Tanzania UKTI Oil and Gas Report

8/10/2019 Tanzania UKTI Oil and Gas Report

1/68

8/10/2019 Tanzania UKTI Oil and Gas Report

2/68

2

HOME

CONTENTS

2

Disclaimer and Copyright

Whereas every effort has been made to ensure that the information given in thisdocument is accurate, neither UK Trade & Investment nor its parent Departments (theDepartment for Business, Innovation and Skills, and the Foreign & CommonwealthOffice) accept liability for any errors, omissions or misleading statements, and nowarranty is given or responsibility accepted as to the standing of any individual, firm,

company or other organisation mentioned.

Copyright Crown Copyright [year of publication] You may re-use this information(excluding logos) free of charge in any format or medium, under the terms of the OpenGovernment Licence. To view this licence, visit OGL or emailpsi@nationalarchives.

gsi.gov.uk Where we have identified any third party copyrightinformation you will need to obtain permission from the copyright holders concerned.

Any enquiries regarding this publication should be sent to us at [insert contact detailsfor your organisation]. You can download this publication from [insert address ofwebsite on which the document will be published]

8/10/2019 Tanzania UKTI Oil and Gas Report

3/68

3 Presentation title - edit in the Master slide

HOME

CONTENTS

3

High Value Opportunity - Tanzania

Oil & Gas

Tanzania is a growing market with on-going exciting discoveries, including 19 exploration blocks and US$10-20bn investment projected for exploration and production in the coming decade. Over the past twoyears, exploration activities in Tanzanias deep offshore waters have led to the discovery of 50.5 trillioncubic feet (tcf) of natural gas. More discoveries are likely to come as drilling campaigns continue to unfold.

It is estimated that the recoverable reserves will double to 100 tcf by the year 2015.

8/10/2019 Tanzania UKTI Oil and Gas Report

4/68

HOME

CONTENTS

4

Table of contentsSection 1. Background to Tanzania

Section 2. Oil & Gas overview of Tanzania

Section 3. Opportunities in Tanzania LNG Project

Section 4. Doing Business in Tanzania

8/10/2019 Tanzania UKTI Oil and Gas Report

5/68

5

HOME

CONTENTS

5

1. Background to Tanzania1.1. Country Overview

1.2. Political Framework

1.3. Economic Overview

1.4. Performance Indicatorsa. Foreign Direct Investment (FDI)

b. Corruption

c. Competitiveness

d. Risks

8/10/2019 Tanzania UKTI Oil and Gas Report

6/68

6

HOME

CONTENTS

6

1.1. Country Overview

The United Republic of Tanzania

Tanganyika and Zanzibar merged on 26 April 1964 and on 29 October of the same year, the country wasrenamed United Republic of Tanzania ('Tan' comes from Tanganyika and 'Zan' from Zanzibar).

Dodoma is the official capital and seat of Tanzania's Union Parliament. Dar Es Salaam is a commercialcity, and home to government ministries and major institutions, including diplomatic missions.

**2014 forecast

Key Information1

Population 47 Million

GDP in USD billions ** 34.9

GDP Growth Rate ** 7.2%

Inflation ** 5.8%

Key Languages Swahili & English

Religions Christianity and Muslim

Currency Tanzanian Shilling (TZS)

Jakaya Mrisho KikwetePresident of Tanzania

Ali Mohamed Shein

President of ZanzibarMohamed Gharib Bilal

Vice President of TanzaniaMizengo Kayanza Pinda

Prime Minister of Tanzania

8/10/2019 Tanzania UKTI Oil and Gas Report

7/687

HOME CONTENTS

7

1.2. Political Framework

Key Information1

Population ~48 Million

GDP (USD billions) 28.25

GDP Growth Rate (estimate 2013) 6.8%

Inflation (estimate 2013) 9.8%

Key Languages Swahili & English

Religions Christianity and Muslim

Country Political Framework: The United Republic of Tanzania has a two Government framework; The Union and The Revolutionary

Government of Zanzibar. Tanzania is a one party dominant state with the Chama Cha Mapinduzi (CCM) in power currently headed by

president Jakaya Mrisho Kikwete. Opposition party in the Republic of Tanzania is Civic United Front (CUF) which was formed in 1992 The Zanzibar Government consists of members from CCM and CUF. Zanzibar is are currently pushing for a three Government framework for Tanzania, Zanzibar and the Union.

Government: The parliament of Tanzania consists of two parts; the President and the National Assembly. The president and the members of the National Assembly are elected concurrently by direct popular vote for

five-year terms. The vice-president is elected for a five-year term at the same time as the president and on the same ticket. Neither the president nor the vice-president may be a member of the National Assembly. The president appoints a prime minister to serve as the government's leader in the assembly. The president

selects his or her cabinet from assembly members.

Administration: Tanzania is divided into 26 regions; 21 on the mainland, 3 on Zanzibar, and 2 on Pemba. Ninety-nine districts have been created to further increase local authority. These districts are also now referred

to as local government authorities. Currently there are 114 councils operating in 99 districts, 22 are urban and 92 are rural. The 22 urban units are

classified further as city (Dar Es Salaam and Mwanza), municipal (Arusha, Dodoma, Iringa, Kilimanjaro, Mbeya,Morogoro, Shinyanga, Tabora, and Tanga), and town councils.

Tanzania General Elections: The fifth general elections are scheduled to take place in October 2015. Voters willelect the President, Members of Parliament and the local government. The incumbent president, Jakaya Kikwete, is

ineligible to be elected to a third term due to term limits.

8/10/2019 Tanzania UKTI Oil and Gas Report

8/68

8

HOME CONTENTS

8

1.3. Economic Overview

Key Information1

Population ~48 Million

GDP (USD billions) 28.25

GDP Growth Rate (estimate 2013) 6.8%

Inflation (estimate 2013) 9.8%

Key Languages Swahili & English

Religions Christianity and Muslim

Economic Overview: Year 2000 - 2010

Over the past decade, Tanzanias economy has become significantly more open. The real GDP over the pastdecade shows a steady rise (Figure 1). In other terms the trade-to-GDP ratio has increased from 13.5% in 2000to more than 30% in 2011, the highest rate among the East African Community countries, with the value ofTanzanias merchandise exports multiplying by a factor of f ive over this period. (Figure 2). The largestcontributors to the export basket continue to be primary commodities, particularly gold, coffee, tea, cashew nutsand cotton. At the same time, the volume of manufactured exports has surged in recent years, with the lionsshare of these exports going to markets within the region.

Source: Enterprise Map of Tanzania by John Sutton & Donath Olomi & World Bank

Fig 1 - Tanzania GDP: 2000 2010 Fig 2 - Tanzania Exports: 1977 2010

8/10/2019 Tanzania UKTI Oil and Gas Report

9/68

9

HOME CONTENTS

9

1.3. Economic Overview

Key Information1

Population ~48 Million

GDP (USD billions) 28.25

GDP Growth Rate (estimate 2013) 6.8%

Inflation (estimate 2013) 9.8%

Key Languages Swahili & English

Religions Christianity and Muslim

Economic Overview: Year 2010 to date

In 2012 and into 2013, the Tanzanian economy expanded at an annualized rate of approximately 7%. The maindrivers ofTanzanias rapid economic growth continue to be a small number of fast growing, capital intensivesectors, particularly the communications, financial services, construction, manufacturing and retail tradesectors.

The inflation rate continued to decline in 2013, reaching a rate of 6.3% by October 2013.The TanzanianGovernment has implemented a relatively tight monetary policy to reduce monetary expansion and hasincreased guiding interest rates. While this helped to reduce inflation, it resulted nevertheless in increases tothe cost of credit, imposing increased burdens on borrowers and thereby negatively impacting the expansion ofthe real economy. However, the magnitude of this negative impact may not be dramatic.

The overall fiscal deficit for 2012/13 is estimated to reach a value equivalent to 6.8% of GDP. This represents asignificant increase compared to 2011/12, when the deficit stood at a value equivalent to only 5% of GDP.

An accelerated drive for the development of social and physical infrastructure is underway on the recently

launched Big Results Now initiative (BRN).

The most significant transformative factor on the economy is the large natural gas reserves that were recentlydiscovered. If managed well, these gas reserves have the potential to transform Tanzanias economic future.

No major changes are expected in the countrys growth trajectory over the next few years.

Source: World Bank

8/10/2019 Tanzania UKTI Oil and Gas Report

10/68

10

HOME CONTENTS

10

1.4. Performance Indicators Foreign Direct Investment (FDI)

FDI:

Generally, the Government of Tanzania (GoT) has a favourable attitude towards Foreign Direct Investment(FDI) and has made significant efforts to encourage foreign investment. Inflows of FDI continued to grow in2013, according to the United Nations Conference on Trade and Development (UNCTAD). Tanzania is ranked2nd in East Africa after Uganda for all FDI. In the more recent years the FDIs in the Oil & Gas sector aresteadily increasing. BG reports indicate that BG Group contributions to Tanzania from 2010 have been overUSD 1.1 billion for exploration & appraisal activities.

There are 11 countries that account for over three-quarters of the total FDI stock. Three of these 11 countriesplay a dominant role: South Africa, Canada and the UK together account for over half of the total FDI stock.

1 UNCTAD World Investment Report -20142 Enterprise Map of Tanzania by John Sutton & Donath Olomi

0

500

1000

1500

2000

2005 2007 2009 2011 2013

MillionUSD

Fig 3 FDI into Tanzania 1

Fig 4 FDI Stocks & Flow by Country of Origin 2

CountryPercentage of

flow (1999 -2008)

Percentage of

Stock

UK 22.6 13.42

Canada 15.8 17.28

Mauritius 15.5 3.4

South Africa 14.0 22.27

United Arab Emirates 5.3 3.57

Kuwait 5.3 3.53

Norway 4.2 2.91

8/10/2019 Tanzania UKTI Oil and Gas Report

11/68

11

HOME CONTENTS

11

1.4. Performance Indicators - Corruption

Corruption:

Tanzanian businesses identify corruption as problematic factor for doing business 1 . Tanzania ranks 111th

out of 177 countries in Transparency Internationals Corruption Perceptions Index 2013 (where 1st is leastcorrupt).

Prevention and Combating of Corruption Bureau (PCCB), is the Tanzania law enforcement institutionestablished and mandated by the Prevention and Combating of Corruption Act No. 11 of 2007 to preventcorruption, educate the society on the effects of this problem, and enforce the law against corruption. Themandate and operations of PCCB are limited to Tanzania Mainland. In the endeavor to combat corruption theBureau adopts the three-prong approach, namely by prevention, public awareness, investigation andprosecution of offenders.

1 World Economic Forum, Global Competitiveness Report 2013-2014Source: Transparency International The 2013 Corruption Perceptions Index

Fig 5 - Corruption PerceptionIndex 2013

Other African Country Rank 2013 Change

Ghana 63/177 - 1

Mozambique 91/177 + 32

Gabon 106/177 - 4

Tanzania 111/177 - 9

Kenya 136/177 + 3

Uganda 140/177 - 10

Nigeria 144/177 - 5

Angola 153/177 + 4

8/10/2019 Tanzania UKTI Oil and Gas Report

12/68

12

HOME CONTENTS

12

1.4. Performance Indicators - Corruption

Corruption: British High Commission in Tanzania (DFID6 and FCO7) is supporting Tanzania intackling corruption through:

Maintaining anti-corruption is a top priority in dialogue between international partners and the Government ofTanzania. The FCO will provide political support through active engagement at all levels of the TanzanianGovernment to strengthen enforcement of legal frameworks and improve effectiveness of institutions to

combat corruption.

Influencing the business community on integrity and anti-bribery standards. DFID 1 and the FCO 2will workto encourage businesses to uphold high standards on anti-corruption, in line with the Bribery Act 2010.

Intensifying work to address international aspects of corruption including money laundering. DFID is alreadyworking to strengthen the abil ity of the Government ofTanzanias Financial Intelligence Unit to monitorsuspicious financial transactions, with a view to helping the country to remove itself from the Financial ActionTask Force (FATF) list of jurisdictions with strategic anti-money laundering deficiencies.

Supporting programmes to strengthen domestic institutions which address corruption, such as the National

Audit Office, the Prevention and Combating of Corruption Bureau, the Directorate of Public Prosecutions,and Parliament. DFIDs programmes, backed up by FCO political support, seek to enhance the ability ofthese institutions to detect and sanction corruption, and to improve the way they work together.

Continuing to drive improvements in Public Financial Management, such as simplification of financialmanagement information systems, strengthening of payroll controls, procurement compliance audits, andstrengthened action by parliamentary accounts committees.

1 DFID Department for International Development in Tanzania2FCO Foreign and Commonwealth Office in Tanzania

8/10/2019 Tanzania UKTI Oil and Gas Report

13/68

8/10/2019 Tanzania UKTI Oil and Gas Report

14/68

14

HOME CONTENTS

14

1.4. Performance Indicators - Risk

Risk:

Tanzania has a stable economy with a relatively low political risk.

.

Source Maplecroft Risk Scorecard 2014

Fig 7 WEF Global Competitiveness Index

TANZANIA

Trend Rank

46/179

Fig 8 Risks at Glance

LOW MEDIUM HIGH

8/10/2019 Tanzania UKTI Oil and Gas Report

15/68

15

HOME CONTENTS

15

2. Oil & Gas Overview of Tanzania2.1. Timeline of Key Activities

2.2. Current Producing Assets in Tanzania

2.3. Current Projects in Tanzania

2.4. Major Players in Tanzania Offshore2.5. Major Discoveries

2.6. Opportunities in Tanzania

2.7. Regulatory Structure

8/10/2019 Tanzania UKTI Oil and Gas Report

16/68

16

HOME CONTENTS

16

2.1. Timeline of key activities

1950

1952 -1962: BP and Shell were awardedconcessions along the coast, including thelarge islands of Mafia, Zanzibar andPemba. Although 4 wells were drilled theydid not encounter significant commercialhydrocarbon, however hey confirmed thepresence of hydrocarbons.

1960 1970 1980

1969 : Tanzania PetroleumDevelopment Corporation (TPDC) wasestablished and the first ProductionSharing Agreement (PSA) was signedwith AGIP on former BP/Shellconcessions.

1974: AGIP discoversSonga Songa gas fields.

1980: The Petroleum (Exploration andProduction) Act of 1980 introduced.

1981:Agip discovers Mnazi Bay gasfield.

1990 2000 2010

Set technical agreements forthe development of the SongoSongo gas field.

Tanzania venturing into deep-sea exploration.

2000 : 1st Tanzania Deepwater licensing round 6 blocks on offer in the Mafia Basin PetroBras awarded Block 5 (signed 2004)

2002 : 2nd Tanzania Deepwater licensing round

7 blocks on offer

Shell awarded Blocks 9,10,11 & 12 but no PSAsigned till date

2004: 3rd Tanzania Deepwater licensing round

7 blocks on offer Ophir awarded Block 1 & Statoil awarded Block 2

2004: 1st commercial production from Songa-Songa

2006 : Ophir awarded Block 3 & 4

2007: Statoil awarded Block 2

2010: ExxonMobil purchased a 35% stake from Statoil in itsdeepwater Block 2 offshore Tanzania. Statoil previouslyowned the entirety of the block. BG farmed in to Blocks 1, 3and 4. BG acquired 60% interests in the blocks from OphirEnergy.

2011: BG assumed operatorship of Blocks 1, 3 and 4 after

obtaining approval from the government.

2011 & 2012: Many gas discoveries have been made inBlocks 1, 2, 3 & 4 supporting the case for developing anonshore LNG plant.

2012: Statoil began talks with the Tanzanian government todiscuss the development of an LNG export plant. Thegovernment requested that Statoil and BG, who has alsoproposed building an LNG export plant in Tanzania, considercombining their proposals to build a single LNG plant.

2013: 4th Tanzania Deepwater licensing round 7 blocks on offer & Lake Tanganyika North

8/10/2019 Tanzania UKTI Oil and Gas Report

17/68

17

HOME CONTENTS

17

2.2. Current Producing Assets in Tanzania

Songo Songo Gas fields

4 onshore & 3 offshore natural gas wells, of which 3 onshore and 1 offshorecurrently operational

Gas from the wells is processed by two 35Mmscf/d processing units (dehydrationand refrigeration) since May 2011, the plant has been temporarily re-rated to

deliver up to ~100 MMscfd, current typical daily delivery is 90-95 MMscfd

Processed gas transported through a 225 km pipeline to Dar Es Salaam

The first tranche of gas is used at Songas Ubungo power plant, the largest gas-fired power station in East Africa (with a smaller portion used at the TanzaniaPortland Cement Company )

Songas Ubungo power plant comprises 2 Siemens industrial turbine (~20MW

each) and 4GE aero-derivative turbines (~35MW each) which together generate

180 megawatts (MW) of electricity (approximately 25% of Tanzanias electricityneeds) and is supplied to the national electricity grid and distributed to end usersby TANESCO

Additional gas from Songo Songo Island (SSI) is used by Tanesco and Tanesco-contracted generators, so that overall the gas from SSI powers ~50% ofTanzanias usable power capacity

PanAfrican Energy Tanzania & TPDC also supply gas from SSI for industrial andcommercial use to approximately 35-40 industrial and commercial consumers

Source: Songas, offshore-technology.com, PanAfrican Energy

Fig 9 Songo Songa Gas Field

8/10/2019 Tanzania UKTI Oil and Gas Report

18/68

18

HOME CONTENTS

18

2.3. Current Projects in Tanzania

National Natural Gas Infrastructure Project (NNGIP)

512 km long and 36 inch pipeline linking the Mnazi Bay field to Dar esSalaam with a 24 inch spur line to Songo Songo

The pipeline will have a capacity of 784 MMcf/d of gas, to be used forthe production of 3,900 MW of electricity.

This includes two new processing plants; one at Mnazi Bay and other atSongo Songo Island.

PanAfrican Energy is negotiating with the government the terms onwhich it will double gas production capacity from 100 million to 200million cubic feet per day in order to provide enough gas for the NNGIP.It is estimated that a further USD 150 million is required in order to drillnew wells, service some of existing ones, and install additionalinfrastructure.

Pipeline construction has commenced and approximately 120 km ofpipeline has now been fabricated and laid by six welding teams workingonshore. A seventh welding team and a pipe barge have been mobilizedto lay the offshore spur from Songo Songo Island to Somanga Funga.Skid mounted modular plant and processing equipment is beingfabricated in several international locations and initial site preparationhas commenced on Songo Songo Island for the two 70 million cubic feetper day (MMcfd) gas processing plant trains.

Source: Pipelines International, CPTDC, PanAfrican Energy,

Fig 10 Tanzania Gas Pipeline Project

8/10/2019 Tanzania UKTI Oil and Gas Report

19/68

19

HOME CONTENTS

19

2.4. Major Players in Tanzania Offshore

Shell Blocks (9-12)

Under Application

(Near Zanzibar Island)

BG Blocks (1, 3 & 4)

PSA Exploration License

(BG-60%, Ophir-20% &

Pavilion-20%)

Statoil Block (2)

PSA Exploration License

(Statoil-65% & ExxonMobil-

35%)

Petrobras Blocks (6 & 8)

PSA Exploration License

Block-8: Petrobras-50% &

Shell-50%Block-6: Petrobras-38%,

Statoil-12% & Shell-50%

Source: TPDC, Ophir, BG, Statoil, Petrobras

8/10/2019 Tanzania UKTI Oil and Gas Report

20/68

20

HOME CONTENTS

20

Tanzania Offshore Activity Map (April 2014)Source: Tanzania Petroleum Development Corporation

Source: TPDC

8/10/2019 Tanzania UKTI Oil and Gas Report

21/68

21

HOME CONTENTS

21

2.5. Major Discoveries

Name Partners Status Discoveries Reserves

Block 1, 3 & 4BG: 60%(Operator)Ophir :20%Pavilion Energy: 20%

Discovery

Block 1: Jodari,Jodari N, Chaza,Mzia & Mkizi

Block 2: Papa

Block 4: Chewa,Pweza & Ngisi

~ 15 -17 TCF

Block 2Statoil: 65% (Operator)ExxonMobil: 35%

Discovery

Lavani, Zafarani,Tangawizi, Piri&Mronge

~ 17 - 20 TCF

Block 6

Petrobras: 38% (Operator)

Statoil: 12%Shell: 50%

Exploration Not Available Not Available

Block 7Ophir: 80% (Operator)Mubadala Petroleum: 20%

Exploration1st Well drilled (MlinziMbali-1)

None None

Block 8Petrobras: 50% (Operator)Shell: 50%

Exploration Not Available Not Available

Source: HIS-PFC Energy, Ophir, BG, Statoil, Deloitte

8/10/2019 Tanzania UKTI Oil and Gas Report

22/68

22

HOME CONTENTS

22

2.6. Opportunities in Tanzania

Opportunities

(~50.5 TCF GasDiscoveries in TZ)

Power Generation

(Songo Songo Gas fieldsalready supplying gas for

power generation)

Compressed NaturalGas (CNG)

(PanAfrican invested TZS7.4 billion to construct a

pilot CNG facilities)

Industrial Sector

Songo Songo Gas fieldsalready supply gas to 37

industry users)

Fertilizer

Natural Gas used asfeedstock for ammonia

production

LNG

(Major offshore discoveriesto enable LNG exports)

EXPORTMARKET

DOMESTICMARKET

8/10/2019 Tanzania UKTI Oil and Gas Report

23/68

23

HOME CONTENTS

23

Tanzania LNG Opportunity:

By 2025 global LNG demand will increase to 400 mtpa compared to the current supply of 270 mtpa Demand located in Pacific Basin (east of Suez) Japan, China, South Korea & India Tanzania has enough gas to supply both Domestic Market and LNG Exports Tanzania is well positioned geographically to supply LNG to the demand centers east of Suez Typically around 10 TCF of gas is sufficient to set up a 2 x 5 MPTA LNG facilities; so enough gas is

available in Tanzania to set up a 4 x 5 MPTA LNG facility in Tanzania

Source: BG Copyright: BG 2nd Tanzania Oil & Gas Conference October 2013Opportunities and Challenges for the Development of a Local Gas Market in Tanzania, EY Copyright: EY - Global LNG Will new demand and new supply mean new pricing?

Fig 12 Global LNG Supply Demand Profile

Fig 11 TZ Domestic Gas Requirements

8/10/2019 Tanzania UKTI Oil and Gas Report

24/68

24

HOME CONTENTS

24

2.7. Regulatory Structure Key Legislation

Government of Tanzania (GoT)

Ministry for Energy & Minerals

(MEM)

NOC1 - TPDC

IOCs2 via PSA

Exploration License

Development License aftercommercial discovery

The key legislation regulating the Tanzanian upstream oil & gas sectoris the Petroleum (Exploration and Production) Act 1980, which veststitle to all petroleum within Tanzania and its territorial waters to theUnited Republic of Tanzania.

Under the Petroleum Act 1980, the oil & gas industry in Tanzania is

regulated by the Ministry for Energy and Minerals (MEM), which setsindustry-specific policies, strategies and laws.

MEM implements its petroleum exploration and development policiesthrough Tanzanian Petroleum Development Corporation (TPDC).

The National Natural Gas Policy of Tanzania 2013 to provideguidance for utilization of natural gas resources domestically beforeexported (Domestic Supply Obligations)

Local Content Policy of Tanzania for the Oil & Gas Industry 2014 (not a

legislation yet) ambitious, and addresses five key focus areas

a) Capacity Building and technology transfer

b) Participation of Tanzanians and Tanzanian owned entities

c) Procurement and usage of locally produced goods and services

d) Fabrication and manufacturing in-country

e) Socio-economic responsibilities

1

NOC National Oil Company2 IOC International Oil Companies

8/10/2019 Tanzania UKTI Oil and Gas Report

25/68

8/10/2019 Tanzania UKTI Oil and Gas Report

26/68

26

HOME CONTENTS

26

3. Upcoming Opportunities in Oil & Gas3.1. Tanzania LNG Project (TLNG)

a. Overview

b. Structure & Participants

c. Value Chaind. Project Development Plan

e. Project Profile

f. Project Schedule

3.2. Supply Chain Opportunities

a. Offshore - Block 1 & 2

b. Onshore - LNG Plant

8/10/2019 Tanzania UKTI Oil and Gas Report

27/68

27

HOME CONTENTS

27

3.1 Tanzania LNG (TLNG) - Overview

The discovery of ~32-37 TCF of recoverable gas in Blocks 1, 3, 4 (BGOperated) & Blocks 2 (Statoil Operated) has prompted proposals for a LNGProject

The project is likely to be a joint development of an Onshore LNG Plant at Lindiand two independent offshore gas filed development projects in Block 1 &Block 2

It is expected that the LNG plant will be a shared infrastructure model (like theNigerian LNG project), however there is no clarity yet on the ownership elements

It is expected that initially the LNG plant will consist of 2 trains with the options to

expand to 4 trains at a later stage Lindi has been identified as the site for the LNG plant but the exact site details have

not been announced

It is expected that TPDC will also have a stake in the LNG plant, however no furtherdetails are available at this stage

8/10/2019 Tanzania UKTI Oil and Gas Report

28/68

28

HOME CONTENTS

28

3.1 TLNG - Structure & Participations

ONSHORE FACILITIESOFFSHORE FACILITIES

BLOCK 1

BG: 60%Ophir :20%

Pavilion Energy: 20%

BLOCK 2:

Statoil: 65%ExxonMobil: 35%

JV SupplyAgreements

to be Finalized

Statoil:32%

BG: 30%

ExxonMobil: 18%

Ophir Energy: 10%

Pavilion Energy: 10%

TPDC: TBC

Source of Gas Gas Supply Agreement LNG Plant

LNG Plant Ownership Structure is based on PFC Energy assumptions and is calculated from the equity partnership for theupstream licenses, though the final ownership structure will likely change (Source: PFC Energy). It is also likely that TPDC will also

have a stake in the LNG plant.

Ophir has expressed an intention to further farm down its stakes in Blocks 1, 3, and 4 prior to an LNG development, but since nospecific divestment plans have been announced, it is represented in the current partner structure. (Source: PFC Energy)

Heads of Agreement has been signed by Block 1 & Block 2 partners in April 2014 and BG will lead the development phase of theLNG project. BG and its partners have set up an integrated project team at their Dar Es Salaam offices in July 2014. (Source:ExxonMobil)

The upstream facilities will be developed independently by BG & Statoil in Block 1 & Block 2 respectively, however no agreements

have been reached on the feedstock commitments. It is understood that GoT has set a minimum target to each of the PSA holdersto supply 10% of the total gas produced towards Domestic Market requirements. (Source: ExxonMobil)

8/10/2019 Tanzania UKTI Oil and Gas Report

29/68

29

HOME CONTENTS

29

Typical CAPEX Investment c. 35-45%

3.1 TLNG - Value Chain

Typical CAPEX Investment c. 55-65%

Tanzania LNG Project Estimate

Offshore Facilities CAPEX: $ 7 9 BillionTanzania LNG Project Estimate

LNG Facilities CAPEX: $ 11 -13 Billion

Gas Reception & TreatmentGas Production

Source:Block 1 & Block 2

(Subsea lines)

Feed Gas

ONSHORE FACILITIES

Gas transport PipelineFor Domestic Market

Usage

LNG storage

Primarygas/liquid

separation

Condensatestorage

OFFSHORE FACILITIES

Gas Liquefaction

LNG LoadingFacility for Export

LNG Carrier

CondensateStabilization

Acid GasRemoval

Dehydration& MercuryRemoval

LNG TRAIN 1

HydrocarbonSeparation &Liquefaction

Fractionation

Condensates

C5+

LNG TRAIN 2

8/10/2019 Tanzania UKTI Oil and Gas Report

30/68

30

HOME CONTENTS

30

3.1 TLNG Indicative Development Plan

Block 1

Block 2

Block 3

Block 4

TANZANIA

L ind i

Mtwara

Lindi Bay

Block 2

Block 1

Offshore Development LNG Plant at Lindi

Mtwara Port Offshore Supply Base

8/10/2019 Tanzania UKTI Oil and Gas Report

31/68

31

HOME CONTENTS

31

3.1 TLNG Project Profile

Offshore

Development Blocks: Block 1 (BG Operated) + Block 2 (Statoil Operated). Two totallyindependent projects will be executed by BG & Statoil respectively

Number of Wells: Between 24 48 wells in total across both Blocks

Water Depths: 1800 2000 meters

Drilling & Completions: Development wells through 12 inch big-bore

Offshore Facilities: Subsea separation and boosting systems with Subsea Well streamCompression systems (WSC)

Onshore LNG Plant

Location: Lindi

Development Concept: Two x 5.0 mmtpa onshore trains

Output Capacity: 10 mmtpa

Feedstock Gas: Block 1 (BG Operated) and Block 2 (Statoil Operated)

8/10/2019 Tanzania UKTI Oil and Gas Report

32/68

32

HOME CONTENTS

32

3.1 TLNG Indicative Project Schedule

Activity 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Commercial

Subsurface(Block 1 & 2)

Offshore(Block 1 & 2)

LNG Site

LNG Train 1

LNG Train

2, 3 etc

Critical

Milestones

Pre-FEED

(1-2 Years)

FEED

(1-2 Years)

Execute - EPC(4-5 Years)

Site MoUSigned

April 2014

Pre-FEEDContract Award

FEEDContract Award

EPCContract Award

Execute - EPC(4-5 Years)

1st LNG Cargo

Pre-FEED(1-2 Years)

FEED(1-2 Years)

Execute - EPC(4-5 Years)

Host GovernmentAgreements

Development Wells

SiteAccess

Concept Select Final Investment

Decision (FID)

TZ GeneralElections

October 2015**

** The general elections scheduled for October 2015 could potentially delay the project due to a) lengthy process of negotiating the Host Government Agreements, b) Land Acquisition(for LNG plant) and Resettlement requirements

8/10/2019 Tanzania UKTI Oil and Gas Report

33/68

33

HOME CONTENTS

33

3.2 Supply Chain Opportunities Offshore

Rigs

Single rig drilling champions fordevelopment wells in Blocks 1 & 2Development drilling anticipatedbetween Q4 2019 & Q3 2021

Casings & Piping

Conductor CasingSurface Casing

Intermediate CasingsProduction Casings

Well Completions Equipment

Sub-surface Safety Valves (SSSV)DH gauges, Packers, etc

Wellhead System Equipment

Wellheads (low/high pressure)Rigid Lock Seal Assy (RLSA)

Casing Hangers & Seal assemblySpacer Sleeves

Xmas tree Equipment

Production treeTree capsSubsea tree modulesTubing Hangers

Engineering & Design

Basic Engineering DesignFront End Engineering Design(FEED)Detailed Engineering

Manifolds

Cluster manifolds, templatemanifolds, pipeline end manifolds

(PLEMs), subsea distribution units(SDUs)

Jumpers & tie-in spools

Termination heads, breakoutconnectors, etc

Umbilicals

Infield & extension

Valves & Fittings

Isolation, control, anti-surge valves,flanges & pipe fittings

8/10/2019 Tanzania UKTI Oil and Gas Report

34/68

34

HOME CONTENTS

34

3.2 Supply Chain Opportunities - Offshore

EPC Contracts

The engineering, procurement,installation and commissioning ofsubsea umbilicals, flowlines andstructures.

Flexible Pipe

Flexible pipes

Clad Pipes& Fittings

Mechanical cladding, Pipe weldcladding, cladding of fittings &flanges

3rd Party Inspection & Expediting

Manufacturing & testing inspection,field expediting

Offshore Equipment Rentals

Winches, Marine Cranes, Pumps,Rigging equipment, umbilical reels,hydraulic power packs, power tools,mobile workshop & deck equipment

Pre-commissioning and

Commissioning Services

Subsea Separation Modules

Subsea Compression Modules

3rd Party Project Review Services

Project evaluation & project systembenchmarking

Offshore Vessels

Construction Support vessels (CSV),Barges, Platform Supply Vessels(PSV), Anchor Handling Tug Supply(AHTS)

8/10/2019 Tanzania UKTI Oil and Gas Report

35/68

35

HOME CONTENTS

35

3.2 Supply Chain Opportunities - Offshore

Life-of-Field

The inspection, maintenance, repairand integrity management of subseainfrastructure.

Logistics & Freight Forwarding

Special Forgings

Mechanical joints, clamps, hubs,thermowell, blinds & rings

Training

HSSE, Technical & vocational

8/10/2019 Tanzania UKTI Oil and Gas Report

36/68

36

HOME CONTENTS

36

3.2 Supply Chain Opportunities LNG Plant

LNG Process Train 1

Pressure vessels, heat exchangers,pumps, refrigeration compressors,air coolers, cold boxes, pumps andcryogenic piping products

LNG Process Train 2

Pressure vessels, heat exchangers,pumps, refrigeration compressors,air coolers, cold boxes, pumps andcryogenic piping products

Power Generation, Distribution &

Fuel Gas Facilities

Emergency diesel generator, fuelgas system & power plan substation

Effluent Collection and Firewater

Facilities

Fire water system, service water

system, drainage & effluent systems

Instrument air, Inert Gas and

Cooling Water Facilities

Air separation, cooling watersystems, etc

Boil Off Gas (BOG) compressor &

flare facilities

BOG compressors & flare stack

Inlet gas facilities & solvent

storage

Filtration skid, solvent storage tanks& pipe track in unit

LNG Storage tanks

LNG storage valves structure &storage systems

Refrigerant Storage & Water

System Facilities

Interconnection Pipe Rack

8/10/2019 Tanzania UKTI Oil and Gas Report

37/68

37

HOME CONTENTS

37

3.2 Supply Chain Opportunities LNG Plant

LNG Supporting Facilities

Administrative building, maintenancefacility, ancillary buildings

Temporary Facilities & Services

Construction camp, catering,communications, temporary powerequipment, scaffolding

LNG Loading Corridor

Loading line/rundown header drainpump etc

LNG Jetty & Mooring Facilities

Berths, vapour loading arms, costalprotection, etc

Engineering & Design

Basic Engineering DesignFront End Engineering Design(FEED)Detailed Engineering

3rd Party Project Review Services

Project evaluation & project systembenchmarking

Pre-commissioning and

Commissioning Services

Site Civil Works

Concrete supply and placing,Formwork supply and install, Sitepreparation (Clearing, Grubbing andRough Grading)

Modules Setting & Heavy Lifts

Logistics

Logistics, freight forwarding

8/10/2019 Tanzania UKTI Oil and Gas Report

38/68

38

HOME CONTENTS

38

3.2 Supply Chain Opportunities LNG Plant

Piping & Valves

Control valves, pipes

Electrical & Instrumentation

Electrical and instrument cable,control systems (distributed controlsystems, safety systems)

Bulk Procurement

Structural steel, bolts, fuel, PPE,tools, construction equipment , etc

Training

HSSE, Technical & vocational

Waste Management Services

Sanitation & Sewage, Non-Hazardous & Hazardous waste,Pollution control activities

Maintenance, Repair & Operations

Maintenance contractors, Spares &Consumables

Professional & Administrative

Services

Legal, Accounting, Cleaning, officeadministration, facilitiesmanagement, etc

IT & Communication

Computer, telecom & conferencesystems

Catering Services

Security

LNG Plant, Camps

8/10/2019 Tanzania UKTI Oil and Gas Report

39/68

39

HOME CONTENTS

39

4. Doing Business in Tanzania4.1. Barriers/Issues & Recommendationsa. Overview

b. Government of Tanzania (GoT) initiatives

c. Recommendations

4.2. Market entry strategies

4.3. Setting up Companies

4.4. Tanzania Investment Centre

8/10/2019 Tanzania UKTI Oil and Gas Report

40/68

40

HOME CONTENTS

40

Barriers & Issues

Legislative &Regulatory

Legal system andJudiciary

Setting upCompanies

Access to Land

Customs &Shipment R

Labour &Employment

Capability &Capacity

Limited SupportingIndustries

Skilled Labor &TechnicalManpower

Local Content

Financial

Access to Finance

High Interest Rates

Value Added Tax

(VAT)

Others

Poor Infrastructure

Corruption

4.1. Barriers/Issues - Overview

CONTENTS

8/10/2019 Tanzania UKTI Oil and Gas Report

41/68

41

HOME CONTENTS

41

4.1 Barriers/Issues - GoT initiatives

Tanzania Development Vision (TDV) 2025

A Long-term Development Philosophyintroduced in the year 2000

- Objectives -Social & Economic progress

Political DevelopmentInstitutional Development

Technological DevelopmentEnvironmental Sustainability

Long-Term Perspective Plan (LTPP)a vehicle for implementing TDV 2025

1st (2011-15)Unleashing Growth

Potential

2nd (2016-20)Nurturing Industrial

Economy

3rd (2021-25)Export-led Growth

3 x Five Year Development Plans (FYDP)

Big Results Now (BRN)a vehic le for pr ior i t iz ing

Initiative of the government aimed at establishing a strong and effective system tooversee, monitor and evaluate the implementation of its development plans

(particularly the 1st FYDP)

6 priority areas have been identified in collaboration with the private sector to improve the business environment

1. RealigningRegulations &

Institutions

3. Taxation,Multiplicity of

Levies & Fees

4. CurbingCorruption

6. ContractEnforcement,Law & Order

5. Labor Law &Skill set

2. Access toLand & Security

of Tenure

132 legislative amendments targeted in the next 12 months to simplify and speed up administrative processes

HOME

CONTENTS

8/10/2019 Tanzania UKTI Oil and Gas Report

42/68

42

HOME CONTENTS

42

Issue/Barrier Background Recommendations

Legal system and

Judiciary

Tanzania is part of the Commonwealth; its legalsystem is based on the English Common Lawsystem

The existing constitution includes the principles ofthe Rule of Law, separation of powers and apluralistic political system

The court system is hierarchy with hierarchicalPrimary Courts as lowest courts in the land followedby Subordinate Courts (Magistrates, District andResident Magistrates), High Courts and the Court of

Appeal as the highest

oAll appeals from Subordinate Courts go to the High Court

o The High Court of Tanzania has three main divisions; theCommercial, Labour and Land divisions of the High Court,which were established to provide for specialization andideally more streamlined case management

The judiciary is often criticized for its lackof speed and efficiency. However in recentyears the Commercial Division of the HighCourt of Tanzania has been establishedfor the sole purpose of addressing

disputes arising from commercialtransactions

Tanzania has in place the Arbitration Act,Cap 15 R.E 2002 (Arbitration Act) and isalso a contracting state of the Conventionon the Recognition and Enforcement ofForeign Arbitral Awards (New YorkConvention)

Parties may elect to submit to foreignarbitration and arbitration awards areenforceable in line with the New YorkConvention and the arbitration act

In line with common law principles, theparties are free to choose the applicablelaw, including foreign law and English lawis an obvious choice in Tanzania

4.1. Legislative & Regulatory Legal System and Judiciary

Source: DLA Piper & IMMMA Advocates

HOME

CONTENTS

8/10/2019 Tanzania UKTI Oil and Gas Report

43/68

43

HOME CONTENTS

43

Issue/Barrier Background Recommendations

Legal system and

Judiciary

Although the Court of Appeal of United Republic ofTanzania has jurisdiction in Zanzibar and mainlandTanzania, Zanzibar has its own distinct andseparate legal system, including commercial lawsand regulations

There are currently around 4100 advocates

registered with the law society of Tanzaniacompared to 166,423 registered solicitors inEngland and Wales

The Arbitration Act allows the Tanzaniancourts to stay proceedings if (includingforeign) arbitration was agreed but theyhave discretion to assume jurisdiction ifthey believe arbitration is an unreasonablevenue for the matter

Source: DLA Piper & IMMMA Advocates

HOME

CONTENTS

8/10/2019 Tanzania UKTI Oil and Gas Report

44/68

44

HOME CONTENTS

44

Issue/Barrier Background Recommendations

Setting up

Companies

Generally there are no restrictions for non-Tanzanian citizens to incorporate a company and/orown shares and interest in a company in Tanzania

Foreign companies or non-Tanzanian individualswishing to establish a business presence inTanzania can establish an onshore entity as abranch office, as a private limited company or as apublic limited company (See section 4.3 for moreinformation on different types of companies)

Currently there are (compared to othercountries in Sub-Saharan Africa) fewsectors where foreigners cannot freelyopen businesses. However, the increasedinterest in the Oil & Gas sector has

triggered a political and social debateabout local content provisions andrestrictions

It is not unlikely that as the sectordevelops, the legislator will introduce morelocal content requirements, which mayinclude mandatory shareholdings andownership stakes in oil & gas industry

related businesses In addition, it is likely that tenders and

other procurement approaches may haveto favour Tanzanian businesses with anincreased local content

4.1. Legislative & Regulatory Setting up Companies

Source: DLA Piper & IMMMA Advocates, ASCO

HOME

CONTENTS

8/10/2019 Tanzania UKTI Oil and Gas Report

45/68

45

HOME CONTENTS

45

Issue/Barrier Background Recommendations

Setting up

Companies

In order to have a limited liability companyincorporated under the Companies Act, theprospective shareholders will first be required toconduct a name clearance with the Registrar ofCompanies in order to establish the availability ofthe name under which it wishes to register

Once this is done, the company is required to

present its Memorandum and Articles of Association(MEMARTS) to the Registrar of Companiesaccompanied with the requisite forms and filingfees. The filing fees for incorporation of a limitedliability company range from 45,000 TZS up to300,000 TZS depending on the share capital of thecompany

Once registered, the envisaged limited liability

company must obtain from Tax Payer IdentificationNumber (TIN) from Tanzania Revenue Authority(TRA). In order to obtain the TIN, the company mustfill in the requisite forms and deliver the same to theTRA

The process of incorporating a limitedliability company requires a number ofsteps and approach different offices

The process is not automated but if alldocuments are provided and steps arefollowed diligently the process may takebetween 1-3 months depending on the

nature of the business

However, the involvement of a number ofsteps and offices may lead to delays,especially if the process is not followedcorrectly. Any delays may lead todifficulties in obtaining work permits,entering into leases, tendering forcontracts and it is thus recommended to

follow the process diligently or seekprofessional legal advice

In addition to the business registration,companies will need to have a businesslicense which will have to be renewed onan annual basis

Source: DLA Piper & IMMMA Advocates, ASCO

HOME

CONTENTS

8/10/2019 Tanzania UKTI Oil and Gas Report

46/68

46

HOME CONTENTS

46

Issue/Barrier Background Recommendations

Setting up

Companies

The initial directors of the company must also holdpersonal TINs and in the event they do not alreadyhold the same, they must also acquire personalTINs from the TRA. Part of the process for acquiringthe personal TIN is for the directors to have theirfingerprints taken by the local TRA offices which inturn will require physical presence of the directors

After receiving the TIN, a business licence must beobtained. A business licence is obtained from eitherthe municipal council or from the Ministry of Industryand Trade depending on the nature of the businessconducted by the newly incorporated company

Subsequently the new company will also have toregister with the TRA to obtain a Value Added TaxCertificate in the event their turnover exceeds TZS

40 Million, a social security fund and such otherregulatory approvals as may be required dependingon the nature of the companys business

The business license fees vary by sectorand business activities (categories arepredefined and determined at the time ofapplication), are payable annually and arenotably higher for foreign ownedcompanies

Source: DLA Piper & IMMMA Advocates, ASCO

HOME

CONTENTS

8/10/2019 Tanzania UKTI Oil and Gas Report

47/68

47

HOME CONTENTS

47

Issue/Barrier Background Recommendations

Access to Land According to Section 4 of the 1999 Land Act, allland is public land and is vested in the President astrustee for and on behalf of all the citizens ofTanzania

Non-Tanzanian citizens are not permitted to acquire

rights over land for any purpose unless it is by wayof derivative rights for investment purposes throughthe Tanzania Investment Centre (TIC), a lease froma Tanzanian citizen or through a joint venturecompany

Investors can be granted derivative rights to occupyand use land from a superior title held in the nameof the TIC for investment purposes under the Land

Acto Essentially it is similar to a long-lease, the derivative right

allows the holder to deal with the land granted to themincluding mortgaging the same with the prior approval of theTIC

o The holder of a derivative right can only use the land for theapproved investment purpose and it shall not exceed 99years

If a foreign investor decides to enter into alease agreement with a Tanzanian, itshould be a lease contract that shall beten days less then the period for which theright of occupancy has been granted tothe lessor

Leases that are longer than 5 years mustbe registered in the Land Registry

If a valid long-term lease exists it can bemortgaged and banks will usually acceptthis security

4.1. Legislative & RegulatoryAccess to Land

Source: DLA Piper & IMMMA Advocates

HOME

CONTENTS

8/10/2019 Tanzania UKTI Oil and Gas Report

48/68

48

HOME CONTENTS

48

Issue/Barrier Background Recommendations

Access to Land Tanzanian citizens, in contrast, have the right toacquire rights over land whether for residential,industrial, commercial, social or cultural andscientific purposes (known as a right of occupancy),but are restricted by the Land Act from transferringtheir rights to non-citizens

A foreigner can enter into a sub-lease agreement

with a Tanzanian who has been granted a right ofoccupancy

Foreign investors may also incorporate companies,in which one or more Tanzanian citizens are majorshareholders and are able to acquire land, by a jointventure agreement and use the acquired land forcompany purposes

Source: DLA Piper & IMMMA Advocates

HOME

CONTENTS

8/10/2019 Tanzania UKTI Oil and Gas Report

49/68

49

HOME CONTENTS

49

Issue/Barrier Background Recommendations

Customs &

Shipment

Regulations

Tanzania is a member of the East AfricanCommunity (EAC) customs union along with Kenya,Burundi, Rwanda, and Uganda

o Customs tariffs, rules of origin, import prohibitions, and

trade remedy regulations have been harmonized throughthe EAC

o In this single customs territory, duties and other restrictiveregulations have been removed and internal bordercustoms controls on goods moving among the partnerstates have been minimized to realise a free circulation ofgoods

o The applicable customs rules and regulations distinguishbetween goods originating from inside and outside EAC aswell as goods for export from EAC

o Imported goods from non-EAC countries are formallytreated as transit goods and are liable to customs duty atthe point of entry into Tanzania, at the rates published inthe EAC Common External Tariff

The Customs Department under theTanzania Revenue Authority is vested withthe responsibility of collecting duties andtaxes on imports and exports

oAll goods being imported into Tanzania can onlybe cleared through the ports of Tanzania by aclearing and forwarding agent licensed by theTanzania Revenue Authority

o The documentation process is to be effectedonline and can be done before the arrival of thegoods

4.1. Legislative & Regulatory Customs & Shipment Regulations

Source: DLA Piper & IMMMA Advocates

HOME

CONTENTS

8/10/2019 Tanzania UKTI Oil and Gas Report

50/68

50

O

50

Issue/Barrier Background Recommendations

Customs &

Shipment

Regulations

The taxes and duties vary depending on the goodand its origin but the following taxes and duties maybe payable for import into Tanzania:

o Excise duty which ranges from 0%-50% depending on theitems imported

o Value added tax at the rate of 18% which is payable on theimportation of goods or services from any place outside

mainland Tanzania

Source: DLA Piper & IMMMA Advocates

HOME

CONTENTS

8/10/2019 Tanzania UKTI Oil and Gas Report

51/68

51 51

Issue/Barrier Background Recommendations

Labour &

Employment

The Employment and Labour Relations Act of 2004,governs labour matters in Tanzania, and sets, interalia, minimum standards for employment and grantscertain rights and protection

Key features are, the need to have a written

employment agreement, minimum requirements forbreaks, vacations, sick leave and pay

Any labour disputes will be instituted at the Councilfor Mediation and Arbitration (CMA) and all appealsarising out of any awards from the CMA are referredto the High Court Labour Division

The labour laws and regulations are oftendescribed as employee friendly by foreigninvestors but in principle wouldnt exceed

any protection that companies would findin the UK or continental Europe

The labour courts are described as beingemployee friendly and favouringTanzanian especially in relation to foreigninvestors, but often foreign investorsstruggle with their cases since they havenot applied the same diligence they wouldhave applied in relation to contracts andprocedures in other jurisdictions

It is therefore highly recommended tounderstand the local labour laws andregulations and follow and manage thebusiness (including HR matters)accordingly

4.1. Legislative & Regulatory Labour & Employment

Source: DLA Piper & IMMMA Advocates, ASCO

HOME

CONTENTS

8/10/2019 Tanzania UKTI Oil and Gas Report

52/68

52 52

Issue/Barrier Background Recommendations

Labour &

Employment

Visa Requirements & Permits:

Prior to commencing work in Tanzania, a foreignermust obtain a permit to do so. There are 4 mainclasses of permits:

CTA (Carrying on Temporary Assignment) permitusually granted to those conducting a temporaryassignment in Tanzania but are not employed here;

this includes meetings, business developmentactivities. CTA is also usually obtained at the initialstages when a company is setting up its branch orsubsidiary in Tanzania

A Residence Permit Class A, can be granted to an

investor making at least USD 300,000 worth ofinvestment in Tanzania

The Residence Permit Class B, is the most

common work permit and is usually granted to aforeigner undertaking specific employment inTanzania

o The Residence Permit Class B, has to be applied for by the

employer for the prospective employee

The Residence Permit Class B is the

most common permit

o The Director of Employment (Ministry of Labourand Employment) must review whether there areno Tanzanian citizens that could otherwise beemployed

o Once this test has been completed, the PrincipalCommissioner of Immigration Service (Ministry

of Home Affairs) will issue the Residence PermitClass B

The increasing number of foreignersentering Tanzania has created a backlogon approvals

o In addition a political and public debate about theneed for foreigners has commenced which ledrecently to more scrutiny when reviewing theapplications

oAs a result the approval times can be up to 3months and the outcome is not alwayspredictable

o It is therefore highly recommended to plan anysuch recruitment and application carefully inadvance and to follow the process andrequirements diligently

Source: DLA Piper & IMMMA Advocates

HOME

CONTENTS

8/10/2019 Tanzania UKTI Oil and Gas Report

53/68

53 53

Issue/Barrier Background Recommendations

Labour &

Employment

o The Residence Permit Class B will be granted if the

employer can show that there are no Tanzanian citizens thatcould perform the duties of the employment and that it istherefore justified to employ a foreigner for a limited period oftime

The maximum duration of a Residence Permit Class B

is 3 years but it has become standard that these permitsare being issued for a maximum of two years

The Residence Permit Class B can be extended but ateach application for extension is subject to a similar testas to whether a Tanzanian citizen could be employedinstead

Residence permit Class C usually granted to

foreign students, researchers, volunteers, personsattending court cases or persons awaiting to leavethe country following the expiry of a Class A or Bpermit

Permits for dependents: The Residence PermitsClass A, B, and C include the possibility to grant

dependents permits for the duration of theResidence Permits for family members. Thesedependent permits can be applied for at the time ofthe application for the main permit or thereafter. Thedependent permits usually do not allow thedependents to work in Tanzania

In the oil and gas sector, the review of theneed to employ foreign workers may beundertaken by the TPDC and TPDC mayhave de facto powers to approve or rejectthe application, however this only appliesto some of the businesses in the sectorand it is recommended to prepare anysubmissions accordingly

Source: DLA Piper & IMMMA Advocates

HOME

CONTENTS

8/10/2019 Tanzania UKTI Oil and Gas Report

54/68

54 54

4.1. Capability & Capacity Limited Supporting Industries

Issue/Barrier Background Recommendations

Limited

Supporting

Industries

Tanzanias major contribution to GDP comes fromAgriculture, Mining, Wholesale & Retail sectors

The Manufacturing sector contributes marginally tothe GDP compared to agriculture.

About 65 percent of manufacturing sector consistfood processing industries, beverages and tobaccofollowed by rubber and plastic.

Tanzanias top 5 companies operate in Food

processing, Beverages, Plastic, Glass and Paper

Opportunity to work in collaboration withlocal companies & government agenciesto develop joint infrastructure projects

Companies can further benefit from theSpecial Economic Zone (SEZ) which has

been designated for the establishment ofa industries as part of the new economylinked to gas exploitation

Opportunity to set up logistics clusters thatemploys readily available TZ low-skilledworkforce. The logistics clusters has thepotential to attract assemblymanufacturing plants

DFID is currently co-funding a World Bankstudy on local content analysis to identifyareas for local capacity development.DFID will be allocating some funds forlocal capacity development, budgets arenot confirmed yet, but it be around GBP 2million over a 5 year time period.

HOME

CONTENTS

8/10/2019 Tanzania UKTI Oil and Gas Report

55/68

55 55

Issue/Barrier Background Recommendations

Skilled Labour &

Technical

manpower

availability

Sizeable skills gaps include engineers (civil, mining,chemical and production) as well as projectmanagers and graduates of earth sciences(geologists, physicists, and chemists).

Skills gaps are also pervasive in skilled trades, suchas electricians, machine operators, bricklayers,carpenters, and various forms of technicians

Some UK companies have startedinternship programs to attract and trainlabor force. Some companies have alsoinitiated graduate development programsfor technical & management roles

Opportunity for in-direct service providersin the oil & gas sector to set up traininginstitutes in partnership with localcompanies or with the government &government agencies (e.g. TPDC) toensure a match between the supply anddemand for skills, including throughcurriculum development and certification

DFID is currently co-funding a World Bankstudy on local content analysis to identifyareas for local capacity development.DFID will be allocating some funds forlocal capacity development, budgets arenot confirmed yet, but it be around GBP 2million over a 5 year time period.

4.1. Capability & Capacity Skilled Labor & Technical Manpower

8/10/2019 Tanzania UKTI Oil and Gas Report

56/68

8/10/2019 Tanzania UKTI Oil and Gas Report

57/68

HOME

CONTENTS

8/10/2019 Tanzania UKTI Oil and Gas Report

58/68

58 58

Issue/Barrier Background Recommendations

High Interest Rates Interest Rate in Tanzania averaged 12.65 % from2002 until 2014, reaching an all time high of 21.42% in June of 2007 and a record low of 3.70 % inOctober of 2009

Governments bonds offer a return of around 14% atno risk. Commercial banks factor administrativecost, profits and risk factors on top of thegovernment bond rates before lending tocommercial sector

Factor in the cost of finance into businessplans

Consider alternative financing sources, butnote the restrictions under foreign

currency issues. Outward capitalpayments still subject to restrictions andmust be submitted to Bank of Tanzaniathrough commercial banks for approval

4.1. Financial High Interest Rates

HOME

CONTENTS

8/10/2019 Tanzania UKTI Oil and Gas Report

59/68

59 59

Issue/Barrier Background Recommendations

Value Added Tax

(VAT)

Oil & gas companies are entitled to special relieffrom VAT on supplies of goods or services usedexclusively in exploring or prospecting for oil & gas.Companies are however required to pay input VATon their costs during the development and

production phases, which can be claimed backwhere the company is in a refund position

VAT refunds claims can only be made every sixmonths and can take a significant amount of time tobe paid back by TRA

The new VAT bill, anticipated to come into effect in2015, presents a number of potential challenges, forexample with regards to imported services, VAT

treatment of exports and importation of capitalgoods

In order to claim VAT refunds, companiesneed to submit a claim that has beencertified by an audit firm

4.1. Financial Value Added Tax (VAT)

HOME

CONTENTS

8/10/2019 Tanzania UKTI Oil and Gas Report

60/68

60 60

4.1. Others - Infrastructure

Barrier/Issue Background Recommendations

Infrastructure Roads:

Low road density (55 square km of road for 1000square km of land)

Poor quality of roads - 40% of the trunk roads are

paved. Less than 9% of classified network is paved

Roads overburdened due to poor railway system

Inadequate integration of the road networks tomarkets and productive areas

Unplanned urbanization and traffic congestion inurban areas

Power: It is estimated that the demand for electricity will

triple by 2020, of which the planned projects will notbe able to meet the demand unless other strategiesare used to increase the supply of power

Poor service quality, power cuts without notice,unplanned power stoppages and interruptions,voltage fluctuations, phase failures and unbalanced

voltages

Evaluate additional cost of doing business inTanzania arising from:

Shipment delays

Transportation cost - limited publictransportation

Capital & Operating cost for back uppower systems (generator sets)

Uninterrupted Power Supply (UPS)requirements

Alternative sources of energy (Solar)

HOME

CONTENTS

8/10/2019 Tanzania UKTI Oil and Gas Report

61/68

61 61

Barrier/Issue Background Recommendations

Corruption There are several laws in Tanzania to fightcorruption, i.e. the Prevention and CombatingCorruption Act (PCCA) of 2007, the Anti MoneyLaundering Act, the 2004 Public Procurement Act,

the Election Expenses Act of 2010, the Economicand Organized Crime Control Act and the CriminalProcedure Act

In 1999 the Government of Tanzania launched theNational Anti-Corruption Strategy and Action Plan(NACSAP) I, followed by the NACSAP II in 2006 toexpand anti-corruption initiates further to localcouncil level and establishing closer collaborationwith civil society

In 2009, Tanzania joined an Extractive IndustriesTransparency Initiative (EITI). EITI is a globalstandard for revenue transparency in the extractiveindustries and consist of a global coalition ofgovernments, companies and civil societyorganisations

In addition to the Tanzanian laws andregulations extraterritorial anti-bribery andcorruption as well as anti-moneylaundering laws may apply to foreign

investors and these laws and regulationsshould be equally followed when doingbusiness in Tanzania

As a rule of thumb, when following eitherUK or USA laws and regulations it isunlikely that the Tanzanian laws andregulations would be breached but it isrecommended to review these on a case-by-case basis as compliance with theselaws and regulations would not excuse abreach of Tanzanian laws and regulations

4.1. Others - Corruption

Source: DLA Piper & IMMMA Advocates

HOME

CONTENTS

8/10/2019 Tanzania UKTI Oil and Gas Report

62/68

62 62

Barrier/Issue Background Recommendations

Corruption In Tanzania, the Prevention and Combating ofCorruption Bureau (PCCB) is mandated with theauthority to investigate allegations or occurrences ofcorruption

o The PCCB, is an independent law enforcement institutionestablished and mandated under section 5 and 7 of thePCCA of 2007 to prevent corruption, to raise awareness andguide government on anti-corruption issues as well asarrest, investigate, initiate proceedings and prosecute casesof corruption

o The office of the Director for Public Prosecutions isresponsible for charging offenders of offences related tocorruption in line with the anti-corruption laws

o The PCCB mandate and operations are limited to Tanzaniamainland

Zanzibar's core anti-corruption laws and institutions

are the Zanzibar Anti Corruption and EconomicCrimes Act (ZACECA), the Auditor General (CAG),the Office of DPP, the Ministry of Justice andConstitutional Affairs, the judiciary, the police, theKMKM and mechanisms under the MoneyLaundering Act, as well as the Anti Corruption

Authority

Source: DLA Piper & IMMMA Advocates

HOME

CONTENTS

8/10/2019 Tanzania UKTI Oil and Gas Report

63/68

63 63

4.2. Market Entry Strategies

Key Information1

Population ~48 Million

GDP (USD billions) 28.25

GDP Growth Rate (estimate 2013) 6.8%

Inflation (estimate 2013) 9.8%

Key Languages Swahili & English

Religions Christianity and Muslim

The most effective way of moving goods and services from UK producers to industrial and consumer users inTanzania is through an agent, distributor and/or by being on the ground. In general, finding a reliable agent ordistributor requires an on-the-ground visit to meet with local business people in person. British companieswishing to approach the Tanzanian market are advised to undertake market research assisted by UK Trade andInvestment (UKTI) post in Dar Es Salaam located at the British High Commission.

Companies wishing to set up a local base may also benefit from support and advice by the UKTI Section of theBritish High Commission in Tanzania. The Tanzania Investment Center (TIC) can also help with useful advice

and contacts.

There are several ways in which British companies can enter the Tanzanian Market:

Export direct Set up an agency Appoint a distributor Joint Venture Selling to the government

In the case of direct export to Tanzania, UK companies are advised to have a local agent in Tanzania.Appointing a local agent /distributor is the best way for initial entry in the Tanzania Market; however this willdepend on the nature of the business itself. Sometimes personal relationships in the Tanzania market dodominate. Initially it might require a personal presence.

There is a need for product training for the agent's workforce especially if your products are very technical. Itmay be required to regularly visit the market especially during the early stages of an interaction with anagent/distributor.

HOME

CONTENTS

8/10/2019 Tanzania UKTI Oil and Gas Report

64/68

64 64

4.3. Setting up Companies

Key Information1

Population ~48 Million

GDP (USD billions) 28.25

GDP Growth Rate (estimate 2013) 6.8%

Inflation (estimate 2013) 9.8%

Key Languages Swahili & English

Religions Christianity and Muslim

Registered Branch:

A foreign branch may be opened by applying for a Certificate of Compliance from the Registrar of Companies The company must submit the full address of their place of business for the branch in Tanzania as well as

names and residential and postal addresses of one or more persons resident in Tanzania authorised toaccept, on behalf of the company, service of notices required to be served on the company

The office in Tanzania then is treated as a branch of a foreign company and is taxed in Tanzania to the extentthat the income has been sourced in the United Republic of Tanzania

Limited Liability Company:

This is the most common type of company used in Tanzania and would create a new and separate legal entitylocally

The number of shareholders for a limited company cannot be less than 2 and must not be more than 50. Eachshareholder is only liable to the extent of his liability as subscribed-in the companys memorandum ofassociation

The limited liability company must have a minimum of 2 directors and a company secretary. There are nogeneral restrictions as to the nationality of the shareholder, directors or company secretary

Public Limited Company:

A company which has 7 or more members, which does not restrict the transfer of shares and offers the publicto purchase its shares

Prior to commencing business as a public company, approval must be sought and obtained from the CapitalMarkets and Securities Authority (CMSA), this being the relevant regulator for Public Companies

In Tanzania there is only one stock exchange this being the Dar Es Salaam Stock Exchange (DSE) as amarket place for shares is monitored and supervised by the CMSA

It is not however mandatory for a Public Company to be listed on the DSE

Source: DLA Piper & IMMMA Advocates

HOME

CONTENTS

8/10/2019 Tanzania UKTI Oil and Gas Report

65/68

65 65

4.4. Tanzania Investment Centre (TIC)

Key Information1

Population ~48 Million

GDP (USD billions) 28.25

GDP Growth Rate (estimate 2013) 6.8%

Inflation (estimate 2013) 9.8%

Key Languages Swahili & English

Religions Christianity and Muslim

The Tanzania Investment Centre (TIC) was established in 1997 by the Tanzania Investment Act to be thePrimary Agency of the Government to coordinate, encourage, promote and facilitate investment in Tanzaniaand to advise the Government on investment poli