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State participation is necessary in natural gas resource development

20th October 2013
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The discovery and development of gas resource in Tanzania offers a hope for a vibrant economy. Natural gas is a geological resource made of hydrocarbons - hydrogen and carbon, the building blocks of life sustaining organic matter. The resource comes from geologically altered organic matter of living organisms - plants and animals of the oceans during the Mesozoic and the Paleozoic geological times over 60 to 600 million years ago.

With a diversity of uses from power generation, household uses, fuel for locomotives and motor cars and manufacture of fertilizer and petrochemical products, natural gas is one of the major driving engines of economies in emerging economic giants like the BRICS countries (Brazil, Russia, India, China and South Africa).

In the developed World too, like Europe, USA and Australia natural gas utilization plays an important role in their economies. The resource also is an important economic engine in most developing countries like Qatar, Saudi Arabia, Venezuela, Nigeria and Algeria.

Many other countries like Angola, Mozambique, Namibia, Mauritania, Cameron, Ghana and Tanzania:substantive amount of natural gas have been discovered in recent years. However these countries face immerse challenges to develop such resources to produce positive economic impacts of their countries.

As of January 2013 Tanzania contained proven reserve of over 6.5 billion cubic meters (bcm) of natural gas ranking 83 of 99 countries of the world that contain natural gas.

The leading countries in proven natural gas reserves are Iran and Russia that stand at 33.6 and 32.9 trillion cubic meters (tcm) of natural gas respectively.

The challenge of developing natural gas in developing countries seems to come from the current global investment system that gives advantage to international oil and gas companies to dominate global investment terrain; ensuring proceeds are taken by these oil and gas companies of the world abroad. This creates a real possibility of States and citizens in developing countries losing out.

Tanzania as one of these countries needs to be wary as it develops its natural gas resources. It needs to learn the trade from emerging economies like India which raised from a minority player into a major player in natural gas in the world because it took the right track. To make my point of advice to the Government bare, let me recount some events in the gas development history of India, and plead the Government to emulate.

The trick was for the State of India to ensure full and upright participation in the business. It all began in 1956 when an Oil and Natural Gas Corporation Limited (ONGCD) company was formed to plan, promote, organize and implement programs for development of Petroleum (including gas) and the production and sale of petroleum and petroleum products produced. Since then the Indian public participation in the natural gas sub-sector was made more localized and it became an aggressive economic fighting machine that ensured technical, manpower and financial capacities were built to the right level and localize the benefit of the economic activity.

Today ONGCD is a Government entity by 80% equity and 20% is owned by the public. Itis one of the leading Oil and Gas Company in the world with projects and investments abroad while ensuring Indian economic benefits and interests are protected. The Indian Government also owns and operates numerous refineries, fertilizer and petrochemical companies.

Gas India Company (GAIL) is another leading Government Gas Company in India that exhibits cutting edge technologies and business expertise in the gas industry ensuring proceeds from gas benefits the country and its people.

In India Government Oil and Gas Companies dominate the arena and other international oil and gas companies like SHELL and BP are equal players and partners in business and this ensures increased local benefits.

In my opinion, Tanzania needs not to fall victim to international oil and gas oligarchy monopoly as the situation may create a losing out scenario in terms of local profits and benefits.

It needs to start and support its National Oil and Gas Company. It should develop a corporate Oil and Gas Company that is free from Government bureaucracy that must enjoy the corporate decision business playing field. It must be truly a private Oil and Gas Company with its majority shareholder as the State.

State participation in natural gas development and utilization is necessary to ensure national benefits from the natural gas. This has worked in India, Norway, Brazil, and Russia and it should also work on Tanzania economic development strategy. I hope this catches your imagination and probably let it be shared by the public.

Dr Dalaly Peter Kafumu is Member of Parliament for Igunga and Former Commissioner for Minerals

SOURCE: GUARDIAN ON SUNDAY