BMI View: Tanzania's recent increase of estimated recoverable natural gas reserves from 804bn cubic metres (bcm) to 924bcm should further raise interest in its already highly anticipated licensing round. The upward revision comes as the country plans to introduce a new regulatory framework for the industry by the end of November 2012 , which should clear the way for the fourth licensing round to proceed . We reiterate that beyond infrastructure challenges, onerous contract terms could also slow the pace of development in Tanzania's gas export plans.
Tanzania's recent increase of estimated recoverable natural gas reserves from 804bn cubic metres (bcm) to 924bcm should further raise interest in already highly anticipated licensing round. The country's Energy Minister, George Simbachawene announced the upgrade at an industry conference in the country on October 18 2012. However Simbachawene also highlighted challenges facing the development of the country's growing natural gas potential, with 'including, but not limited to insufficient institutional and legal frameworks and insufficient human, financial, and physical and related resources for the sub-sector' as key threats.
The Energy Minister's statements reinforce the concerns we have previously expressed in our analysis of East Africa's burgeoning natural gas boom ( see our online service, August 2, 'Infrastructure Required To Service East African Gas Potential'). Yet, the statements come at a critical juncture in the region's development, with a number liquefied natural gas (LNG) options under assessment (with the aim of commercialising the gas) while new regulatory developments are simultaneously in the pipeline.
Tanzania's licensing round had previously been scheduled to occur in September 2012, but took a backseat to the development of a new oil and gas law, which according to junior energy minister Stephen Masele should be in place by the end of November 2012. Parliamentary approval of a new regulatory scheme and the completion of reviews of existing exploration contracts should allow the licensing round to take place sometime in early 2013. The blocks to be offered will be at water depths of 2,000-3,000m and will be the first offshore acreage to be offered since deepwater campaigns that have struck significant gas pay and raised talk of an East African LNG powerhouse.
|Blocks||Licences||Wells||Gas Pay (m)||Gas-in-place (bcm)|
|*Preliminary Resource Estimate; na= not available. Source: Ophir Energy, BG Group, Statoil, BMI|
|Block 1, 3 & 4||BG Group (60%)||Chaza-1||na||85*|
|Ophir Energy (40%)||Chewa-1|
|Block 2||Statoil (65% working interest - operated on behalf of TPDC)||Zafarani-1||120||170†|
|Total Tanzanian Gas In Place||411-465|
We anticipate strong interest from majors and independents in the upcoming licensing round. Moreover, it will also help independents such as UK-based Solo Oil and Aminex , which are seeking farm-in partners for their interest in the Rovuma production sharing agreement (PSA), which they estimate to contain 161bcm of undiscovered gas-in-place. Successful exploration and highly prospective offshore basins have not only lifted regional hopes, but also share prices for those with a slice of Tanzania's lucrative waters as well, as the chart below demonstrates.
|Amienx, Solo Rise On Tanzanian Gas|
|Aminex PLC & Solo Oil PLC Share Performance Normalized As Of 04/24/2012, Last Price (GBP)|
With KBR selected for a pre-front end engineering and design (pre-FEED) study as part of a Statoil-led LNG facility to be completed by 2013, Tanzania is in a strong position to capitalise on recent exploration successes. However, with the country set to roll out a new regulatory framework and updated licensing agreements, we reiterate the potential downside risks to the pace of investment in the country's oil and gas sector should the government move too aggressively ( see 'Commercialising Its Gas Bounty,' September 18).