Oil, Gas and the Transition to Renewables 2024 Comparisons

The United Republic of Tanzania is a union of two countries, Tanzania Mainland and Tanzania Zanzibar. Ownership of hydrocarbons in Tanzania is vested in the public and managed by the government. Persons interested to engage in exploration, development and production are required to obtain necessary approvals and permits as provided for under the Petroleum Act, which is the major relevant law. Where such activities are in Tanzania Zanzibar, such permits and approvals will be granted under the laws applicable in Tanzania Zanzibar. The regulatory system is such that approvals and permits for exploration, development and production would exclusively be granted to the national oil company, which is the Tanzania Petroleum Development Corporation (TPDC), which in turn conducts operations through partnerships with interested persons through either an open tendering process or a direct award of a block.

To qualify for a partnership with TPDC, the participating entities must be registered in Tanzania and demonstrate the required technical knowledge and financial capability. Additionally, when forming a partnership, the TPDC is obligated to maintain a participating interest of at least 25%.

Upon establishment of a partnership, the Minister of Energy, with the advice of the Petroleum Upstream Regulatory Authority (PURA) and approval from the Cabinet, enters into a production sharing agreement with the TPDC and its partners. This production sharing agreement is intended to govern the terms and conditions of the partnership.

The governmental agencies that are mainly responsible for regulating hydrocarbon activities in Tanzania are the Ministry of Energy which is responsible, amongst others, to formulate and review policies and plans for the sector; grant and renew petroleum exploration and development licences; enter into agreements on behalf of the government; and initiate inquiries and studies on petroleum activities.

Another regulatory body is PURA, whose key function includes regulation of the upstream petroleum activities through advising the Minister of Energy on negotiations, promotion and bidding processes of production sharing agreements; granting and renewing licences; advising on proposed development plans by a licence holder; and advising on decommissioning of installations.

There is also the Energy and Water Utilities Regulatory Authority (EWURA) which exercises regulatory powers in the midstream and downstream sectors. Its functions include granting, refusing, renewing, suspending and revoking licences for entities engaged in midstream and downstream activities; implementing government policies; and determining and enforcing tariffs, rates, charges and fees in respect of midstream and downstream activities.

As mentioned above, TPDC is the national oil and gas company of Tanzania. It is responsible for managing and overseeing the commercial aspects of petroleum operations in the upstream, midstream and downstream sectors. It is also responsible for representing the participating interests of the government in petroleum and natural gas agreements. The government maintains 51% shares in TPDC.

The principal hydrocarbon legislation and regulations related to upstream, midstream and downstream operations encompass the following.

Petroleum Act No 21 of 2015

This is the main legislation that sets the legal and regulatory framework of the oil and gas sector in Tanzania. The legislation establishes PURA as the main regulator in upstream activities and acknowledges EWURA as the regulator in midstream and downstream activities. It provides a comprehensive legal and regulatory framework for the exploration, development, production and utilisation of petroleum resources. It also provides for licensing, regulatory authority, environmental protection, health and safety, local content requirements, and revenue-sharing mechanisms.

Energy and Water Utilities Regulatory Authority Act (Cap 414 R.E. 2006)

This legislation establishes EWURA, which exercises regulatory powers in the midstream and downstream sectors. It governs licensing, tariffs, rates, charges and fees for entities engaged in midstream and downstream regulated activities.

Oil and Gas Revenue Management Act No 22 of 2015

This legislation provides for the management of oil and gas revenues in Tanzania. It outlines principles for revenue collection, allocation, management and reporting, ensuring transparency and accountability.

Natural Wealth and Resources (Permanent Sovereignty) Act No 5 of 2017

This legislation affirms Tanzania’s permanent sovereignty over its natural wealth and resources, including oil and gas. It also provides a legal framework for the government to exercise control and ownership over these resources, ensuring their sustainable utilisation for the benefit of the nation and prohibits subjecting matters arising from natural wealth and resources to any foreign court or tribunal.

The Natural Wealth and Resources Contracts (Review and Re-Negotiation of Unconscionable Terms) Act No 6 of 2017

This legislation mandates the government of Tanzania to review and renegotiate or expunge the terms of any contract pertaining to the extraction, exploitation, acquisition and utilisation of natural wealth and resources which are found to jeopardise the interests of the state.

Income Tax Act (Cap 332 RE 2019)

The Income Tax Act regulates the taxation of various sources of income in Tanzania, including income generated from oil and gas activities. It sets out the tax obligations, rates and procedures for companies and individuals.

Environmental Management Act No 20 of 2004

This legislation provides the legal framework for environmental protection and management in Tanzania, including the oil and gas sector. It establishes the rights and responsibilities of stakeholders in safeguarding the environment, preventing pollution and promoting sustainable development, and sets out the procedures for environmental impact assessments, permits and enforcement mechanisms to ensure adherence to environmental standards.

The Tanzania Extractive Industries (Transparency and Accountability) Act No 23 of 2015

This legislation aims to ensure transparency and accountability in the extractive industries for the benefit of the Tanzanian sector through establishing the Extractive Industries (Transparency and Accountability) Committee. 

The Petroleum (Natural Gas Midstream and Downstream) General Regulations, Government Notice No 270 of 2020

These regulations outline the conduct of midstream and downstream natural gas activities including aspects of the transportation, distribution, storage and sale of natural gas.

Upstream Petroleum Regulatory Authority (Annual Levy, Fees and Charges), Government Notice No 959 of 2019

These regulations outline the annual levy, fees and charges imposed by the Upstream Petroleum Regulatory Authority. The regulations specify the financial obligations for companies operating in the upstream petroleum sector and provide guidelines for the calculation and payment of these levies, fees and charges.

The Petroleum (Reconnaissance and Tendering) Regulations, Government Notice No 958 of 2019

These regulations govern the procedures and requirements for conducting petroleum exploration and exploitation activities, including the issuance of licences, bidding processes and evaluation criteria.

The Petroleum (Local Content) Regulations, Government Notice No 197 of 2017

These regulations aim at enhancing and promoting local participation within the petroleum industry. They outline requirements for companies to prioritise local goods, services and employment opportunities in their petroleum activities.

The Petroleum (Natural Gas Pricing) Regulations, Government Notice No 353 of 2020

These regulations establish procedures and methodologies used to calculate and set natural gas prices, in order to ensure fairness, transparency and competitiveness in the pricing process.

The Petroleum General Regulation, Government Notice No 163 of 2011

This regulation provides for the establishment of the Petroleum Supply Technical Committee and compliance specifications, as well as quality control of petroleum products.

The Petroleum (Corporate Integrity Pledge) Regulations, Government Notice No 782 of 2019

These regulations aim at promoting integrity and accountability in the corporate community, reinforce corporate governance and transparency, and provide technical assistance for implementing anti-corruption measures by persons carrying out petroleum operations.

The Petroleum (Bulk Procurement) Regulation Government Notice No 198 of 2017

This regulation governs the bulk procurement of petroleum products. It provides for guidelines and procedures for the procurement process, including qualification criteria, bidding processes and evaluation methods.

As explained under 1.1 System of Hydrocarbon Ownership, exclusive rights to explore, develop and produce hydrocarbons are exclusively granted. The granted rights are not transferable but the TPDC may enter into partnerships with private investors through a production sharing agreement for purposes of exploring, developing and producing hydrocarbons in Tanzania provided that it maintains a 25% participating interest in such partnership. This production sharing agreement will, among other things, state the rights of each party, whereas the rights of TPDC and those of a contracting company will be taken to be joint and several. Specific duties of TPDC include ensuring that it obtains necessary licences required on an identified block and renewal of such licences upon expiry. In the production sharing agreement, the transfer or assignment of rights is not allowed unless there is a written consent from the Minister for such transfer.

As stated in 2.1 Forms of Private Investment: Upstream, upstream licences are only issued to TPDC which can enter into a production sharing agreement with a private investor in Tanzania. The choice of this private investor must be done through an open tendering process which is public and transparent. In so doing, the production sharing agreement will only be concluded after completion of a competitive public tender. In any case, the Petroleum Act, 2015 allows the Minister for Energy, after being advised by PURA and the cabinet, to engage in direct negotiations with qualified and eligible companies where the competitive public tendering is not effective. The only difference is the reconnaissance permit which may directly be issued to any company interested in carrying out preliminary evaluation for hydrocarbons potential. The licence may be granted for not more than three years.

The major qualification for a private investor to form a partnership with TPDC is that it must be registered in Tanzania under the Companies Act and must also have technical knowledge and financial capacity. This means that a private investor would, amongst other things, have to register a subsidiary in Tanzania. Further, TPDC and the private investor will agree on the financial and bond requirements. For instance, the model production sharing agreement requires a guarantee to the tune of a minimum expenditure that has been committed for a certain period or a sum of USD400,000 for the performance of the obligations other than the ones covered by the former guarantee.

TPDC, on behalf of the private investor (contractor), is duty bound to pay royalties for itself and on behalf of its contractor following the production area stipulated in the production sharing agreement to the tune of 12.5% for the areas that are onshore/shelf and 7.5% for areas that are offshore, which is calculated out of the gross volume recovered at delivery point before the recovery of costs.

The private investor (contractor) is required, under the Petroleum Act, 2015, to pay production bonus at commencement of the project and signature bonuses (which is a non-recoverable amount payable to the government upon signature of the agreement). These bonuses are usually more detailed within the production agreement that is entered into between TPDC, the government of the United Republic of Tanzania and the contractor.

There is no separate hydrocarbon income tax regime in Tanzania. The overall taxes governed by the Income Tax Act (Cap 332), Value Added Tax Act (Cap 148) and Stamp Duty Act (Cap 189) will be applicable. Some of these taxes include:

• corporate income tax, which is payable at a rate of 30% per annum;
• withholding tax, which is payable at different rates ranging from 5% to 15% depending on the nature of the service provided;
• value added tax (VAT), which is payable at a rate of 18% per annum. In case of services procured, it is payable for each service that has been performed in Tanzania. It is noteworthy that VAT is only chargeable by persons registered with the Tanzania Revenue Authority who have obtained a VAT registration number;
• stamp duty, which is payable at a rate of 1%; and
• excise duty and import duty in accordance with the East Africa Community Customs Management Act, 2004.

As pointed out above, TPDC is responsible for managing and overseeing the commercial aspects of petroleum operations in the upstream, midstream and downstream sectors. It is also responsible for representing the participating interests of the government in petroleum and natural gas agreements. It has exclusive mandate over all petroleum rights under the Petroleum Act, 2015.

Local content requirements are set under the Petroleum (Local Content) Regulations of 2017, which essentially require that licence holders, contractors and subcontractors or licensees must ensure compliance with minimum local content levels which are set in the First Schedule to the referred Regulations.

Further, it is a requirement to give preference for utilisation of goods and services that are produced or available in Tanzania and where such goods and services cannot be found locally, the law allows for them to be provided by a foreign company which has entered into a joint venture with a local Tanzanian company with the latter having 25% interest in the joint venture. Note that pursuant to the Petroleum (Local Content) Regulations of 2017, a local Tanzanian entity is an entity which is either 100% owned by Tanzanian citizens, or a foreign-owned entity which has a joint venture with a Tanzanian citizen or company where the Tanzanian citizen’s or company’s participating share is at least 15%.

The Petroleum (Local Content) Regulations of 2017 also set a requirement for the preparation of a local content plan which should be presented to the appropriate authority for approval. The local content plan must provide details of employment and training, succession plan, research, development and innovation, procurement of goods and services, technology transfer, legal services, engineering services, financial services, insurance services and any other details that may be required by the relevant authority.

In Tanzania, development licences are issued to either a holder of an exploration licence or a person who does not hold the exploration licence. In case of a holder of an exploration licence, this licence must still be in force and the blocks have been declared within two years in case of crude oil and three years for the case of natural gas. This is dependent on whether the Minister for Energy has been satisfied that the block has a petroleum reservoir. In case of a person who is not a holder of an exploration licence, the Minister must be satisfied that the respective block contains a petroleum reservoir, and it is not a block on which there is an exploration or development licence in place. Either way, the application for a development licence must be accompanied by a development plan which shows the proposal on the establishment and operation of the facilities, the processing and transportation of the petroleum and the adherence to local content by employment and training of Tanzanians.

Where the Minister has received the application, they shall get approval from the cabinet before approving the development licence. Where the approval has been obtained, the Minister, after being advised by PURA, will issue a notice to the applicant of the grant of a development licence and require the applicant to accept the proposed development licences within 60 days, failing which the application will lapse.

Upon issuance, the development licence also covers the drilling of production and injection wells. No separate permit is required for drilling activities.

Each upstream licence contains the start date of the licence, identifies the area subject matter of the licence, conditions upon which the licence has been issued and conditions and duties of the holder of the licence.

The licensee should make application for extension of the development licence 12 months before the licence expires. Together with the application, the applicant must show in respect of each development area, work carried out and petroleum recovered. The Minister may accept or refuse the application for extension of a development licence after being advised by PURA and receiving approval from the cabinet. In case of an exploration licence, the application for extension must be done 90 days before the date of expiry of the licence.

The transfer of interest in upstream licences needs to be approved by the Minister. To this end, an application for approval must be made to the Minister along with transfer documents, an undertaking that the transferee is capable to discharge the duties that the applicant had, undertake an integrity pledge by the transferee, show the qualifications of the transferee and its employees and particulars of the financial resources available to the transferee. Even after making the application the Minister may approve or refuse the transfer. It is noteworthy that TPDC, being the licensee, has a first right of refusal to acquire the rights where the assignment is being made to a non-affiliate company.

The transfer may also be subject to antitrust approvals.

The Minister is empowered to approve a production schedule either before or after grant of a development licence and issue an annual production permit. Despite this production schedule, the Minister may, upon application, approve, for a specified time, the quantity of petroleum that may be produced.

In addition to the above, production rates in Tanzania are also stipulated within the production sharing agreement that is signed between TPDC, the government of the United Republic of Tanzania and the private investor.

Tanzania is not a member of Organization of the Petroleum Exporting Countries (OPEC).

The TPDC has exclusive rights over natural gas midstream and downstream activities. Its role is to safeguard the nation’s interest in the natural gas industry and participate in the strategic ownership of natural gas projects and business. In essence it has the exclusive rights to purchase, collect and sell natural gas from producers. It also owns pipeline networks from production areas or gathering stations to wholesale distributors and final consumers. Despite the monopoly in this area, TPDC is also mandated to enter into joint ventures under public private partnership and strategic arrangements towards the implementation of its duties. It may also, upon application or after a competitive tender, give consent to another person to undertake the regulated activities falling within the midstream and downstream.

Despite the exclusivity described above, generally other persons may participate in midstream and downstream activities provided they obtain necessary permits from EWURA.

As pointed out under 3.1 Forms of Private Investment: Midstream/Downstream, despite the fact that TPDC has a monopoly over natural gas midstream and downstream activities, it can enter into joint ventures under public private partnership and strategic arrangements in the implementation of its duties. It can also give consents to other entities to carry out midstream and downstream activities. The rights and terms of access are more contractual in as far as TPDC issues consents to give such rights.

Midstream/downstream licences are issued by EWURA, and exclusive rights are vested with TPDC. However, other persons apart from TPDC may be licensed to operate in midstream/downstream if they have received consent from TPDC. In order to obtain the relevant licences, the applicant should apply to EWURA showing details of its name and address, business location, proof of financial and technical capacity, its integrity pledge, local content plan and any other particulars as may be required. Where the applicant is not TPDC, the applicant has to prove that it obtained consent from TPDC. When the application has been submitted, it will be evaluated by EWURA, which is bound to give its grant within 60 days.

Each major midstream and downstream operator is governed by a contract between themselves and the infrastructure owner, marketer and customers. These contractual arrangements are between the contracting parties, and it is common to have clauses to the effect that the contractor should take or pay a certain volume of petroleum which is equal to an agreed percent of the annual contract quantity. It should be noted that EWURA, being the regulator, has the mandate by law to monitor petroleum and the prices for petroleum products from time to time. The licensee is obligated to comply with EWURA’s directions.

Similar to the taxation in respect of upstream activities, there is no specific taxation regime that is only applicable to downstream and midstream activities. The taxes explained under 2.4 Income or Profits Tax Regime: Upstream will also be applicable here.

As pointed out under 3.1 Forms of Private Investment: Midstream/Downstream, TPDC enjoys the following rights over natural gas midstream and downstream activities: right to safeguard the nation’s interest in the natural gas industry and participate in the strategic ownership of natural gas projects and business; the right to purchase, collect and sell natural gas from producers; and the right to own pipeline networks from production areas or gathering stations to wholesale distributors and final consumers.

There is no different local content requirement for midstream and downstream operations. The requirements explained under 2.6 Local Content Requirements: Upstream are applicable.

The general conditions on the licences may include the following:

• restriction of activities allowed to be carried out by the licensee;
• requirement to furnish certain information periodically;
• requirement for compliance with directions or determinations as may be issued by EWURA;
• requirement to serve EWURA with reports as may be specified;
• requirement to have a place of business in Tanzania; and
• any other condition as may be specified by EWURA.

Specifically for transportation, the licensee may be required to enter into an arrangement with any person for conveyance of gas through pipeline and third-party access and procedure to be followed when dealing with a public emergency requiring maintenance of a gas supply system. For a distribution licence, the licence may include conditions requiring the licensee to ensure safe, reliable and affordable supply of gas to users and terms regarding the prices to be charged and the methods for the determination of the charge.

A licensee has domain rights to infrastructure on which it operates or which it maintains. However, the law gives EWURA a supervisory power to carry out inspections and monitoring to ensure that the investor that has obtained a licence is acting in accordance with the requirements of the law.

Transportation of hydrocarbons is regulated by EWURA as per the provisions of the Petroleum Natural Gas (Midstream and Downstream) Regulations. This makes it a requirement to obtain a licence from EWURA to carry out the activities of transportation. There is no different treatment between intra- and interstate pipelines. The benefit that comes with the intrastate pipelines is that there is a high chance of negotiating with the regulatory authority of the neighbouring country, together with its government, to obtain some waivers and duty exemptions for the transportation to be carried out. 

The requirements for a transportation licence (see 3.8 Other Key Terms: Midstream/Downstream) require that access be granted to third parties over an infrastructure. As such, the licensee may be required to enter into arrangements with any person for conveyance of gas through the infrastructure it maintains – eg, a pipeline. The law does not state any prohibitions to providing services to multiple segments in the market.

There is no restriction on selling products into the local market. As long as one is licensed, they have the rights to sell the products in adherence to the directions that may be issued by EWURA, such as directives on the prices of the goods. The intermediary will only be available when purchasing products from a foreign entity where the Petroleum Bulky Procurement Agency will be mandated to make all the procurements on behalf of the licensee to sell in the local market.

The export of crude oil, natural gas and petroleum products is regulated by the Petroleum Natural Gas (Midstream and Downstream) Regulations which require any export be made after obtaining an approval from EWURA. Importation is also regulated by the Executive Agencies (The Petroleum Bulk Procurement Agency) (Establishment) Order, 2015 which establishes the Petroleum Bulky Procurement Agency together with the East African Customs Management Act, 2004.

The transfer of operations and assets between private parties can be done through private agreements subject to necessary approvals from the Minister, EWURA and where needed the Fair Competition Commission (FCC). Antitrust approval becomes necessary where the transfer of operations is likely to trigger a direct or indirect change of control on the owner and/or the transaction meets a threshold for notification, which is TZS3.5 billion (approximately USD1.4 million), calculated based on the combined market value of assets or turnover of the transacting parties.

Investments are primarily governed by the Tanzania Investment Act that aims to create favourable conditions for investment through the Tanzania Investment Centre (TIC), which promotes and facilitates investment in Tanzania. The benefits available for investments under the Tanzania Investment Act include guaranteed unconditional transferability through any authorised dealer bank in freely convertible currency of the following:

• net profits or dividends attributable to the investment;
• payments in respect of loan servicing where a foreign loan has been obtained;
• proceeds, net of all taxes and other obligations, in the event of sale or liquidation of the business enterprise or any interest attributable to the investment; and
• payments of emoluments and other benefits to foreign personnel employed in Tanzania in the business enterprise.

The Tanzania Investment Act also provides that foreign investment business enterprises in the oil and gas sector shall not be nationalised or expropriated by the government or state acquisition and a person who owns, wholly or in part, the capital of such a business, shall not be compelled by law to cede their interest in the capital. The exception to the foregoing guarantees is where the same is required under due process of law which makes provision for:

• payment of fair, adequate and prompt compensation; and
• a right of access to court or a right to arbitration for determination of the foreign investor’s interest or right of the amount of compensation to which it is entitled.

Under the Petroleum Act, the Minister of Energy has the function of attracting foreign investment and technology in the sector as well as providing strategic decisions on strategic petroleum investments in consultation with the Cabinet and other relevant sectorial ministries.

Foreign investment is largely attracted in the sector subject to certain protections of permanent sovereignty over natural wealth and resources, including oil and gas. These include disputes arising from extraction, exploitation or acquisition, and use of natural wealth and resources must be adjudicated by judicial bodies or other organs in Tanzania but also in accordance with the laws of Tanzania. Other limitations include that earnings from disposal or dealings must be retained in local banks or financial institutions.

There are currently no sanctions in place for investments in oil and gas. Tanzania continues to attract a plethora of investment in the oil and gas sector with several pieces of legislation targeted at attracting such investment.

Recent amendments to the Natural Wealth and Resources (Permanent Sovereignty) Act, the Natural Wealth and Resources Contracts (Review and Re-Negotiation of Unconscionable Terms ) Act and Petroleum Act mean investors that are transporting natural wealth and resources not exploited in Tanzania under a special arrangement that has been approved by the Cabinet will not need to comply with the Act and therefore there is a lower compliance requirement for such investors operating in this capacity. Under the Petroleum Act, foreign investors with special arrangements approved by the Cabinet shall not be prejudiced by provisions relating to revocation or suspension of an approval from EWURA, licensing application for midstream and downstream activities, monitoring of petroleum and petroleum product pricing, integrity pledge requirements, among others, which allows for investors under special arrangements to structure their investments in a manner that is not burdened by the provisions excluded following these amendments.

Investors are also encouraged with the new Tanzania Investment Act provisions related to guarantees in transfer of capital, profits and dividends or the guarantee against nationalisation or expropriation.

The Environment Management Act No 20 of 2004 is the principal legislation for environmental issues in Tanzania including in oil and gas operations. This law is supplemented by the Petroleum Act No 21 of 2005, which acts as the principal law governing upstream, midstream and downstream operations and also sets out the general environmental principles and liabilities that would apply to such operations in Tanzania mainland and Zanzibar.

Both the National Environment Management Council (NEMC) and EWURA are mandated under the Environment Management Act and the Petroleum Act, respectively, to act as environmental regulators jointly and in consultation. In environmental matters, NEMC works in collaboration with EWURA in establishing environmental standards for petroleum operations. It also has the power to determine whether or not the petroleum activity or project will have an adverse impact on the environment by issuing an environmental impact assessment, undertaking environmental audits or monitoring, enforcing and ensuring compliance of national environmental quality standards and enforcing fines or other remedial measures for failure to comply. EWURA is mandated to prescribe the terms and conditions under the licence for management, transportation, storage, treatment or disposal of waste arising out of petroleum activities and issue a fine for failure to comply.

Environmental Impact Assessment (EIA) Certificate

Prior to the development of any major hydrocarbon project, an environmental and social impact assessment study must be made and, upon approval, the project developer will be issued with the environmental and social impact assessment certificate. The project developer must commission experts registered by NEMC. Briefly, the process entails the following:

• a qualified and authorised environmental expert must be appointed to undertake the EIA process for the project;
• the proposed project must be registered with NEMC by submitting the application for registration form together with the prescribed application fee;
• the application form and project brief are submitted to NEMC for purposes of screening and NEMC must issue its approval of the screening report within 45 days from date of submission;
• the project investor must then engage an environmental expert or consultant to prepare a scoping report and terms of reference for conducting the EIA. These items must then be submitted to NEMC for review and approval before commencing the EIA study. NEMC has a period of 14 days to issue its approval. Oil and gas projects are generally considered type A projects and therefore the supporting project scoping report for a type A project must state the following during submission to NEMC for its review:
1. the nature of the project;
2. the proof of land ownership, including location of the project and the physical area that may be affected by the project’s activities;
3. the activities that shall be undertaken during the project construction, operation and decommissioning phases;
4. the design of the project;
5. a site layout plan;
6. the materials to be used and source, products and by-products, including waste to be generated by the project and the methods of their management;
7. the potential environmental impacts of the project and the mitigation measures to be taken during and after implementation of the project;
8. an action plan to ensure the health and safety of the workers and neighbouring communities during the project;
9. a declaration that the proposed project is not within or near a sensitive ecosystem;
10. an Environmental and Social Management Plan (ESMP) and Monitoring Plan;
11. the economic and socio-cultural impacts to the local community and the nation in general;
12. the project budget;
13. how the scoping exercise was undertaken;
14. identification of issues and problem;
15. synthesis of results of the scooping exercise including details of potential negative and positive impacts;
16. stakeholder groups identified and how they were involved in the scoping exercise;
17. spatial, temporal and institutional boundaries of the project;
18. project alternatives; and
19. any other relevant information which NEMC may require;
• upon approval from NEMC, the consultant must conduct an EIA study according to the approved terms of reference. The time taken to carry out the EIA study will be determined on a case-by-case basis as it depends on the type and complexity of the individual project;
• the environmental impact statement or EIA report or Environmental Management Plan (EMP) together with the EIA submission form are then submitted to NEMC for review, which will entail a review by key stakeholders as well as the cross-sectoral Technical Advisory Committee. The review consists of site visits and confirmation of stakeholder consultations within a period of 60 days following submission of the environmental impact statement;
• the consultant will make improvements to the environmental impact statement by incorporating comments and recommendations raised before submitting a final version of the environmental impact statement to NEMC for final scrutiny;
• NEMC shall then forward the recommendations to the Minister for Environment for final decision; and
• within a period of 14–30 days, the Minister may approve or disapprove the environmental impact statement. Where an approval is issued, the signed EIA certificate will be delivered to NEMC for collection by the project developer.

Environmental Audit

This acts as a means for NEMC to determine the progress of activities and whether the processes or undertakings of a project conform with the approved environment and social management plan and quality of standards. Through this process, NEMC also evaluates means of refining implementation procedures or undertakings to further mitigate adverse environmental impacts as well as check compliance with the plans being a part of the EIA. An environmental audit must be undertaken within 12 months after an EIA and commencement of a project or not more than 24 months after completion of a project, whichever is earlier. The process is as follows:

• appointment of a qualified and authorised environmental auditor who must ensure the appraisal includes consideration of whether there were adequate environmental regulatory frameworks, sustainable use of natural resources, among others;
• registration of the proposed project with NEMC by submitting an application for an environmental audit certificate together with the prescribed application fee;
• approval of terms of reference by NEMC as the audit must be conducted in accordance with the terms of reference developed by the developer in consultation with NEMC. This means submitting the application form together with copies of the project brief and terms of reference for review by NEMC within a period of 14 days;
• the environmental auditor or consultant shall conduct an environmental audit study in accordance with the approved terms of reference and relevant legislation;
• the environmental audit report produced by the auditor must then be submitted to NEMC for review, which entails physical inspection and stakeholder consultations. NEMC shall undertake the review within a period of 60 days following submission of the environmental audit report;
• the environmental auditor or consultant must then make improvements to the report by incorporating all comments from NEMC and the technical advisory committee;
• the final version of the environmental audit report must then be submitted to NEMC for final scrutiny and, upon confirmation, NEMC will then forward it to the Minister for Environment for final approval; and
• upon approval, the Minister shall sign the certificate and forward it to NEMC for collection by the project developer, or upon disapproval the Minister, shall notify NEMC. The approval or disapproval by the Minister shall be delivered within 30 days.

Occupational Health and Safety Act

This Act requires all workplace premises to be inspected and registered by the Occupational Health and Safety Authority. 

There is no different EHS requirement for offshore developments. The requirements explained under 5.2 Environmental Obligations for a Major Hydrocarbon Project, are applicable.

All oil and gas operations are required to have in place a decommissioning plan. The decommissioning plan must contain the following:

• proposals for continued production or shut down of production (in the case of upstream activities);
• decommissioning facilities; and
• information and evaluations considered necessary for the authority to make a direction.

The decommissioning plan must be submitted to PURA in relation to upstream activities and to EWURA in relation to midstream and downstream activities. In both cases the decommissioning plan must be submitted before the licence expires, the licence is surrendered, or before the use of the facility is terminated permanently. For upstream activities, the decommissioning plan must be submitted to PURA at least five years before the time when the use of the facility is expected to be terminated permanently unless PURA directs otherwise. Whereas for downstream activities, it must be submitted within two to four years before the time when the use of a facility is expected to be terminated permanently. Upon submission of the plan, PURA and EWURA have the option of requiring additional information and undertake further evaluations or require a new or amended decommissioning plan, and the licensee must revert within the period requested or within a reasonable time specified in the request from the regulator.

While the law does not specify a bond, a licensee is required to make payment to the decommissioning fund, which shall be applied to the implementation of activities approved in the decommissioning plan. The Petroleum Act provides that a decommissioning fund shall be established for each development area or such other facilities operating in relation to a licence. Upstream activities require the amount deposited in the decommissioning fund to be a portion of the estimated future cost for decommissioning of facilities, whereas EWURA, in consultation with other relevant authorities, shall determine the amount to be deposited into a decommissioning fund for downstream activities.

There is no single law that deals specifically with climate change issues. Tanzania’s efforts to address climate change are reflected in various sector-specific laws, policies and strategies that incorporate climate change considerations. In the oil and gas industries, some of the key initiatives targeting climate change include the following.

• The National Climate Change Response Strategy 2021–2026 which acts as a guide to the country on climate change issues and integrating it into sector policies and plans. The Strategy provides a set of interventions on adaptation and mitigation, which are expected to strengthen the country’s resilience to the impacts of climate change and contribute to the global efforts of reducing greenhouse gas emissions. Relevant to the oil and gas industry are the targets in the energy and industry sector which include:
1. to develop a less carbon-intensive and climate change-resilient energy infrastructure;
2. to build a diversified and resilient industrial sector by promoting alternative and renewable energy sources; and
3. enhance climate-related assessments for industrial development.
• The National Environmental Policy seeks to provide the framework for making fundamental changes that are needed to bring environmental considerations into the mainstream of decision-making in Tanzania. The policy objective in terms of energy includes to promote sustainable renewable energy resources, assessment and control of development and use of energy and energy efficiency and conservation. In terms of industry, the policy objectives include that industries shall be planned in a manner that minimises adverse effects on the environment at all stages, industrial emission control, EIA being an essential element in planning, environmental audit being essential to pollution control and waste minimisation, among others.
• The National Energy Policy which promotes the development and use of renewable energy sources in Tanzania aiming to reduce resilience of fossil fuels and mitigate greenhouse gas emission. The policy aims to promote energy efficiency and conservation across all sectors of the economy. For the petroleum and gas sub-sector, the policy aims to optimise and effectively manage the petroleum resource base and cross-cutting issues such as ensuring compliance with health, safety and environmental standards in the energy sector by promoting the best practice including the “polluter pays” principle.
• The National Strategy for Reduced Emissions for Deforestation and Forest Degradation pioneers forestry-related activities as a key role in climate change mitigation by acting as sinks and sources of carbon dioxide. In the context of petroleum and gas, the policy aims to engage key stakeholders including the general private sector in reducing emissions related to deforestation and forest degradation.
• The Petroleum Act provides the legal framework for upstream petroleum activities, including exploration, development and production of petroleum resources. It sets out provisions related to environmental protection generally that indirectly touch on climate change.
• The Environment Management Act and the Environmental Management (Fees and Charges) Regulations provide for fees for environmental quality standards, which include fees that must be paid for emission and discharges permits. The fees payable are categorised by polluting activities that are less than 25%, between 25%–50% and greater than 50% of the allowable standards. Fees are also payable for persons that import or export ozone-depleting substances.
• The Environmental Management (Control and Management of Carbon Trading) Regulations detail the requirements and compliances that apply to persons engaging in carbon trading projects or programmes. Such projects must be registered and obtain the requisite endorsements for these activities.

Local governments in Tanzania have minimal influence or input in decision-making processes related to oil and gas development within their regions. The key input for local governments in the oil and gas development sector is in terms of consideration and approval of a licensee’s corporate and social responsibility plan which must take into consideration the local government priorities of the host community. A local government is also responsible for preparing guidelines for corporate social responsibility within their respective localities, overseeing implementation of the plan and providing overall awareness to the public on such developments.

From an environmental perspective, the local government must appoint a local government environment officer and participate in the following capacities:

• project registration and screening steps for an EIA application by providing comments to the project brief;
• where appropriate, participate as part of the cross-sectorial technical advisory committee at local government authority level to advise on reviews of EIA-related reports;
• review and comment on where a developer decides to change its development or undertaking;
• exercise the duty to collect fees and charges payable under the Environmental Management (Fees and Charges) Regulations; and
• notably, NEMC may also delegate performance of any of its functions or duties to the local government.

The shift towards use of sustainable energy sources and the broader energy transition initiatives have not extensively impacted the planning, development and use of oil and gas infrastructure in the upstream and midstream sectors. However, there is a notable shift within the oil and gas industry towards LNG projects, although currently, no specific incentives are being offered to alternative energy industries investors as addressed by stakeholders. Tanzania has made direct efforts towards utilising renewable energy sources, as highlighted in the power system master plan of 2020–2024. Oil and gas investors have recognised the viability of transitioning from fossil fuels and incorporating cleaner and more sustainable energy projects into their investment strategies, aligning with the country’s energy vision that also reflects global energy trends.

Additionally, the increased demand of energy usage has further encouraged Tanzania to undertake a strategic approach to advance the usage of renewable energy in its mix. In this regard, the Ministry of Energy has engaged consultants to formulate a dedicated national renewable strategy and roadmap for the next ten years. The aim of the strategy is to harness the abundantly available renewable energy resources to improve access to reliable energy and strengthen the legal and institutional frameworks to support renewable energy investment and development. At the same time, the roadmap shall build on the strategy by outlining specific actions and milestones for stakeholders like the government, businesses, and civil society organisations through a collaborative approach.

Although Tanzania’s energy agenda to transition to renewable energy sources aligns with global climate action commitments, the need to utilise fossil fuels for economic development puts the country at a crossroads. While natural gas discoveries, such as Songo Songo, make the goal of exporting LNG a reality, the repurposing of oil and gas assets remains relatively undeveloped. Additionally, there is limited reporting of concrete actions undertaken by upstream and midstream operators to reduce the release of greenhouse gases during operations beyond the regulatory requirements governed by the NEMC.

Considering that Tanzania has decided to tap into carbon trading as a broader solution to reduce emissions, the link between the regulatory framework of carbon trading and the oil and gas sector remains underexplored as a viable opportunity for energy transition. For example, the sector could use existing pipelines to transport captured carbon dioxide for carbon capture, utilisation, and storage (CCUS) or hydrogen for clean energy as part of the carbon trading project.

With increased global priorities towards renewable energy, Tanzania faces potential setbacks in attracting large-scale oil and gas project financiers, which could limit potential exploration and sector development. However, there are opportunities to integrate current environmental and social responsibility practices to maintain interest in traditional oil and gas sector development. Over the next several years, the authors expect to see a collaborative approach to limit the negative impact on sector development. For example, the development of LNG export has been Tanzania’s long-term focus. However, its long-term viability is expected to come under scrutiny due to the global push towards cleaner energy. On the other hand, Tanzania has set a target to have 80% of households adopting clean cooking methods by 2032. Although these two projects are relatively unconnected, their simultaneous development ensures a balanced approach to sector development.

Tanzania does not have a specific law for unconventional upstream interests like shale, heavy oil and coal-bed methane. Nonetheless, the Petroleum Act 2015 and its regulations would be applicable in any upstream development of unconventional upstream interests, as it would apply in other upstream interests. Similarly, all contractual arrangements would be guided by the model production sharing agreements developed by PURA or any other model agreement, albeit subject to approval by the Cabinet.

The Petroleum Act of 2015 serves as the primary legislation for LNG projects providing the foundational framework for the sector. Other than that, there are no specific laws and regulations that pertain directly to the development of upstream gas reserves.

In the midstream and downstream activities, LNG projects are guided by specific regulations such as the Petroleum (Natural Gas Midstream and Downstream) General Regulations, Government Notice No 270 of 2020, which provide guidelines for transportation, distribution, storage and sale of natural gas. Additionally, the Petroleum (Natural Gas Pricing) Regulations, Government Notice No 353 of 2020, establish procedures and methodologies for calculating and setting natural gas prices, ensuring fairness, transparency and competitiveness in the pricing process.

Tanzania has no specific incentives for upstream activities. There are, however, general incentives both fiscal and non-fiscal that could be advantageous for an LNG project at the midstream or downstream project level, where the involved entities meet the requirements set out under the respective legislation.

These incentives could be accessed through the Tanzania Investment Act, Export Processing Zones Act, and Special Economic Zones Act. The Export Processing Zones Act aims to promote manufacturing within designated EPZ areas, while the Special Economic Zones Act applies to investments involved in producing goods and services for the local market. The tax incentives available under these laws include a ten-year tax holiday, exemption from withholding tax on foreign source loans and rent for a period of ten years, exemption from city service levy for ten years, and remission of VAT and duties on the importation of raw materials and capital goods.

Tanzania is endowed with vast natural gas reserves, with a staggering 57.25 trillion standard cubic feet (TCF), according to the Ministry of Energy. Recently, the Tanzanian government has made a significant step towards realising the export of its vast offshore gas deposits as it announced expectation to sign a host government agreement and a production sharing agreement with two foreign oil and gas companies for the construction of an LNG export terminal. This terminal will facilitate the export of natural gas.

Additionally, there have been remarkable efforts in transitioning to natural gas as a fuel source for vehicles and power generation. This shift aims to reduce dependence on imported fossil fuels and promote cleaner energy alternatives. These developments present exciting business opportunities for private investors in Tanzania.

The oil and gas law and regulation in Tanzania have largely remained unchanged over the past year. However, there have been some developments that impact investments in Tanzania, including the hydrocarbon industry. These developments include the enactment of the Tanzania Investment Act Government Notice No 395B of 2023, which has repealed the Tanzania Investment Act No 26 of 1997. The new legislation reaffirms the use of arbitration in the event of a dispute between an investor and the Tanzania Investment Centre or the government, following the rules of procedure for arbitration of the International Centre for the Settlement of Investment Disputes or any bilateral/multilateral investment protection agreement.

In addition, Tanzania has recently implemented the Environmental Management (Control and Management of Carbon Trading) Regulations, 2022 under Government Notice No 636 of 2022. These regulations outline the necessary steps for registering a carbon trading project, establishing a legal framework for sustainable environmental management, conservation, and the reduction of greenhouse gas emissions. These regulations are of significant importance in the hydrocarbon industry given that companies involved in oil and gas exploration, production, refining, and distribution also contribute to greenhouse gas emissions.