Total Set to Get Tanzania Oil, Gas Exploration Licenses

Tanzania is set to award exploration permits to Total SA, Europe’s third-largest crude producer, to search for oil and gas in the East African country, Energy and Minerals Minister Sospeter Muhongo said.

The company, based in Paris, “has approached us and we are going to issue licenses to Total” to explore in Lake Tanganyika, on the border with Democratic Republic of Congo, Muhongo said in an interview yesterday in Cape Town. The permits will be issued in the “next few months,” he said.

BG Group Plc, a U.K. explorer, and Statoil ASA, Norway’s biggest energy company, are among companies searching for gas in Tanzania, where an estimated 33 trillion cubic feet of the fuel has already been found. Along with neighboring Mozambique, where explorers made the biggest discovery of the decade, more than 100 trillion cubic feet of reserves have been found, enough to meet global demand for a year.

Tanzania plans to create a sovereign wealth fund that will use growing oil and gas revenue to finance development projects in East Africa’s second-biggest economy, Muhongo said. The fund may also invest in company shares to accumulate wealth, he said.

“We should have a fund whose accessibility is somehow very restrictive and the utilization of the resources are for good intentions,” Muhongo said.

The government has “just” completed a second draft of a policy document for the gas industry that’s aimed at improving revenue management, Muhongo said. After feedback from the general public and companies has been incorporated, parliament is expected to vote on the policy, which hasn’t been updated since 1980, before the end of the year, he said.

Licensing Round

Muhongo on Sept. 3 ordered the Tanzania Petroleum Development Corp. to delay the country’s fourth international licensing round for offshore oil and gas blocks until after the policy is ratified. Nine blocks were to have been auctioned on Sept. 13.

“We have emphasized in this document that natural gas has to be of benefit to the citizens of this country,” Muhongo said. “Secondly, that the resources will be used wisely for today and for future generations and that the gas economy will be integrated in the national economy.”

Among the benefits Tanzania hopes to draw from its natural gas wealth is to more than double electricity production to 3,000 megawatts by 2015.

Tanzania last year received a $1.2 billion loan agreement from the Export-Import Bank of China to build a 500-kilometer (311-mile) pipeline from the coastal town of Mtwara to Dar es Salaam, the commercial hub, where it will feed proposed power plants. The conduit will be completed on schedule in 18 months, even after protests by residents of Mtwara last month over the planned location of the power plants, Muhongo said.

‘Ill Informed’

“All these demonstrations are by ill-informed people, they are not in the national interest,” he said. “Nothing will change. It is on schedule.”

The Tanzania Electric Supply Co., Tanzania’s state-owned power utility, is also in negotiations with Citigroup Inc. and other international lenders to secure funding to build six gas-powered electricity plants and 400-kilovolt transmission systems, he said.

No one was immediately available for comment at Total when Bloomberg called the company’s Paris headquarters today.

Before it's here, it's on the Bloomberg Terminal.