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House team to probe gas firm

17th July 2011
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Kigoma Urban MP Peter Serukamba

The Parliament has ruled out scrutinizing controversial dealings of the Pan African Energy in relation to the extraction, purification and distribution of natural gas in the country.

The decision was passed in the House on Friday during a debate on the Ministry of Energy and Minerals’ budget estimates after some MPs , including Kigoma Urban MP Peter Serukamba called for termination of the contract between Pan African Energy and Tanzania Petroleum Development Corporation ( TPDC).

Deputy Speaker, Job Ndugai said the House was in support of the decision reached by the standing committee on Energy and Minerals to form a sub committee so as to look keenly into the matter.

”The standing committee has informed us that it is forming the sub committee let them carry on and they would bring us report on their findings so that we can decide the route to be taken,” said the Deputy Speaker.

The standing Committee Chairperson, January Makamba, had told the National Assembly that his team was suspicious that the nation did not benefit desirably from availability of natural gas in terms of competitive price, urgent availability, and capacity building to Tanzanians for investment and expertise on the gas related matters.

”Despite the fact that natural gas is a crucial natural resource for national economy and security, the committee had found out that the business on its extraction, purification, distribution and sales are surrounded by high level of contractual controversy and bureaucracy with no national interest,” noted Makamba.

He added: “The committee was not satisfied by the involvement, performance and credibility of Pan African Energy Tanzania on the development of gas sector in the country.”

Makamba’s committee also recommended to the government that it (government) should take a leading role through Tanzania Petroleum Development Corporation (TPDC) in the gas sector and not sitting aside and waiting for revenues.

He also advised the government to pressurise the companies in the gas industry especially Songas and Pan African Energy to allow other companied to extract gas and utilize the existing infrastructure.

The committee also said Pan African Energy should pay to TPDC the money the owed to the tune of 30 billion shillings.

However, The Guardian on Sunday has established that the money in question which is supposed to be paid by Pan African Energy to TPDC is $28 million, meaning the money in shillings is more than that stated by Makamba. Anatomy of the issue

This paper has established further that the first 5 wells known as SS 1-9 at Songosongo island were drilled by Agip Tanzania Ltd in 1974.

When Pan African Energy came in as gas investors in middle 1990’s they signed an agreement with TPDC to drill SS 10, developing the previous 9 wells drilling the development wells and establishing the actual natural gas reserve available.

Under the agreement which is regarded as risky, Pan African Energy had to invest and their funds to be recovered only if they were successful, but if their activities were fruitless no funds could be recovered.

After natural gas was realized Pan African Energy and TPDC as project developers signed an agreement with Songas, the power generating company, for the later to establish a gas pipeline from Songosongo to Dar es Salaam because the former had no capacity to do so.

As the gas reached Dar es Salaam it was realised that the gas reserve at Songongo was so huge that it was agreed that the use of gas be extended to industries and domestic use. At this point in 2005 TPDC welcomed the known partner, Pan African Energy. The agreement was signed on November 2004.

But according to available information at TPDC, a bad scenario is that the state-owned corporation signed a one page agreement under the same terms as those of the risky investment, meant to recover gradually the invested money.

It is because of this shoddy agreement Pan African Energy used to deduct all the money they used to distribute the gas to various industries in Dar es Salaam between 2005 and 2009.

Thirty five industries are connected to the gas pipeline in Dar es Salaam and the connection is going on.

The argument within the government is that the investment down stream (in Dar es Salaam) is quite different from that up stream (at the source) since previous investment is justifiable by the fact need to attract investment coupled by the possibility of the investor to lose money when unsuccessful.

This paper understands that unlike the upstream investment the down stream one is a direct investment as the money invested is directly recovered from customers through paying for connection charges.

It remains unclear why TPDC signed such a controversial agreement which has denied it billions of shillings.

The existing gas pipeline has a capacity to transmit 90 million cubic feet a day, as the gas reserve at Songongo is 1.3 trillion cubic feet.

However the realised biggest reserve amounting to 4 trillion cubic feet is reported to be at Mnazi Bay in Mtwara, where a bigger gas pipe line with a capacity to transmit 340 million cubic feet is to be laid.

SOURCE: GUARDIAN ON SUNDAY
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