DEVELOPING A LEGAL FRAMEWORK FOR TANZANIA’S NATURAL GAS SECTOR
By Juvenalis Ngowi
The exploration of oil and gas in Tanzania started way back in 1952. Nothing was discovered until 22 years later when the first natural gas discovery was made in 1974 at Songo Songo island, located at Lindi region. This was followed by another discovery at Mnazi Bay in 1983 and by 2012 about 8 trillion cubic feet of natural gas had been discovered at Songo Songo, Mnazi Bay, Mkuranga, Kiliwani North and Ntorya.
Despite the first discovery having been made in 1974, Tanzania has no policy for natural gas. It is only in October, 2012 that the first draft of the policy was prepared. It is also important to note that there is no specific legislation for natural gas yet. The legislation that is currently in force currently is the Petroleum (Exploration and Production) Act which was enacted in 1980. However, there is a draft legislation of the Gas Bill, 2009. This article will attempt to show some relevant areas which should be covered by the policy and the Act.
The draft policy acknowledges that the existing legal and regulatory frame work for the energy sector does not comprehensively address the governance of the natural gas industry. The policy requires establishment of a legal and regulatory framework for midstream and downstream activities.
The policy suggests a number of issues which should be addressed within the legal and regulatory framework. These issues include security of supply of gas to the domestic market, establishment of an appropriate regulatory authority for the natural gas industry and development of appropriate standards for the natural gas industry based on internationally acceptable standards.
The issues addressed by the policy particularly on the legal and regulatory framework is of great importance considering that Tanzania does not have specific legislation dealing with natural gas. The Petroleum Act (Exploration and Production) Act does not specifically provide for natural gas although the Act defines petroleum in such a manner that gas is inclusive. This treatment is not sufficient for development of gas exploration and production. The importance of having a specific legislation dealing with gas is that the specific legislation can address the increased activities within the natural gas industry in details. Nonetheless, the policy positively identifies this deficiency within the existing legislation hence the need to enact specific legislation to deal with the situation.
As pointed out, there is a draft Gas Bill that has been in place since 2009. However, this is somehow unusual since the policy ought to have been first established and then the legislation enacted to give that policy force of law. Contrary to the normal procedures, the intended gas legislation was drafted first followed by the policy. Be as it may, there are chances to amend the draft gas legislation before the same is enacted into an Act of Parliament. Under the situation, the draft Gas Bill must be redrafted after the policy has been passed so as to address the recommendations made in the policy.
One of the most important areas that the new gas legislation should address is the establishment of the authority that will be responsible for regulating the natural gas industry. There should be a clear demarcation of the authority regulating gas industries and the activities of the Tanzania Petroleum Development Corporation (TPDC) which presently acts as the regulator. Under section 3 of theEnergy and Water Utilities Regulatory Authority Act (Act No. 11 of 2001), natural gas transmission and distribution falls under the sector regulated by EWURA. However, the EWURA appears to have no power to regulate upstream activities which must be well regulated.
The Gas Act should address this situation clearly. There is a need to revisit TPDC’s role within the sector to ensure that we do not have two different entities with parallel roles in the regulation of the gas industry whether directly or by implication. Another important aspect which the new legislation must deal with is to ensure that Tanzanians are placed in a position to benefit from the natural gas industry. Although this is well stated in the draft policy, it does not guarantee that it will be taken care of in the legislation to be enacted. Enactment of the Gas Act will obviously necessitate the amendment of the Petroleum (Exploration and Production) Act and the legislation establishing the TPDC.
Under the existing legal regime the TPDC holds interest in any undertaking, enterprises or projects related to exploration and production of petroleum. In enacting new legislation, there should be such protection to ensure that Tanzanians benefit in the production of gas either by making it mandatory for government to hold shares in any project be it through TPDC or any other entity which may be established, or such other mechanism as may be necessary to ensure involvement of Tanzanians in the industry. Other areas which the new gas legislation should cover are the issue of compensations.
With the experience that Tanzania has garnered from the mining sector, it is imperative to clearly provide for responsibility for compensation of those who will be affected directly by activities of exploration, production and distribution of natural gas. This issue covers land which is the major source of livelihood of majority of Tanzanians. It is unfortunate that land disputes have greatly been politicized and cause unnecessary hostile environment between investors and the local population. A well drafted legislation may arrest the situation beforehand.