The Natural Resource Governance Institute (NRGI) in its 2021 Resource Governance Index assessment of Tanzania’s oil and gas industry, has placed the sector in a ‘weak’ performance band with a score of 55 out of 100 points.
The score is however, a 2 points increase in the 53 points score recorded by the index in 2017.
The improvement in the country’s score is largely owed to the country’s gains in the governance of revenue management.
“Nevertheless, revenue management remains in the “weak” performance band alongside value realization and the broader enabling environment,” added NRGI.
The NRGI, while commending the government of Tanzania for implementing a good tax regime in the sector, identified some weaknesses in value realization, attributing them to poor licensing governance of oil firms in the sector.
With respect to value realisation, revenue management and enabling environment, Tanzania’s oil and gas sector scored 58 points, 53 points and 53 points respectively.
On how to improve upon its score on the Resource Governance Index, the NRGI made the following recommendations to the government of Tanzania:
- The Ministry of Energy should establish an oil and gas cadaster. This would improve public administration efficiency, transparency, and also make it easier for all governmental authorities to upload information into the public domain via an online portal, allowing citizens and other stakeholders to engage in dialogue about how the country’s resources are managed. Tanzania’s mining cadaster is a relevant example of how this could be done in the oil and gas sector.
- Tanzania’s parliament should pass laws requiring senior public officials to publicly disclose their financial holdings and ensure that this is enforced. Doing so can prevent conflicts of interest and help ensure compliance with anticorruption provisions.
- The Minister of Energy should enforce oil and gas contract disclosure rules. Doing so enables citizens to understand the agreed terms of projects and hold each party accountable for non-compliance. It also incentivizes government officials to arrange fair contracts and deters them from concluding contracts that are disadvantageous to citizens.
- The Business Registration and Licensing Agency (BRELA) should prioritize enforcement of beneficial ownership rules. This mitigates the risk of the government going into business with disreputable individuals, and can also prevent tax evasion, ensuring that the country receives the revenues it is owed.
- The Ministry of State for the Environment and Vice President’s Office should create a provision for environmental/social impact disclosure rules in legislation and ensure their enforcement, as environmental and social disclosures can help citizens understand whether extractive operators are complying with national legislation and regulation. It can also help companies to build trust with local communities, strengthening their “social license to operate.”
- The Ministry of Energy should stand by the commitment to resume project negotiations with investors, which previously stalled due to contentious regulatory, fiscal and local content regulations. This will be crucial to supporting the country’s ambitions to supply gas to the region and reduce dependence on imported oil.
