The Parliamentary Committee on Economic Affairs, Industry and Trade has called on the government to review gas contracts so far awarded to foreign companies in order to protect national interests and protect local investors.
Presenting the committee’s report in the National Assembly yesterday, Kisesa MP, Luhaga Mpina (CCM) said under the existing contracts the participation of Tanzanians in the gas economy is very small and that most of the pacts entered with foreign companies favoured their interests, leaving the local people powerless over their resources.
Mpina who is the committee’s chairperson told the National Assembly that the existing gas policy states clearly that any gas commercialisation project shall be structured either through an integrated or segmented gas value chain at the contractors' absolute discretion. He said that prior to making the decision the contractor shall consult with TPDC, implying that the local content policy doesn’t have any legal power.
Speaking after the Finance Minister Saada Mkuya Salum tabled the ministry’s budget estimates for the 2014/15 financial year, Mpina said: “The local content policy will not work because existing contracts insist that foreign companies (Statoil and Exxonmobil) shall have final decision on the value and supply chains.
Mpina wondered whether the current policy on the participation of locals in the gas economy being prepared by the Ministry of Energy and Minerals shall have any legal powers against the signed contracts.
He said the committee saw a need to review all additional contracts (addendum) on the Production Sharing Agreements (PSA) between the government, Tanzania Petroleum Development Corporation (TPDC), and Statoil Tanzania AS (Norway).
He explained that after entering into a contract with the companies to search for crude oil on Block 2, it decided to sign the addendum after realising that the area had a great potential for natural gas extraction.
On how Tanzanians hardly benefit from the current contracts, Mpina said under the production sharing arrangement foreign companies will first deduct the so called ‘recoverable contract expenses’ that includes operating expenses, exploration expenses and development expenses which accounts for 70 percent of all the extracted gas amount. He said the remaining 30 percent will then be shared by both.
“With this formula, TPDC will end up getting 10 percent of the total gas extracted while foreign companies will get 90 percent of it,” said Mpina.
The Kisesa legislator said that the Minister responsible for Energy and Minerals, Prof Sospeter Muhongo was in September 2012 quoted as saying that some of the gas contracts deserve to be terminated as they do not benefit the country, but nothing had been done todate.
“How many contracts has the government terminated so far…Is the contract between TPDC and Statoil Tanzania AS (Norway) beneficial to the nation? asked the committee chairperson.
“What of the promises that Tanzanians will remain with around 70 per cent ofn the natural gas extracted in the country?” asked Mpina.
He also pointed out that under the addendum, foreign companies will be allowed to bank outside the country all their earnings from the sale of the natural gas. “Can we control them if they violate the contracts, such as giving false production data?” He called for the law to require that they keep a certain percentage within the country, even if it is for a short time.
He also said that the amount of the gas allocated for internal use is only 10 per cent. “This means that even if Tanzania’s natural gas demand exceeds the set amount, we will be forced to buy from them,” he said.
He called for a meeting between the committee for Economic Affairs, Industry and Trade and the committee for Energy and Minerals in order to review the tricky contracts.
Meanwhile, Minister for Finance Saada Mkuya Salum said that the ministry failed to realise its Big Results Now (BRN) initiatives on revenue collection in 2013/ 2014.
She said that the Ministry targeted collection of 1.16trn/- from its revenue sources and 96.7bn/- from non-income tax respectively, but by April had colle4cted only 338bn/- equivalent to 29.14 per cent.
She said that BRN recommended the change of customs duty for non petroleum products from specific to advalorem which was to ensure collection of 386bn/-.
The other recommendation which was not implemented is the introduction of five percent of tax on imported goods which would have earned the government in 225.6bn/- in revenue.
The official opposition camp through its Finance Shadow Minister, James Mbatia asked the government to bring into the national assembly a report showing how funds from development partners were spent for various development activities.
Mbatia noted that the current national debt stands at 20trn/- while the external debt has increased from 9.3trill/- in 2007 to 22.2tril/- in April this year.
Citing the 2013/2014 Central Bank’s Quarterly Reports, Mbatia said that the weakness in the collection of tax has made the government fail to collect incomes estimated to 977.2bill/-.
He said according to the Central Bank’s report of 2012/2013 the government failed to collect 190bn/- from non-tax revenues.
The Finance Minister asked the parliament to endorse over 95bn/- for the ministry in the coming fiscal year whereby out of it 60.61bn/- is for recurrent expenditure and 29.71bn/- for development expenditure.
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