September 17, 2012 / 5:44 AM / 7 years ago

Tanzania orders review of all oil and gas exploration contracts

NAIROBI (Reuters) - Tanzania’s energy minister has ordered a review of all contracts with oil and gas exploration companies by November 30, saying some were not in the country’s interest and should be revoked, adding to measures already under way to overhaul the country’s energy policy, newspapers reported on Sunday.

An oil rig used in drilling at the Ngamia-1 well on Block 10BB, in the Lokichar basin, which is part of the East African Rift System, is seen in Turkana County, in this undated handout photograph. REUTERS/Tullow Oil plc/Handout

Earlier in September, state-run Tanzania Petroleum Development Corporation (TPDC) delayed a licensing round for nine deep-sea oil and gas blocks previously set for this month until a parliamentary vote on a new gas policy in October.

Tanzanian newspapers quoted Energy and Minerals Minister Sospeter Muhongo saying that the incoming board of the TPDC had until the end of November to complete the review of contracts.

“Some of the agreements are really shoddy and they need to be revoked,” Muhongo was quoted saying in the privately-owned Guardian on Sunday newspaper.

“I can’t tolerate agreements which are not in the country’s interest but they benefit a few individuals.”

Newspapers reported that the nine board members were handed bags containing the 26 existing production sharing agreements and told to start work right away.

East Africa has been a focus of hydrocarbon exploration after substantial deposits of crude oil were found in Uganda in 2006 and major gas reserves were discovered in Tanzania and Mozambique.

In June, Tanzania - which already uses some of its natural gas to produce electricity and to power industry - said it had nearly tripled its estimate of recoverable natural gas reserves to up to 28.74 trillion cubic feet (tcf) from 10 trillion following recent major discoveries.

Opposition lawmaker Zitto Kabwe has urged the government to impose a 10-year moratorium on issuing new licences.

Tanzania’s energy ministry has been in talks with the country’s largest gas producer - PanAfrican Energy, a unit of Toronto-listed Orca Exploration - over payment of $33 million.

A parliamentary investigation said last year that PanAfrican had denied TPDC a share of gas revenues, a finding that Orca strongly rejects.

Among other companies exploring in Tanzania are Norway’s Statoil, Ophir Energy and BG Group, which have all made significant offshore natural gas discoveries offshore.

Others include Canada’s Wentworth Resources, which along with its partners is building a 532 km gas pipeline from Mtwara in southern Tanzania to the commercial capital Dar es Salaam at a cost of $1.06 billion, expected to take 12-14 months to complete.

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