Tanzania Gas, Exploration, Investment East Africa
Tanzania drew international attention this year by almost
trebling its appraisal of its natural gas reserves. Now confirmed at 43
Trillion Cubic feet (TCF), they are valued around $430 billion.
The discovery mirrors a larger energy boom currently taking
place in East Africa. According to the U.S. Geological Survey, East Africa’s
coastal waters are expected to hold up to 441 trillion cubic feet of
natural gas. This is almost double the estimate given a few months ago in May
2012, and numbers are likely to grow with further exploration deals in the
The Economist has hailed the emergence of an “Eastern
Eldorado”, predicting the region to rival West African resource giants
such as Nigeria and Ghana. British Gas have announced plans to invest about $15
billion in Tanzania within the coming decade. This figure alone is more
than half the country’s current annual GDP.

The expected revenue gains and investments could mean a
decisive shift towards industrialisation for Tanzania’s donor-dependent
agro-economy. President Kikwete has announced his hope that Tanzania will soon
become one of the leading global gas suppliers.
However, this economic enthusiasm should be tempered by a healthy
dose of scepticism – especially with regard to the Tanzanian state’s ability to
handle the opportunity of new capital inflow. In a press statement, the
state-run Tanzanian Petroleum Development Corporation confirmed that it had
postponed last week’s offshore exploration licensing round, due to take place
in Houston, Texas. The round will be delayed until the government reviews a new
draft gas bill. The announcement forms part of a larger debate about benefits
and potential detriments of the suspected boom of the resource extraction
Potential for Conflict
Local politicians’ scramble for profit from natural
resources has the potential to destabilise the relatively peaceful relations between
East African nations.
The heated debate between Tanzania and Malawi surrounding oil-drilling activities
in Lake Nyasa is alarming. Oil finds in Lake Tanganyika have sparked
border disputes between the Democratic Republic of the Congo and Tanzania –
according to watchdogs such as the International Crisis Group.
However, there is not only potential for disputes with
Malawi, Uganda and the DRC – offshore oil discoveries could also precipitate
the formation of further separatist movements on the semi-autonomous
island of Zanzibar. The potential for oil discovery is at the centre of a
political debate between Zanzibar and the mainland because it is still unclear
if the capture of oil and gas should be the responsibility of the union or
whether Zanzibar should form its own petroleum company.
Exceptionally, corporate interests might be a positive
influence in finding a solution to this problem. A spokesperson of Shell told
Reuters that they are trying to broker a compromise between the concerned
parties, with Shell directly suffering from the political gridlock – unable to
make use of the exploration rights granted to them ten years ago.
Scepticism in Tanzania
Although the potential for international skirmishes should
not be neglected, the negative consequences of the gas discoveries are more widely
felt among ordinary Tanzanians. Extractive wealth has generally been unevenly
distributed amongst populations. Despite being the fourth largest gold
producer in Africa, Tanzania and its people receive very little benefits from
the mining sector, which generated some $2.3 billion during the year
ending February 2012.
The political opposition in Tanzania has warned the
government not to repeat past mistakes and to safeguard Tanzania’s energy
resources for the future. In a recent declaration, Shadow Finance Minister
Kabwe Zuberi Zitto urged the government to think its long-term strategy: “We
may not be here tomorrow, but Tanzania will be”. The lack of coherent policy
guidelines, strong supporting institutions, and local expertise were decried as
he called for a ten-year moratorium on all explorations to achieve structural
adjustments and pass necessary legislation on future resource explorations.
The potential impact of exploration activities on other
sectors such as agriculture and tourism is also worrying. A Dar es Salaam-based
lawyer conveyed these sentiments in a conversation with Think Africa Press:
“I don’t believe the country is ready to implement the existing
systems and laws that will effectively protect the coastal environment.
Tanzania stands already vulnerable and ready to lose its once glorious and
bountiful coastline which is a major tourist attraction both above and under
Use your blessings wisely
Prominent Tanzanians are calling for a change in
the attitudes amongst political leaders, the civil service, and public to
prevent Tanzania from suffering the famed “resource curse” of other African
To prevent this, Tanzania needs to first create a culture of
transparency. Negotiations between companies and the government usually take
place behind closed doors and contracts remain a secret. This encourages
corruption in a country which has a historical prevalence for rent-seeking
behaviour and short-term gains by politicians and other public officials.
The drilling and exploration of oil and gas could exacerbate these problems.
And without effective monitoring and open debate in the public sphere, there is
little hope for improving the current situation.
Resource findings, especially in border areas, need not be a
potential source of regional conflict if politicians direct them towards
further economic integration of the East African region. On a national level
the equal distribution of benefits is paramount. The incoming revenues can
stimulate local economies and help Tanzania create a sustainable economic
Structural constraints, such as a lack of expertise or
promising high quality labour, should not prevent the majority of Tanzanians
from deriving the benefits of capital inflows into their economy.
Socio-economic baseline studies to assess negative impacts should be carried
out in all affected communities, and risk mitigation measures should combat the
potential negative effects. The government can use the revenue and capital
inflows to make strategic investments in infrastructure, health and education.
This will help ordinary 
Tanzanians reap their fair share of the benefits that
comes along with the natural resource blessing. It is critical for politicians
to live up to their duty of care and act in the broader interests of the
population – only this realisation will help Tanzania move forward in its
development process.
Article by:Katharina Neureiter who holds an MSc in History of International
Relations from the London School of Economics specialising in African
colonial history and war cultures. She is currently working as a consultant in
East Africa and blogs at Hear About


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