Energy

December 2015

Update

New energy
legislation introduced
in Tanzania
In July 2015, we published an energy briefing on the
Tanzania Extractive Industries (Transparency and
Accountability) Bill 2015 (the TEI Bill) and the Oil and
Gas Revenues Management Bill 2015 (the OGRM Bill).
Since then, the Bills have been passed by Parliament
and assented to by the President. This months briefing
will briefly highlight what changes have occurred
between the Bills and the Acts and summarise the key
issues of these Acts of Parliament.
Background
The Tanzania Extractive Industries (Transparency and Accountability) Act
2015 (TEI 2015) and the Oil and Gas Revenues Management Act 2015 (OGRM
2015) have been enacted to further regulate Tanzanias booming energy sector.
The central new law in the energy sectors legal framework is undoubtedly the
Petroleum Act 2015 (PA 2015), an Act which we have analysed at length in a
separate briefing which has also been released last month.

Tanzania Extractive Industries (Transparency and

Accountability) Act 2015
What are the key changes between the TEI Bill and TEI 2015?
Extension of the application of TEI 2015
Part 2 of the Preliminary Provisions has been amended so that the Act applies not
only to Mainland Tanzania, but also to extractive industry companies undertaking
joint petroleum operations or petroleum activities in Tanzania Zanzibar, in specific
areas or overlapping blocks in accordance with PA 2015. Where the extractive
industry activities are undertaken within Tanzania Zanzibar, the activities shall be
governed and administered in accordance with the laws of Tanzania Zanzibar.
Clarification of definitions
The definition of extractive industry company has been amended to
specifically include both private and state owned companies engaged in
exploitation of minerals, oil, natural gas and includes any other company
engaged in natural resources extraction.
Composition of the Tanzania Extractive Industries (Transparency and
Accountability) Committee (the Committee)
Under the TEI Bill the fifteen members, additional to the Chairman of the
Committee, were to be made up of individuals who possess knowledge and
experience relating to extractive industries. This has been amended in TEI
2015, so that the members of the committee will be made up of those that
possess knowledge and experience in the governance of industries in general.
The TEI Bill contained conflicting terms as to whether the majority of Committee
members were to be appointed by the Minister responsible for energy and

minerals. TEI 2015 clarifies that the Minister shall only

appoint five members to the Committee from members of
Government (one of whom shall be the Attorney General or
his representative). Of the remaining members: five are to be
appointed by extractive industry companies and a further
five are to be appointed by civil society organisations.
TEI 2015 expressly states that when appointing members
to the Committee, specific regard must be given to gender
balance.
Functions and powers of the Committee
The Committee shall require extractive industry companies
to disclose to the Committee accurate records of the cost of
production, capital expenditures at every stage of investment,
volumes of production and export data from extractive
industry companies in respect of each licence, rather than
every financial year as was the case under the TEI Bill.
The Committees functions under section 10 have been
expanded to include: (a) promoting the effective citizen
participation and awareness of resources governance in
extractive industry and its contribution to socio-economic
development; and (b) making consultations amongst
Government civil society and companies for effective
management of natural resources.
Obligation to publish information
Along with the obligations to publish information as
outlined by the TEI Bill, TEI 2015 also requires that all
information on activities undertaken by an extractive
industry company which would be required to be reported
or submitted to its local or foreign stock markets shall
equally be reported or submitted to the Committee.

Key issues
TEI 2015 provides for the founding of the Tanzania
Extractive Industries (Transparency and Accountability)
Committee, which shall be an independent government
body with oversight responsibilities for promoting and
enhancing transparency and accountability. The Committee
shall be comprised of no more than sixteen members, with
the Chairman appointed by the President. The remaining
members will be appointed as described above.
The overarching purpose of the Committee is to ensure
that the benefits of the extractive industry are verified,
duly accounted for and prudently utilised for the benefit
of the citizens of Tanzania. In order to achieve this, the
Committee shall, amongst other things (including those
functions new to TEI 2015 outlined above):
(a) Develop a framework for transparency in the reporting
and disclosure by all extractive industry companies on
revenues due or paid to the Government
(b) Require from any company an accurate account of the
money paid by and received from the company
(c) Require companies to disclose accurate records of the
cost of production, capital expenditures at every stage of
investment, volumes of production and export data, and

(d) Conduct investigations on material discrepancies

between revenue payments and receipts
Every year the Committee will publish a threshold where
every company which exceeds it shall be required to reconcile
payments made to the Government against receipts held
by the Government and provide a report (a Reconciliation
Report) detailing this reconciliation to the Committee. Where
a Reconciliation Report identifies a material discrepancy,
the Committee shall within fourteen working days submit
the report to the Controller and the Auditor General, who
shall produce an audit report which shall in turn be provided
to the Committee. Having received the report from the
Controller and the Auditor General, the Committee shall
discuss the matter with the Government before following the
recommendations of the Controller and the Auditor General.
All companies working in extractive industries shall also
be required to provide the Committee with an annual
report detailing their corporate social responsibility
programmes and also submit to the Committee their
capital expenditures at every stage of investment. Failure
to do so will be a criminal offence.
Also as part of the transparency regime, the Committee
shall require the publication of the following information:
(a) All concessions, contracts and licenses relating to the
extractive industries
(b) The names of shareholders who own interests in the
extractive industries, and
(c) Reports into the implementation of Environmental
Management Plans
Failure to comply with the provisions of TEI 2015 and to fail
to provide the Committee with the documents as requested
is a criminal offence, with the punishment, upon conviction
being either a fine of not less than ten million shillings in the
case of an individual, or a fine of not less than one hundred
and fifty million shillings in the case of corporate entity.
This is a big point for all companies in the extractive and
energy sectors. Will all Production Sharing Agreements and
Mineral Development Agreements need to be published for
example? How does this sit with the confidentiality provisions
in these agreements? We are monitoring the application and
enforcement of these provisions.
Amendment of the Mining Act
Finally, TEI 2015 has made numerous amendments to the
Mining Act 2010. For a detailed analysis of the amendments
made to the Mining Act, please see our specific Mining Act
update of November 2015 on the subject.

The Oil and Gas Revenues Management Act 2015

What are the key changes between the OGRM Bill
and OGRM 2015?
Extension of the application of OGRM 2015
Under the OGRM Bill, the Act was to apply equally to Mainland
Tanzania and Tanzania Zanzibar in relation to management
of oil and gas revenues derived from exploration, development
and production of oil and gas activities.

As under the OGRM Bill, OGRM 2015

shall apply to Mainland Tanzania
and Tanzania Zanzibar respectively.
However, OGRM 2015 goes further
and states the Act will apply to
activities undertaken under joint
petroleum operations or petroleum
activities in specific areas or
overlapping blocks, in accordance
with PA 2015. The assumption is that
where activities are carried out in
these areas, an agreement will be
made as to whether the revenues
derive from Mainland Tanzania or
Tanzania Zanzibar.
Where the extractive industry
activities are undertaken within
Tanzania Zanzibar, the activities
shall be governed and administered
in accordance with the laws of
Tanzania Zanzibar.

Further information
If you would like further information
on any issue raised in this update
please contact:

Peter Kasanda
Partner, Dar es Salaam
E: peter.kasanda@clydeco.com
T: +255 767 850 054

Kumara Mallikaaratchi
Associate, Dar es Salaam
E: kumara.mallikaaratchi@clydeco.com
T: +255 767 850 060

Clyde & Co Tanzania

1th Floor, Golden Jubilee Towers
Ohio Street, PO Box 80512
Dar es Salaam, Tanzania
T: +255 768 983 000/022
F: +255 222 103 004
Further advice should be taken
before relying on the contents
of this summary.
Clyde & Co Tanzania accepts no responsibility
for loss occasioned to any person acting or
refraining from acting as a result of material
contained in this summary. No part of this
summary may be used, reproduced, stored
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Clyde & Co LLP 2015
CC009071 - November 2015

Definitions
Additional oil and gas entitlements
which in the OGRM Bill referred to
the portion of a contractors share
of oil and gas produced to which the
Government was entitled to a share,
had been removed from OGRM 2015.
Government profit share has
been included in OGRM 2015 as the
remaining balance of profit gas or
profit oil payable to the government
after deducting contractors profits of
oil or gas.

Key issues
OGRM 2015 provides that taxes and
levies shall continue to be assessed,
collected and accounted for by the
Tanzania Revenue Authority (TRA),
whereas non-tax oil and gas revenues
shall be collected and accounted for
by the National Oil Company (TPDC)
this includes surface rentals and
block fees. The Petroleum Upstream
Regulatory Authority (formed under
PA 2015) shall be responsible for
auditing the cost recovery on the
exploration, development, production
and sale of oil and gas to determine
government profit share and royalties.
Another significant development is
the forming of the Oil and Gas Fund
(the Fund), whose objectives shall be
to ensure that:
(a) Fiscal and macroeconomic stability
is maintained

(b) The financing of investment in oil

and gas is guaranteed
(c) Social and economic development
is enhanced, and
(d) Resources for future generations
are safeguarded
The Fund shall receive its capital from
Government royalties, Government
profit share, the dividends on
Government participation in oil and
gas operations, corporate income
tax on exploration, production and
development of oil and gas resources,
and the return on investments of
the Fund.
The Funds strategy shall be decided
by the Minister of Finance, advised by
a Board consisting of five individuals
appointed by the President. Where the
Minister of Finance declines to follow
the advice of the Board, the matter
shall be determined by the President.
Management of the Fund shall be in
accordance with the statutory fiscal
rules, which are:
(a) The financing of the Government
budget
(b) The financing of the Funds
investments
(c) Fiscal stabilisation, and
(d) Saving for future generations
Amongst other reasons, these fiscal
rules have been based upon the
recognition that it is important to
protect the Tanzanian economy
against the inherent volatility of oil
and gas revenue and the presence of
uncertainty over the timing and size
of that revenue.

Tanzanian Explorers Club

The Tanzanian Explorers Club (TEC)
is for people working in, or affiliated
with, Tanzanias energy industry,
specifically the mineral exploration
sector. TEC provides an informal
environment to facilitate networking
and information sharing between key
participants of the industry. If you
are interested in joining the next TEC
meeting, please email Clyde & Cos
energy team to find out further details.