Trading and distribution
How are oil and gas resources traded in your jurisdiction and what (if any) regulations and procedures apply to oil and gas sales, distribution and marketing activities, both nationally and internationally?
The Petroleum (Wholesale, Storage, Retail and Consumer Installation Operations) Rules 2018 regulate activities in mainland Tanzania concerning:
- the petroleum wholesale business;
- the petroleum storage business;
- the petroleum retail operations business; and
- petroleum consumer installation operations and related matters.
However, the rules do not apply to petroleum retail businesses in villages and small towns and prohibit engaging into regulated activities without a licence.
‘Wholesale business’ means the import, storage or sale of a petroleum product in bulk and includes transit trade in petroleum products. Wholesalers may sell petroleum products only to retailers, consumer installation licensees or government institutions, provided that they, as per the terms and conditions agreed on, enter into a borrow/loan arrangement.
The Petroleum (Retail operations village and townships) Rules 2017 regulate petroleum retail business activities in townships and villages in mainland Tanzania. The regulations prohibit parties from conducting regulated activities without a petroleum retail licence. ‘Retail sale’ means the sale or offer for sale of a petroleum product at a retail outlet. Retailers must procure petroleum products only from wholesalers and establish and maintain records of such procurement pursuant to applicable law and orders and directions of the authorities. Consumer installation licensees may procure petroleum products only from wholesalers or retailers.
Is oil and gas pricing regulated in your jurisdiction?
The pricing of natural gas must be in accordance with the method prescribed in the Petroleum (Natural Gas Pricing) Regulations 2016 and take into account international best practices. The price of petroleum and petroleum products throughout the supply chain are governed by rules of supply and demand, subject to the Energy and Water Utilities Regulatory Authority (EWURA) Act and the Fair Competition Act.
The Energy and Water Utilities Regulatory Authority (Petroleum Products Price Setting) Rules 2009 govern the regulation of petroleum prices in mainland Tanzania. EWURA will intervene to regulate wholesale or pump prices:
- where it has determined the existence of price gouging in the petroleum market;
- where there is evidence or proof of price fixing in the petroleum market; or
- in the event of a declared state of emergency.
EWURA must determine the appropriate wholesale and pump prices in accordance with its pricing formula. The pricing formula must contain:
- cost insurance and freight costs;
- local charges and levies;
- government taxes;
- distribution costs; and
- distribution margins.
The Petroleum (Natural Gas Pricing) Regulations 2016 apply in mainland Tanzania and govern the pricing of natural gas for domestic and cross-border markets.
When determining the price of natural gas, in addition to the best international natural gas pricing practices, the following factors are considered:
- investment and operation costs for natural gas exploration, appraisal and field development plus a fair profit margin, also referred to as the ‘cost-plus appropriate profit margin’;
- pricing structures which provide incentives for promoting investments while sustaining supply and demand for natural gas;
- affordable and predictable pricing for strategic industries and domestic households;
- the use of environmentally friendly fuels; and
- the economic use of natural gas throughout the value chain and other considerations as may be determined by supply and demand forces inside and outside mainland Tanzania.
‘Domestic market’ means the use of natural gas for power generation, industrial and household heating, transportation, commercial and non-commercial institutions and the petrochemicals sector.
‘Cross-border markets’ mean regional markets connected to the domestic market by a pipeline.