As intrepid investors are keen to enter Tanzania’s extractives industry, the rush into the country’s oil and gas industry is one in which people are still cautiously entering. While there is an ardent approach for many to enter and have first mover advantage, the situation that one must decipher is whether entering this region is viable, moreover entering Tanzania is suitable, given that energy is found across the African continent.
As we sit down with Ambassador Ombeni Sefue, who is the Chairman of the Association of Tanzania Oil and Gas Service Providers (ATOGS), The Exchange asked him a few questions on why Tanzania is considered such an attractive place to invest, and why the international community is keen on jumping at the opportunity to pour billions in the country’s nascent energy industry.
The timing of this interview is critical as it marks a few days before the 2nd Tanzania Oil and Gas Congress that will be held on September 24th and 25th.
- Ambassador Sefue, it is evident that Tanzania holds nearly 60 Trillion cfu of natural gas, and that oil is currently being explored, but why does Tanzania stand out among the many other nations in Africa as a preferred destination for energy exploration and extraction?
Tanzania is richly endowed with natural resources, most of it still not yet fully developed which, with the right business environment, can be exploited profitably for mutual benefit between investors and the Tanzanian people, directly through jobs, goods, services or sub-contracts, or through their government. Oil and gas are just the tip of the iceberg in so far as Tanzania’s natural resource endowment is concerned. This positions Tanzania in a competitive situation regarding the range of possibilities and opportunities open to investors. With regard to oil and gas, I think we have a very good legal and regulatory framework for their extraction and utilization as well as management of the revenues that will flow from them. The government has made it quite clear that it wants a win-win situation between investors and the host country. Successive governments have made it a priority to ensure that Tanzania is competitive in terms of attracting the kind of investment and technology needed to unlock the potential that the extractive sector provides, in a manner that ensures investors a fair and decent return on their investment, but also unlocks the country’s growth potential by hooking as many local citizens and companies as possible to the resource value chain. That, I believe, is also what investors want. An investor who does not want Tanzania to benefit fairly from its natural resource endowment has no place in Tanzania. But those that believe in a win-win situation have every reason to be attracted to Tanzania, in addition to our peaceful environment and positive business environment.
- Please state your thoughts on the role of energy production in East Africa and as Chairman of ATOGS, how do you see Tanzania in taking a lead in this?
East Africa is a new frontier in oil and gas exploration and energy development. The countries of the region need to capitalize on it and work together to ensure maximum returns accrue to our countries and region. We should avoid the so-called “race to the bottom” where we become unnecessarily generous to foreign investors thinking that is the way to build individual country competitiveness. We need to present a regional competitive advantage that does not seek to undermine each other, but ensures win-win outcomes for everybody. In addition, energy is a sine qua non for unlocking the region’s growth potential. Industrialization, which is a priority for all countries in East Africa, will not happen without adequate, reliable, clean and affordable energy. But investments in this sector are taking off from a very low base, hence the huge opportunities this provides for foreign and local investment. In most countries in East Africa, economic growth ranges from 5 – 8 % annually but for this level of growth to be sustained over the long-term we need much more investment in the energy sector. As far as I know, Tanzania wants to produce energy to meet its current and future needs, as well as supporting neighboring countries through interconnected energy grids.
- Do you believe Tanzania, once it achieves being an energy producing nation that it will attain middle income status, and in that process, how can more Tanzanian citizens take part in this industry?
Energy is only one out of many other sectors that can unlock Tanzania’s growth potential. The key is having a 360-degree view of the challenges that impact growth, and which, if properly addressed, can truly transform the Tanzanian economy and firmly position us as a middle-income country. We are approaching the lower band of middle-income countries, and this puts even more demand on the energy sector. To catapult to higher bands of middle-income status, we will need to have a lot more reliable, clean and affordable energy at our disposal.
But for benefits of investments in oil and gas to truly transform the country, our people have to be more proactive and participate in the extractive sector value chain. This can be in the form of identifying and acquiring the requisite skills and technical competencies for those looking for employment; and the capacity to provide competitive goods and services, or be sub-contractors. The issue of local content has now a much higher profile than in the past, and can easily be political. International oil and gas companies need to bear this in mind and be truly committed to working with the government and our people to realize this goal in a win-win environment. With goodwill on both sides, the issue of local content will bind rather create fissures between government and international oil and gas companies. But, again, Tanzanians need to be more proactive and not think that goodies will drop on their platter with minimal effort just because the government is pushing international investors on local content.
- With energy being found across Africa, what would you say is a vital measure of change that Tanzania must adhere to in order to attract global energy investors to invest in Tanzania and not any other neighboring country?
Successive governments in Tanzania have already worked hard to create a conducive environment for foreign investment, in all sectors, not just the extractive sectors. We now need to create more stability in the legal and regulatory framework to give investors more confidence and enable them to plan medium to long-term. This would definitely take us to a higher level of competitiveness. We need to know our thoroughly thought out bottom line, legislate it as we have done, and keep it stable over the medium and long-term. I think the government also needs to keep open the lines of communication to ensure an ongoing and constructive dialogue with existing and potential investors.
- As Chairman of ATOGS, could you give us a brief outline what next weeks means for Tanzania as it aims to be an energy player globally?
I accepted to chair ATOGS to lend my support to those Tanzanians who want to take advantage of the business environment, as well as the law and regulations that create space for the participation of Tanzanians and Tanzanian companies in the oil and gas value chain. I am glad to see many Tanzanians and Tanzanian companies joining ATOGS and participating in the oil and gas congress as it brings to our shores major global and regional players in this sector and thus creating opportunities to learn, network and hopefully build mutually beneficial partnerships. This is also an opportunity for dialogue not just between the government and these global and regional players, but also to find common ground on the issues of concern to each of the players, and those who now want to participate. Tanzania is positioning itself to be a major energy player in our region and globally; but we will miss the boat of the economically transformative power of this resource if the issue of local content is not well addressed. Tanzanians will not accept to continue being mere spectators in the development of these resources, but they must also prepare and empower themselves better to participate, not just because they are Tanzanians and it is their right, but because they are as capable as anyone.
- Since ATOGS is a major player at next weeks Congress, can you tell us how more local content service providers can participate in the energy industry and what those who aren’t part of ATOGS do to become players in Tanzania’s energy arena?
There are three main levels in which Tanzanians and Tanzanian companies can participate in the oil and gas value chain. The first is employment. Regarding local content issues, perhaps nothing infuriates local people off the bat like seeing people from outside the country doing jobs that could easily and as well be performed by local people, directly or with a little training and orientation. Here, I think, it is important for oil and gas companies to make known early on, even 10 years before, what job opportunities are likely to occur in their future operations, and what kind of skills, competencies and certifications they will need. The government needs to know this, and the citizens need to know this. It has to be a totally transparent process. This will give the government, the people and training institutions ample time to ensure our people are as qualified as any to be employed.
The second level is service provision, and this is especially important because of the linkages it provides to the rest of the economy. Like in employment, oil and gas companies must make known years in advance what kind of services they might need years down the road, and the kind of standards and competencies they will require to give our people enough time to prepare to meet those standards. They must also be willing to actively engage local service providers in guiding them on what they have to do to meet those standards. Gone are the days when Tanzanians would acquiesce to seeing foreign transport, cleaning, clearing, catering and similar services being entrusted to foreign companies. It is important for those who want to hook into this oil and gas value chain to join ATOGS and hence increase our voice within government as well as within the oil and gas fraternity as we seek to ensure maximum local content in the sector.
The third level is subcontracting, and the same requests go to the international oil and gas companies to help attract and nurture local companies to build capacities to be entrusted with larger sub-contracts.
- What skills do you believe are needed for Tanzanian’s to increase participation in this industry and what should today’s youth look at in order to be players in the country’s energy sector?
The easier part in the local content agenda is demanding it; but it will not happen just because we demand it, or because it is in the legal framework of the sector. That is an important first step; but it is just that – a first step. We now need to develop the skills, competencies and capacities to avail ourselves of what the policy and law provides. The list of needed skills, competencies and capacities in the entire oil and gas value chain is very long from fairly simple skills to very complicated technical skills. As I said earlier, the key is getting the oil and gas companies to divulge and broadly share their detailed skill requirements years ahead so that our members and anyone else interested can see the opportunities that are coming and prepare to acquire the needed skills. This also applies to subcontractors and major service providers.
- What does next week’s event hope to achieve as Tanzania aims to be a dominant energy player across the continent and globally?
I do hope that the oil and gas congress will bring together oil and gas companies and a cross-section of local companies and individuals with interest in the sector, opening opportunities for each one, creating platform for engaged discourse, and space to share experiences and build enduring partnerships. The event also provides a good opportunity to raise questions and concerns with the concerned parties and get answers at this one event.