural gas project is not yet guaranteed to happen. It remains unclear how much Tanzanians will actually benefit from the country’s natural gas reserves.

Whether the sector’s potential is realized will depend in large part on Tanzania’s ability to design good policies and implement them effectively. One component of that policy framework is a local content strategy the government is in the process of developing. The Petroleum (Local Content) Regulations 2017 were published in early May and will come into full effect in early November. We analyze Tanzania’s evolving local content strategy in this brief.

We note that:

  • It is uncertain whether Tanzania has gas reserves that justify investing in the development of highly technical skills or the production of specialized goods and services of use only to gas operations.
  • The legally binding definition of a “local company” allows an 85 percent foreign-controlled joint venture to qualify as a local company.
  • A baseline study of local capacity has yet to take place—there is a risk of setting unrealistic requirements that could lower government revenues, deter investment and encourage non-compliance.
  • It is not clear how the different government institutions involved in developing and implementing the strategy will coordinate and delineate roles and responsibilities.
  • The policy and legal framework has few explicit transparency provisions and it is unclear what information is publically available.

We recommend that the government:

  • Reviews the regulations to ensure they are based on two key elements: impact and feasibility.
  • Aligns the local content strategy with the broader national development agenda.
  • Strengthens definitions of “local” companies, goods and services.
  • Prioritizes the collection of baseline information on local capacity and uses this information to inform the revisiting of mandatory targets.
  • Further develops mechanisms for interagency coordination.
  • Improves provisions for making information available to the public.

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