Tanzanian law on oil and gas local content in pipeline

Tanzania will soon have a policy and law prescribing the position of local content in oil and gas business, as well as regulation of the lucrative industry, according to proposals by the Ministry of Energy and Minerals.

The ministry also proposes several changes on revenue laws including income tax and value added tax. In a draft “Local Content Policy for Oil and Gas Industry,” Ministry of Energy and Minerals proposes the enactment of Natural Gas Act and Natural Gas Revenue Management Act.

“Legislative and regulatory frameworks will need to be in place in administering nationwide oil and gas development,” the draft policy states.

Proposing sweeping changes to address concerns by locals that they are losing out in owning the lucrative industry, the ministry also proposes to amend Income Tax Act and Energy and Water Utilities Regulatory Authority (Ewura) Act and Petroleum Act of 2008, among many other laws.

The draft also proposes the establishment of National Local Content Committee to assist the PRA whose mandate will include regulating upstream and mid-stream oil and gas activities.

“The institutional framework articulates major roles of key institutions direction towards a transformed economy and sustainable growth and development,” it noted.

The draft further proposes minimum purchases of goods and services from local sources, employment and ownership of the industry’s activities.

The draft widely circulated in the local media for stakeholders’ comments also proposes limited and non-renewable work permits for expatriates and foreign workers, procurement of local goods and services are given preference.

“However, it is a global tendency now to set Local Content minimum and maximum percentages in the procurement notice for the phases of exploration, development and other operations, as well as minimum percentages for items defined by the bidding party,” the draft policy stated.

It further pointed out that in order to create business opportunities for local enterprises, foreign companies operating businesses which locals cannot shall be required to partner with the domestic companies.

In order to enhance the value addition to Tanzanian commodities by introducing similar measures as practised elsewhere in the world, the government shall, “Ensure a compulsory Local Content requirement in every invitation bid.”

The draft policy also proposes in-country fabrication and manufacturing of equipment and spare parts for items relating to oil and gas industry.

“In order to maximise in-country fabrication, welding, assembling, manufacturing and repair works, the government shall ensure availability of equity financing to local business engaging in country fabrication and manufacturing,” the draft noted.

Stakeholders have almost two weeks to submit their views on the draft whose deadline is Tuesday, May 20, this year.