Exploration and production

Rights

Who holds the rights to oil and gas reserves in your jurisdiction?

The government manages petroleum on behalf of and in trust for the people of Tanzania, (but without prejudice to any right to explore, develop or produce petroleum granted, conferred, acquired or served under the relevant law of Zanzibar).

The Minister of Energy has the power to grant licences and consider the Petroleum Upstream Regulatory Authority’s (PURA’s) advice in exercising its powers.

The National Oil Company has exclusive rights over all petroleum operation rights. The licence granted to the National Oil Company is not transferable to any other party. The National Oil Company may, subject to the minister’s consent and on advice from PURA, enter into partnership with a Tanzanian or foreign entity through an open tendering process or the direct award of a block. The licence granted will require the National Oil Company to maintain a participating interest of not less than 25%, unless it decides otherwise.

Is there a distinction between surface and subsurface rights?

Surface rights

The lawful occupier of any land in an exploration or development area will have the right to graze stock or cultivate surface land if the grazing or cultivation does not interfere with exploration or development operations in such area. The lawful occupier of land in a development area must not erect any building or structure in the area without the written consent of the holder of the development licence concerned. If the minister considers that consent is being unreasonably withheld, they may give their consent to the lawful occupier.

Sub-surface rights

Surface rights include the right to conduct exploration operations. ‘Exploration operations’ are defined as operations for or in connection with the exploration of petroleum and include:

  • geological and geophysical surveys and studies;
  • aerial surveys and other studies as may be included in approved work programmes and budgets;
  • the drilling of shot and core holes, stratigraphic tests, exploration wells and other related holes and wells; and
  • the purchase or acquisition of such supplies, materials and equipment which may be included in approved work programmes and budgets.

The holder of an exploration licence will have the exclusive right to:

  • explore petroleum in the exploration area;
  • carry out operations; and
  • execute works as necessary.

What rules and procedures govern the grant of rights for exploration and production purposes (eg, through licences, leases, concessions, service contracts, production sharing agreements)?

The grant of rights for exploration and production purposes is done through production sharing agreements. A party may enter into partnership with the National Oil Company if it is a body corporate registered under the Companies Act or any other written law and such entity is of recognised capacity, technical knowledge and financial capability.

Where two or more applicants jointly intend to apply for an award of acreage, the applicants must enter into a cooperation agreement for petroleum activities, which must be submitted to the minister as a condition for entering into the agreement. The minister may require information from the applicant of a joint venture composed of specific companies as condition for the award of an acreage. The minister may, on the advice of PURA and on behalf of the government, enter into an agreement with the National Oil Company and its partners regarding:

  • the grant of a licence;
  • conditions for the grant or extension of a licence; and
  • any other matter incidental or connected to the grant or extension of a licence.

The minister, on behalf of the government, will not enter into an agreement without prior approval of Cabinet. PURA will develop and submit to the minister a model of production sharing agreement or any other model agreement to be approved by Cabinet, which act as guidance in the negotiations of any agreement. At present, the Model Petroleum Sharing Agreement 2013 applies.

Petroleum agreements should not be entered into unless a transparent and competitive public tendering process has been completed. The minister orders that an invitation of tender be published in a newspaper of wide circulation. Where all or part of the area tendered in a competitive public tender process for the award of an agreement has not become effective and it is in the public interest, the minister may, on advice from PURA and the approval of Cabinet, initiate direct negotiations with qualified and eligible companies.

What criteria are considered in awarding exploration and production rights (eg, are there any restrictions on the participation of foreign investors/companies)?

The National Oil Company must apply for a petroleum exploration licence to the minister in respect of any block.  

There is no restriction on the participation of foreign investors or companies in exploration and production activities. Further, the National Oil Company may, subject to the minister’s consent and on advice from PURA, enter into partnership with a Tanzanian or foreign entity through an open tendering process or the direct award of a block. No new petroleum sharing agreement has been signed in the past six years or so.

Joint ventures

Are there any special legal provisions applicable to joint ventures?

Where two or more applicants intend to apply jointly for an award of acreage, they must enter into a cooperation agreement for petroleum activities, which must be submitted to the minister as a condition for entering into agreement. The minister may require information from the applicant regarding a joint venture composed of specific companies as condition for award of an acreage. Where a non-local company must provide goods and services to a contractor, subcontractor, licensee or any such person, that non-local company must form a joint venture with a local company. The local company must own at least 25% of the joint venture.

Third parties

Can exploration and production rights be transferred to third parties?

Exploration and production rights can be transferred to third parties with ministerial approval for an instrument by which a legal or equitable interest in, or affecting, a licence is created, assigned, effected or dealt with, either directly or indirectly.

Fracking

Is hydraulic fracturing (‘fracking’) permitted in your jurisdiction?

Fracking is permitted but not common in Tanzania since, geologically speaking, it is composed of sedimentary rock (ie, soft rock, which does not require fracking for gas exploration). Fracking is considered an unconventional method of exploring hydrocarbon in Tanzania.