Watu
JF-Expert Member
- May 12, 2008
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By ERICK KABENDERA
Posted Saturday, July 9 2016 at 13:14
IN SUMMARY
Background
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Sources within the ministry of Finance and the TRA said that the government had also decided to temporarily suspend Shell and BG Group’s application for renewal of exploration licenses in the two blocks until the dispute is resolved.
Exploration licences are given for periods of four years then renewed for four years and another period of three years, after which a company is expected to apply for a development licence.
Block 1 licensce expires in December this year, while the block 4 licence expires in October 2017.
By then, according to the government records, the company will have exceeded the minimum of 11 years and to apply for development licenses but it is not yet ready for that.
“The scenarios meant that Shell had to apply for an extension of the exploration license for block 1 and 4 but the extension is upon the discretion of the minister since it is beyond the 11 year period. That is where the government has an upper hand,” the sources said.
Innocent Bashungwa, an MP for Karagwe and former co-ordinator at the Tanzania Extractive Industries Transparency Initiative told The EastAfrican that the administration of oil and gas sector involves billions of dollar’s worth of investments and transactions between farm- ins and farm-outs.
“When big bucks change hands, disputes can arise if the legal and regulatory system in a host country is ambiguous about transactional procedures,” said Mr Bashungwa, adding that the dispute is the sign of poor legal and regulatory preparedness on the part of the government at the time of signing the production sharing agreement (PSA) with BG and other PSAs that were signed then.
“The dispute is unfortunate at this time of gas developments in the country, when the government is trying to show the world that we can be relied upon for long-term investments. I trust the government and BG will find an amicable solution for the capital gains transaction in dispute. Otherwise, the Oil and Gas Association of Tanzania members and prospective investors may take the issue as a harbinger of what to expect in the future,” the legislator said.
Source: Taxman freezes BG Group’s accounts in $500m tax row
Posted Saturday, July 9 2016 at 13:14
IN SUMMARY
Background
- Shell officially acquired the BG Group stake in a $55 billion deal , touted as the biggest energy deal in more than a decade — positioning Tanzania as one of the continents’ top suppliers of gas— in February.
- The takeover gave Shell a 16 per cent controlling stake in the world’s liquefied natural gas (LNG) business, with Tanzania and Egypt as its anchor operation areas on the African continent. Tanzania has proven reserves of 55 trillion cubic feet of natural gas, which is expected to generate almost $5 billion annually.
- The country is expected to construct an LNG plant at the start of next year, with a target completion date of 2024, depending on Shell’s strategies.
Tweet
Sources within the ministry of Finance and the TRA said that the government had also decided to temporarily suspend Shell and BG Group’s application for renewal of exploration licenses in the two blocks until the dispute is resolved.
Exploration licences are given for periods of four years then renewed for four years and another period of three years, after which a company is expected to apply for a development licence.
Block 1 licensce expires in December this year, while the block 4 licence expires in October 2017.
By then, according to the government records, the company will have exceeded the minimum of 11 years and to apply for development licenses but it is not yet ready for that.
“The scenarios meant that Shell had to apply for an extension of the exploration license for block 1 and 4 but the extension is upon the discretion of the minister since it is beyond the 11 year period. That is where the government has an upper hand,” the sources said.
Innocent Bashungwa, an MP for Karagwe and former co-ordinator at the Tanzania Extractive Industries Transparency Initiative told The EastAfrican that the administration of oil and gas sector involves billions of dollar’s worth of investments and transactions between farm- ins and farm-outs.
“When big bucks change hands, disputes can arise if the legal and regulatory system in a host country is ambiguous about transactional procedures,” said Mr Bashungwa, adding that the dispute is the sign of poor legal and regulatory preparedness on the part of the government at the time of signing the production sharing agreement (PSA) with BG and other PSAs that were signed then.
“The dispute is unfortunate at this time of gas developments in the country, when the government is trying to show the world that we can be relied upon for long-term investments. I trust the government and BG will find an amicable solution for the capital gains transaction in dispute. Otherwise, the Oil and Gas Association of Tanzania members and prospective investors may take the issue as a harbinger of what to expect in the future,” the legislator said.
Source: Taxman freezes BG Group’s accounts in $500m tax row