IMF deputy managing director and acting chairperson Naoyuki Shinohara

Tanzania has good prospects of becoming a major producer of natural gas by the end of a decade, according to the International Monetary Fund (IMF).

But, the Bretton Woods institution has warned that successful management of the future gas wealth remains critical. Following the Executive Board’s discussion on Tanzania, Deputy Managing Director and Acting Chair Naoyuki Shinohara stated:  “There could be large foreign direct investment inflows over the next five years, and a substantial increase in exports and government revenue beginning around 2020.

“The authorities are appropriately planning to review over the coming year the macroeconomic policies and institutions that are needed to meet this challenge.” The country has proven natural gas deposits of about seven trillion Cubic Feet (CF). It is estimated that Tanzania will confirm around 60 trillion CF of natural gas from the current seven trillion CF.

About 3.5 trillion CF of the reserves have already been commercialised with natural gas wells being drilled in Songo Songo and Mnazi Bay gas fields. Tanzania’s gas reserves border those of Mozambique in the Ruvuma basin where commercial natural gas reserves of about 800billion US dollar (1,280trn/-) have been discovered by Eni SpA and Anadarko Petroleum Corp.

To prepare the economy for major gas investments, the government is drafting a natural gas master plan as well as a gas and petroleum revenue management Bill. The Bill will cover the budget treatment of gas revenue. Also the tax regime will be reviewed to ensure adequate cover for the gas sector. This will go hand in hand with development of staff expertise in the Tanzania Revenue Authority (TRA) on tax issues associated with the development and exploitation of gas.

The reports for huge gas deposits have drawn the interest of the world’s largest oil and gas exploration companies such as BP, Petrobras, Statoil, Exxon Mobil and Shell. According to Bloomberg, a news wire firm, this year, 23 wells will be drilled off Kenya, Tanzania and Mozambique, almost double the number in 2011, according to research from Morgan Stanley.

“Assuming that the drilling success is continued you would expect to see consolidation around probably one mega-terminal,” for Mozambique and one in Tanzania, Ophir Chief Executive Officer Nick Cooper said in an interview. “Obviously the bigger fish tend to eat the smaller fish.”

Statoil ASA (STL), Norway’s largest oil company, plans to drill a well this year at an exploration block in Tanzania where it’s a partner with Exxon Mobil, CEO Helge Lund said. Statoil also has to drill at two exploration licence areas in Mozambique before 2015. The “geographic location is almost perfect for LNG” shipments eastbound, the Exxon Mobil CEO said.

Mozambique and Tanzania may eventually rival Qatar and Australia as the world’s biggest suppliers of liquefied natural gas (LNG), Investec’s Joyner said. The East African deposits found so far are large enough to justify construction of at least eight LNG production trains, according to estimates by the companies.

By ABDUEL ELINAZA, Tanzania Daily News

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