Statoil in Tanzania

Statoil is an international energy company with operations in over 30 countries in the world. The company conducts at least 50 per cent of its business outside its country of origin. Staoil made its presence in Tanzania for the first time in 2007. It has a presence in almost all continents including countries such as Venezuela, the United Kingdom, United Arab Emirates, North America, Nigeria, Mozambique, Kazhakhstan, Singapore and South Korea, etc. where it engages in gas, oil and coal operations.

Operations in Tanzania
In 2007, Statoil signed a Production Sharing Agreement (PSA) for Block 2 with Tanzania Petroleum Development Corporation (TPDC). Statoil Tanzania (AS) is the operator with 65 per cent working interest with ExxonMobil as a partner with 35 per cent interest. In 2012 and 2013, Statoil and its partner ExxonMobil made the significant Zafarani, Lavani, Tangawizi and Mronge discoveries in Block 2, which covers an area of approximately 5,500 square kilometres and lies in water depths between 1,500 to 3,000 metres. The discoveries have proved 17-20 Tcf of in-place volumes and mark an important step towards a possible natural gas development in Tanzania. Recent discoveries of natural gas in Tangawizi-1 during the first quarter and Mronge-1 significantly increased the total in-place volumes in Block 2. Statoil and ExxonMobil are also working to mature additional prospects in Block 2 and have completed the acquisition of additional 3D seismic data in those areas of Block 2 hitherto only covered by 2D seismic.



Expansion Drive
In May 2013, Statoil acquired a 12 percent working interest in Block 6 from operator Petrobras Tanzania Ltd. Block 6 covers 5,549 square kilometres in the Mafia basin offshore Tanzania, with a water depth of 1,800 metres. Block 6 is located approximately 170 kilometres north of the Statoil-operated Block 2, where the company made further gas discoveries in 2012 and 2013. The transaction was subject to approval by Tanzanian authorities. Statoil was now considering investing in Liquefied Natural Gas (LNG) to process natural gas for export. The company understands that with the significant gas discoveries in Tanzania, the future for the country as gas producer is promising.

Statoil at Centre of Debate
The leak of an important addendum to a Production Sharing Agreement (PSA) between Statoil and the Government of Tanzania in July 2014 ignited a debate on whether Tanzania “got a good deal” from granting these extraction rights for a block now expected to produce large amounts of commercial natural gas. The debate demonstrated a public appetite for explanations from the government on the country’s management of its nascent oil and gas industry. Potentially at stake are billions of dollars of potential revenues that could boost socio-economic development in Tanzania if it becomes possible to extract these gas resources.

An analysis by Natural Resources Governance Institute (NRGI) indicated that it was premature to say whether the Statoil PSA and addendum represent a good deal for Tanzania. Given the limited information available, the deal does not seem out of line with international standards for a country that had no proven offshore reserves of natural gas at the time when the original contract was signed. More detailed elements and explanations from the national oil company TPDC or the government could confirm for Tanzanian citizens that this is the case. The fact that Statoil won its rights through a competitive process should also indicate what market information was available to the government at the time, and should also help the government to explain its assessment that the deal was the best possible option at the time.

However, the differences between the 2010 model PSA addendum and the leaked Statoil addendum have led to legitimate questions about the reliability of model PSAs to assess the legal environment of the emerging gas sector, and the actual content of signed PSAs. These questions underscore the need for contract transparency. Opposition legislator Zitto Kabwe raised the red flag over the Statoil/ExxonMobil (the company’s partner in Block 2) deal, claiming that it would cost the country a staggering loss of $55 billion dollars should it go through. This loss is gross value calculated without considering factors such as inflation in the 15 years of the license period. The alleged ‘bad’ contract between the Government and Statoil was leaked prompting analysts and politicians alike to say that the government stood to lose one billion dollars a year. TPDC as the government parastatal overseeing the sector defended the deal saying the government stands to gain under the PSA entered between the State and Statoil Company.

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