Africa Oil & Gas: Laws Could Jeopardize LNG Plans in Tanzania

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Companies operating in Tanzania express concerns

Tanzania is fiddling with its mining and energy laws, submitting three new bills to parliament that could put a crimp in international firms’ plans to exploit natural gas resources discovered off the country’s coast. The three bills to parliament on June 29 would allow the government to force mining and energy companies to renegotiate their contracts.

Companies operating in Tanzania have been expressing concern that President John Magufuli’s interpretation of tax laws, increased fines and demands they rapidly list on the local stock exchange are meant to squeeze the companies out. Magufuli maintains that the reforms will increase transparency and revenues. He also asserts that the companies have not been paying their fair share of taxes.

The three bills are expected to be fast-tracked through parliament. They cover natural resources contracts, sovereignty, amend existing laws and would allow the government to renegotiate or dissolve contracts.

“This is unprecedented in terms of an escalation and an assault on the mining sector,” said Ahmed Salim, vice president of global advisory firm Teneo Intelligence in a Reuters report. “There hasn’t been much dialogue between the private sector and government. Major companies in Tanzania, both foreign and domestic, mostly wake up to news about major changes in legislation and regulation alterations … This will have very severe consequences in terms of foreign investment.”

On the energy end, companies that could be affected include BG Group, part of Royal Dutch Shell, ExxonMobil, Statoil and Ophir Energy. These four firms are spearheading the development of Tanzania’s natural gas resources through a $30 billion LNG export terminal.(Source: Petroleum Africa)

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