Tanzania Lack of clarity in Natural Gas manufacturing Seen As a Hurdle.

Dar es Salaam  As global pressure on transparency mounts in the extractive industry, the practice is said to be wanting in natural gas production as local authorities from resource areas doubt about the amount of revenue collected from the industry.Local officials in areas, where the natural gas is extracted say they are supposed to get more than what they receive, citing lack of transparency as a stumbling block.Although government revenue from the industry has considerably increased in the past six years, income remitted to districts, according to them, doesn't match the increase.The Local Government Finances Act, 1982 requires corporate entities operating in a particular locality to pay quarterly 0.3 per cent of the total revenue to councils.Natural gas production companies are not left either on this as the resource is an important resource as Tanzania envisages becoming a middle income economy by 2025. Kilwa District Council and Mtwara Rural District Councils hosting the Songo Songo and Mnazi Bay natural gas projects have called for immediate reforms in policy, law and regulations to ensure there is a win-win situation in natural gas deals.According to district officials, transparency in production sharing agreements (PSA) and contracts signed with international oil companies (OICs) will enable district councils to generate enough revenue to fund development budgets. This will enable the implementation of projects in their areas and will improve people's lives.Are queried on transparency founded?The National Bureau of Statistics (NBS) Tanzania in its Figures 2015 Report shows that the government generated Sh575.3 billion from 2010 to 2015 from natural gas production activities from Songo Songo and Mnazi Bay projects.In the report published in mid-last year, NBS data shows revenue has been growing every year with an exception of 2015, when the government saw its coffers receive $45.77 million down from $60.52 million in 2014. But such revenue growth, according to local council officials, does not mean much in reality.A Tanzania Extractive Industries Transparency Initiative (TEITI) report shows that the two district councils received only Sh2.63 billion in the last five fiscal years - that is from 2011/12 to 2015/16. The Citizen investigation has confirmed the figures in respective councils.From the NBS report, $252.17 million of that amount (Sh554.78 billion) was revenue generated by Pan African Energy Tanzania, which has been subcontracted to conduct extractive activities in Songo Songo by Songas.Although natural gas extraction in Mnazi Bay started in 2015, the government collected $9.3 million (Sh20.5 billion).The Natural Resource Governance Institute (NRGI) manager for East and Southern Africa Silas Olan'g is of the view that probably revenue collected by the government from Mnazi Bay in 2015 was raised from other sources other than the sale of natural gas. Maurel & Prom Tanzania (M&P) and Tanzania Petroleum Development Corporation (TPDC) are companies operating in the area.But data from Mtwara Rural District Council establishes that Sh394.76 was raised in 2015/16 of which Sh304.02 million was paid by M&P Company paid to the council."We could earn more than that if the council was involved in calculating the volume of natural gas produced, processed at Madimba Plant before its transportation to Kinyerezi plants for power generation," says Mtwara Rural acting district council director Dennis Kitali."Something has to be done with the present level of transparency to increase benefits to councils."According to him, the council was receiving an average of Sh103 million to Sh105 million from both companies quarterly."Transparency should be improved in contracts and revenue generated. Sometimes we use Tanzania Revenue Authority (TRA) reports to establish fairness in revenue paid by companies to councils," he added.As a way of improving transparency, Mr Kitali says, the council has proposed meter readers from the council be stationed at Madimba Processing Plant and Kinyerezi Power Production Plant to deliberate on the amount of natural gas processed and delivered for sale at a specific time and place."We have taken the issue with great concern, we are considering training and recruiting people. who can do the job. However, we are also considering medium and short solutions to the problem because the same concern was also raised by the Controller and Auditor General (CAG) in his previous report," he said.However, he agrees that the council is receiving little revenue partly because natural gas extraction hasn't reached the maximum level due to lack of customers, calling upon the government to ensure the harvest is increased, a move that will raise revenue paid to the council.Between the last five fiscal years (2011/12 and 2015/16), the council received Sh591.05 million as service levy although serious natural gas production started in 2015.In the half of this financial year, Mtwara Rural District Council had already generated Sh196.3 million from natural gas with officials in the council expressing optimism to have increased revenue should the number of customers and consumption increase.Unlike to their counterparts in Kilwa District, where natural production started earlier, Mtwara will have to wait to gain more revenue from the resource as production is still low.The CAG, Prof Mussa Assad, in his recent released report said Mtwara-Dar es Salaam natural gas pipeline, which comes from Mnazi Bay, was underutilised by 94 per cent, expressing his concern that the country could fail to service its $1.283 billion loan from China's Export Import Bank. "I recommend consultation between TPDC, Tanesco and the Ministry of Energy and Minerals and discuss means of completing new Tanesco plants, Kinyerezi II, Ubungo I, Ubungo II, Tegeta and Symbion to ensure the pipeline operates at its reasonable capacity to enhance timely loan repayment," reads part of the 2015/16 CAG report.Despite receiving a large amount of revenue from natural gas due to high production, Kilwa officials also express concern on transparency as members of the public expect a lot from the cash generated from the industry.Kilwa Masoko district council executive director Zablon Bugingo says service levy collected from natural gas production is the second largest source of revenue contributing to 15 per cent of the budget in 2015/16 after agriculture."We expect the same percentage will be contributed in the 2016/17 budget estimated to Sh3.1 billion. Hopefully, the revenue will rise after increasing transparency," he said.The TEITI report shows that Kilwa Masoko District Council garnered Sh406.99 and Sh433 million in 2012/13 and 2014/15 respectively.Financial reports from Kilwa District Council show that Sh2.04 billion was received between 2011/12 and 2015/16, which has helped the local authority to improve service delivery, including road construction.Mr Bugingo said variation in the revenue remitted by natural gas extracting companies was partly caused by inconsistency in production as sometimes producers had to stop for maintenance, although he noted transparency could have increased the coffers. Openness, participation and accountability in the energy sector is highly promoted in the world to address governance issues in the lucrative industry that has seen some communities fall into conflict.Tanzania is a member of the Extractive Industries Transparency Initiative (EITI), the global standard that promotes open and accountable management of extractive industry. In 2015, the Parliament passed the Tanzania Extractive Industries (Transparency and Accountability) Act that will ensure the country benefits well from the extractive industry, including natural gas by increasing governance in the sector.Tanzania is among of the few lucky African countries to have huge deposits of natural gas, currently estimated to be more than 57 trillion cubic feet.

Villagers speak outVillagers too want to know what they get from natural gas production. People from Ruvula and Mtandi in Msimbati Ward, Mtwara, where the five wells are located told The Citizen that they were unaware of the revenue generated by the council and the arrangement to reach their villages for development."We would have built a school, a dispensary and dug wells for clean and safe water in the village," said Mr Shaibu Napata from Ruvula Village.He was supported by Ms Tunimana Selemani, who said the revenue would have built a fish market to provide them with reliable market for fish."This fish market could have ensured us with long-term income generating sources at the village and the Mnazi Bay in general," Ms Selemani said.Unlike the past, when Mtwara residents protested against the construction of the Mtwara-Dar es Salaam natual gas pipeline to Kinyerezi (Dar es Salaam), now local leaders say they don't want any quarrel with the government and investors, but only transparency and participation will increase trust in them.

No more quarrelsTo ensure at least they have a glimpse of what is happening in gas production, Ruvula village chairman Yusuph Haki has aappealed to the government to consider involving villagers and local leaders in reaching agreements on projects, instead of signing contracts then informing them what has been done on their behalf."A pyramid approach in decision making is outdated, we would prefer contracts with some inputs originated from the villagers. Currently, we can't demand various issues from the companies extracting natural resources in the area because of ignorance of the agreement," he said.Mr Haki said community involvement would help them address issues of their concern, a move he thinks will minimise unnecessary disputes between the villagers and investors.Experts say the growth of revenue received by the central government from natural gas companies sometimes should not be correlated with that of service levy in local councils because the former has more taxes and duties to be collected from corporate entities than the latter."Probably the government might have been collecting other taxes, including land rent and capital gain tax in case shareholding was transferred from one company to another. Such revenue is not distributed to district councils," said Mr Olan'g.

Transparency is unlimitedAuthorities denies absence of transparency on natural gas production activities and say they are willing for the involvement of stakeholders.TPDC acting director general Kapuulya Musomba said councils were allowed to verify their payments, assuring Tanzanians that extracting companies were complying with laws and regulations governing the natural gas business in the country."I'm proud of seeing that natural gas has increased the country's power generation and has reduced rationing. The government is no longer paying Sh3 billion annually being charges for turbines leased to generate emergency power," he said.However, Prof Assad in his 2015/16 audit report challenged TPDC for failing to implement local content provisions to develop guidelines for international oil companies during the implementation of the PSAs.The ministry of Energy and Minerals, according to Prof Assad, lacked adequate strategies to ensure Tanzanians were employed in the oil and natural gas subsector as stipulated in the PSAs.Mr Benedict Mushingwe (working with TEITI secretariat) told The Citizen that there was a ray of hope as the country was expected to implement the Tanzania Extractive Industries (Transparency and Accountability) Act, 2015 and contracts would be made public at the ministry website.