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Discoveries of gas and oil: What of `resource curse`?

20th June 2012
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Editorial Cartoon

The Tanzanian media have in recent months been awash with mouth-watering reports confirming the discovery of indications massive reserves of oil and/or natural gas off the eastern African coastline – all the way from Kenya to the north to Mozambique to the south, with Tanzania lying strategically somewhere in between.

The latest such reports originated from Oslo on Thursday last week, and had Norwegian oil company Statoil and US-based ExxonMobil Corporation announcing that they had come across a large natural gas deposit off Tanzania’s coast.

It was stated that the discovery of 3 trillion cubic feet of gas in well 2,400 meters under the sea was Statoil’s seventh major find in just over a year and appreciably boosted the region’s hydrocarbon potential.

Now, Statoil operates the licence on 5,500-square-kilometre block on behalf of the state-owned Tanzania Petroleum Development Corporation and holds a 65 per cent stake, while ExxonMobil Exploration has 35 per cent.

Although doubtless an inspiring story, this was just part of the picture. The background information it may be worth having includes the fact that ExxonMobil is one of the most profitable companies in the world and makes no secret that it is on a money mission – and that it has been extremely successful in accomplishing that mission.

This should not come as a surprise, as the corporation’s mission statement talks about being committed to being the world’s premier petroleum and petrochemical company and therefore continuously achieving superior financial and operating results while simultaneously adhering to high ethical standards.

Energy and Minerals minister Sospeter Muhongo was understandably all smiles as he briefed the media on the new Statoil/ ExxonMobil find. What citizen of a “poor” country would act to the contrary in the face of similarly heartwarming circumstances?

But we have no doubt whatsoever that the good geology professor boasts enough expertise and experience to know that a country blessed with an abundance of natural resources such as minerals, wildlife and sources of water that never dry up is not necessarily also an economic colossus to be reckoned with.

We can bet he can cite dozens of case studies to support this proposition, among the ready examples being oil-rich countries most of whose citizens are languishing in abject poverty in part characterised by high levels of unemployment and functional illiteracy as well as lack of basic needs.

All we mean to say is that Tanzania ought to be especially vigilant as it seeks to assert its position as a giant in the oil and natural gas industry, etc., lest it too finds itself falling prey to the proverbial resource curse – also known as the paradox of plenty.

As has long been established, this is the sad and embarrassing situation in which countries and regions richly endowed with non-renewable resources like minerals and fuels tend to have less economic growth and worse development outcomes than countries not as fortunate.

Some of the reasons for such an eventuality are corruption, failure to negotiate favourable terms with international investors or “partners”, and blatant mismanagement of the very resources that would have made meaningful development possible.

One only hopes we are indeed vigilant enough. 

SOURCE: THE GUARDIAN
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