Tanzania - Investor Confidence Knocked By Delay to Fourth Deepwater Licensing Round28 Apr 2011 • by Natalie Aster
BMI View: Tanzania's decision to delay its fourth licensing round highlights questions over the government's ability to manage its burgeoning oil and gas sector, which has become a hot spot for East African oil and gas investment. Nevertheless, we expect the country's resource potential to attract interest when the bidding round is launched sometime in 2012.
Tanzania has delayed the launch of its fourth deepwater licensing round until 2012, the country's state-run oil company and upstream regulator Tanzania Petroleum Development Corporation (TPDC) announced on April 12.
Exploration success since late-2010 at BG Group and Ophir Energy's blocks 1 and 3 offshore Tanzania, which the companies think could hold enough resources to support a liquefied natural gas (LNG) project, has heightened interest in the round. Those interested, however, will have to wait. A TPDC statement said that the round was delayed to 'give more time for preparation' and incorporate newly acquired seismic data into the demarcation of the blocks to be put on offer. The TPDC statement did not indicate when in 2012 the round would be launched.
And They're Off
BG Group and Ophir Energy's Offshore Tanzania Blocks
The delay will not do anything to bolster confidence in Tanzania's ability to manage its burgeoning petroleum sector. Concerns have already been raised over TPDC's dual role as the upstream regulator and the state oil company, with an interest in the very projects it is meant to regulate, which clearly presents conflicts of interest. Further concerns have also been raised that TPDC and the Energy and Water Utilities Regulatory Authority (EWURA) claim overlapping authorities to regulate the midstream and downstream sectors. Legislation has been proposed to deal with these matters but no progress has been made yet. A delay in the latest round only raises further concerns over whether the country's regulatory regime is yet suitable for large-scale oil and gas investment. Problems encountered by Tullow Oil in Uganda and Kosmos Energy in Ghana point to the sort of difficulties posed by immature regulatory environments.
Nevertheless, we expect the round to attract significant interest when it is launched. Major industry players ExxonMobil, Statoil and Petrobras took offshore acreage around the prospective Rovuma and Mafia basins before BG and Ophir proved the region's hydrocarbon potential, so we expect interest to be even stronger in Tanzania's first round since the discoveries. When announced in February 2010, TPDC said the fourth deepwater licensing round would include 13 blocks, all located beyond the near-shore blocks that have already been awarded. The blocks likely to attract the most attention are blocks 1A and 1B, 2A and 2B, 3A and 3B and 4A and 4B, which are extensions of the blocks in which BG and Ophir have made discoveries.
The Waiting Game
Tanzania's Upstream Players
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