The Minister for Energy and Minerals, Mr William Ngeleja (right) signs two production sharing contracts for exploration in Kilosa, Kilombero and Pangani with Swala Energy Ltd Business Development Director, Mr Chris Opperman (centre) and Swala Oil and Gas (Tanzania) Limited Board Director, Ernest Massawe in Dar es Salaam on Monday. Looking on is the Deputy Minister for Energy and Minerals, Adam Malima (back right) and Legal Officer with Tanzania Petroleum Development Corporation (TPDC), Selengia Mlawi. (Photo by Fadhili Akida)

Swala Oil and Gas (Tanzania) Limited signed two Production Sharing Agreements (PSAs) with the government on Monday for exploration of natural gas and oil in Pangani and Kilosa-Kilombero basins, setting a precedent as the first company in the industry to incorporate local shareholders.

The Minister for Energy and Minerals, Mr William Ngeleja, hailed the company for the move and urged other players in the extraction industry to emulate the Australian company.

“Though the areas of exploration are of high risk as there is no prior geo-physical data yet, Swala has decided to involve local entrepreneurs from the very beginning,” Mr Ngeleja said during the signing ceremony at the ministry headquarters in Dar es Salaam. The two onshore PSAs cover an area of about 35,000 square kilometres in Pangani and Kilosa-Kilombero basins in Tanga and Morogoro regions respectively.

Swala’s Director of Business Development, Mr Chris Opperman, said more than 12 local shareholders have so far been given opportunity to invest in the company. “We want to broaden our local credentials by offering investment opportunities to a broad range of investors across Tanzania,” Mr Opperman said,  without however,  revealing the percentage of  the local shareholders’ stake.

He added that the company would allocate a certain percentage of shares, as free carried shares, to communities where exploration would be conducted. “Once we strike oil or gas and we start fully-fledged production we will then float some of our shares at the DSE (Dar es Salaam Stock Exchange),” he said.

At the signing ceremony, the government was represented by Minister Ngeleja and his Deputy Mr Adam Malima as well as other high-ranking ministry officials while Swala was represented by Mr Opperman and its Exploration Director, Mr Neil Taylor. The other signatory in the deal was Tanzania Petroleum Development Corporation (TPDC) whose Managing Director, Mr Yona Kilagane, signed the agreements.

Earlier, Mr Ngeleja cautioned  that poorly planned petroleum exploration and production could be detrimental to the surrounding environment. “Some of the negative effects of oil pollution are irreversible (while) petroleum resources are non-renewable.  It is important to conduct well planned exploration activities that would not damage the environment,” the minister said.

According to the minister, the two PSAs signed yesterday bring the number of oil explorations in Tanzania to 26, the highest in East Africa.  Kenya has 17 PSAs and Uganda has 10. Mr Kilagane stressed that Tanzania was yet to discover oil, noting however, that the discovery of natural gas had helped to boost the economy.

Natural gas accounts for about 35 per cent of power generated and pumped into the national grid, at 416MW and thus saving  billions of shillings that would have been used to purchase heavy furnace oil (HFO), diesel and jet oil to generate electricity. Dar es Salaam has 35 industries that use natural gas as source of energy in production.

Mr Kilagane revealed that the use of natural gas for power and industrial production has helped save the nation some US$ 3.3 billion and US$ 200 million respectively whereas the government has earned US$ 146 million in revenues. “The major challenge we are grappling with is limited capacity to transport gas from where it is produced to Dar es Salaam,” Mr Kilagane said. Natural gas  is  produced at Songo songo and Mnazi Bay in Lindi and Mtwara regions respectively.

By ALVAR MWAKYUSA, Tanzania Daily News

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