Secret oil and gas deals generate heat in Dar

November 17, 2014

[caption id="attachment_14179" align="alignleft" width="595"] Secret deals signed by governments and oil and gas exploration companies have generated a heated debate, with Tanzania’s parliament threatening to remove a Cabinet minister from office if he insists on keeping the information confidential. PHOTO | TEA GRAPHIC | NATION MEDIA GROUP[/caption] Secret deals signed by governments and oil and gas exploration companies have generated a heated debate, with Tanzania’s parliament threatening to remove a Cabinet minister from office if he insists on keeping the information confidential.

The Public Accounts Committee has warned that it will instigate the removal from office Energy and Minerals Minister Prof Sospeter Muhongo for failing to disclose 26 agreements the government has signed with foreign oil and gas exploration companies on sharing of proceeds of the sector.

Prof Muhongo has said the contracts cannot be made public for technical reasons.

“The minister risks losing his job because he is not serving the public interest, but acting in the interest of multinational companies. Prof Muhongo has no authority to order that the Production Sharing Agreements not be submitted before the committee,” PAC deputy chairman Deo Filikunjombe said, adding that only President Jakaya Kikwete had the mandate to request documents or contracts not be submitted before the committee for national security reasons.

Although Prof Muhongo did not disclose the technicalities, standard Production Sharing Agreements (PSA) usually contain secret clauses barring the parties from disclosing the terms of the agreements without the other’s consent.

However, the clauses have been abused by most oil producing countries and provided an avenue for siphoning off revenues from the economy.

Similar secrecy surrounds oil contracts in Uganda while in Kenya, a draft PSA under discussion also provides for non-disclosure of terms.

The oil revenue sharing row erupted in Tanzania earlier this month after the PAC ordered the arrest of Tanzania Petroleum Development Corporation (TPDC) director General James Andilile and board chairman Michael Mwanda for failing to present to the committee the 26 PSAs the government entered into with multinational companies.

Arrest of officials

The two were released shortly after arrest with police saying they needed advice from the Attorney General on whether the PAC can order legal action to be taken against witnesses who fail to meet its expectations. The PAC had wanted them prosecuted.

Dar es Salaam Special Police Zone Commander Suleiman Kova said the police released them pending clarification from parliament.

He said it was noted the law requires that the PAC chairman was supposed to report the complaint to Speaker of the National Assembly first. The PAC has since written to House Speaker on the need for legal action against TPDC executives.

Attorney General Frederick Werema has been quoted in some quarters as saying there is nothing like a secret contract, especially in public contracting.

The PAC deputy chairman said the committee would ensure action is taken against Prof Muhongo the same way seven ministers including a former finance minister were removed from office in 2012 after the committee uncovered cases of mismanagement.

“Former Tanzania Bureau of Standards director general Charles Ekelege was arrested and is currently serving a one-year sentence after we uncovered mismanagement,” said Mr Filikunjombe.

Lawyers Environmental Action Team director Dr Rugemeleza Nshala said that according to the Constitution, parliament has the mandate to scrutinise and discuss all natural resource contracts entered by investors in the country.

“It should be understood that oil and gas contracts are not formula issues whereby one needs to know how to solve the problem; these are resources belonging to Tanzanians,” Dr Nshala said.

Head of research and investigations at Journalists for Human Rights Elias Mhegera said keeping the contracts a secret would be against international conventions that Tanzania has signed including the Open Government Partnership and the African Peer Review Mechanism.

He said East Africa countries should learn from Mozambique, which has translated gas contracts into vernacular to ensure citizens are well briefed to avert social tensions in future.

Recently, a PSA agreement between the Tanzanian government and Statoil leaked out and sparked a heated debate after it emerged that it did not follow the model PSA set by the government.

PAC chairman Zitto Kabwe said the leaked PSA provided an opportunity to examine whether Tanzania would benefit from its considerable natural gas resources. The Tanzania Petroleum Development and Exploration Act (1980) permits the government to enter into PSAs with an oil and gas company to explore for, and produce, petroleum.

Although the government said prospectors demanded confidentiality for business purposes, some have said they would make the terms public if the government allows it.

The ruling CCM has also challenged the investors to voluntarily disclose their contracts with the party’s secretary general Abdulrahman Kinana, saying this would promote transparency in the management of natural resources.

Tanzania last year changed the terms for companies signing agreements for exploration and production contracts for crude oil and natural gas. The new model has tougher terms and conditions entailing payment of higher fees by companies.

The 2013 model issued TPDC outlines capital gains tax obligations and a new royalty structure. It requires firms to make a one off payment of $2.5 million on signing of the agreement and pay at least $5 million when production starts. *Source theeastafrican

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