Production Sharing Agreement in Tanzania
Production sharing agreements (PSAs) are a common tool used in the oil and gas industry to divide the risks and rewards of exploration and production activities between governments and private companies. In Tanzania, PSAs have been used since the 1980s to attract foreign investment and develop the country`s oil and gas resources.
PSAs in Tanzania typically involve a government-owned entity, the Tanzania Petroleum Development Corporation (TPDC), and a private oil and gas company. The TPDC holds a share of the production, usually between 5% and 25%, and receives royalties and taxes from the private company. The private company is responsible for all exploration, development, and production activities and bears the costs and risks associated with those activities.
PSAs in Tanzania have been successful in attracting foreign investment and developing the country`s oil and gas resources. The country has seen a significant increase in exploration and drilling activities in recent years, with major discoveries made in offshore fields such as the deepwater blocks in the Indian Ocean and the natural gas fields in the Songo Songo Island.
However, PSAs in Tanzania have also been criticized for their lack of transparency and accountability. Some industry analysts argue that the government`s share of production is too low, resulting in a loss of revenue that could be used to benefit the country`s citizens. There have also been concerns about corruption and mismanagement of funds, particularly in the wake of the “Panama Papers” scandal that implicated several high-ranking Tanzanian officials in offshore tax evasion.
Despite these challenges, PSAs in Tanzania remain a key tool for attracting foreign investment and developing the country`s oil and gas resources. As Tanzania continues to explore its potential as an oil and gas producer, it will be important for the government and private companies to work together to ensure that PSAs are structured in a way that benefits both parties and promotes transparency and accountability.