29th

ANNUAL REPORT
USE FUEL EFFICIENTLY
TO CONSERVE
THE ENVIRONMENT
TANZANIA PETROLEUM DEVELOPMENT CORPORATION

2004/2005

ADDRESS
P.O. Box 2774
DARES SALAAM

BANKERS
CRDB Bank Limited
Lumumba Street Branch
P .O. Box 268
DAR ES SALAAM

TELEPHONE
2126452,
2118535/6
FAX
2129663
DAR ES SALAAM

AUDITORS
SBC CONSULTANCY SERVICES
(Certified Public Accountants)
PPF HOUSE 4TH FLOOR
Morogoro Rd/Samora Avenue
P.O Box 72712
DAR ES SALAAM

ADVOCATES
G.M.KILINDU & CO ADVOCATES
NEDCO BUILDING
A, H. Mwinyi Road
DAR ES SALAAM

REGISTERED OFFICE
Plot No. 37/38,Ali Hassan Mwinyi Road, UPANGA DAR ES SALAAM

CORPORATE PROFILE
Tanzania Petroleum Development Corporation is a fully Government owned Parastatal
organization under the Ministry of Energy and Minerals. It was established under the
Public Corporations Act No. 17 of 1969 of the laws of Tanzania (repealed and replaced
by the Public Corporations Act (CAP 257 R.E 2002) of the Laws of Tanzania); through
Government notice No. 140 of 30th May, 1969. The Corporation commenced operations
in 1973.
The functions of the Corporation as laid down in the Government Notice include:
(a)

to promote the development of the petroleum industry and the production of

petroleum;

(b)

to carry on the businesses of prospectors, producers, refiners, storers, suppliers

and distributors of petroleum;

(c)

to conduct or engage in petroleum prospecting operations including

exploration, drilling, testing, appraisal, extraction, producing, treatment,
storing, transportation and such other activities relating thereto as the Board
may from time to time decide;

(d)

to acquire by agreement and hold interests in any undertaking, enterprise or

project associated with the exploration and prospecting for, or the production
of petroleum and for such purposes to obtain, exercise, carry out and use any
mining lease, licence, concession, franchise, authority, power, right or
privilege which any government, corporation, public body or other authority
may be empowered to grant;

(e)

to manage the affairs of any corporation, company, firm or other body the
interests of which are transferred to or acquired by the Corporation under the
provisions of the Act or this Order;

(f)

to carry on its business, operations and activities either within the United
Republic or elsewhere, whether as principal, agent, contractor or otherwise,
and either alone or in conjunction with any other persons, firms or bodies
corporate;

(g)

to do all such acts and things as may be necessary to uphold and support the
credit of the Corporation and to obtain and justify public confidence, and to
avert or minimize any loss to the Corporation;

(h)

to do any thing or enter into any transaction which, in the opinion of the Board
is calculated to facilitate the proper and efficient carrying on of its activities
and the proper performance of its function as specified in this paragraph.

(i)

The Corporation is under the said Notice authorized to perform its functions
either itself or through any contractor or contractors employed by it on such
terms and conditions as the Board may approve.

BOARD OF DIRECTORS

Gen. R. Mboma (Rt)

Mr. J. Msindai

Mr. Abdulaziz

Dr. Mbaga
Naiko

Mrs. Bukuku

Mr. P. VictusMrs.

Mr. Dacosta

Mrs. Kate Kamba

(MP)

Mr. Ole

Sophia Simba
(MP)

MANAGEMENT

Mr. Y.S.M. Killagane

Managing Director

Mr. S. Mlawi
Corporation
Secretary

Mr. H.R. Halfani

Director of Exploration
Production & Technical
Services

Mr. L. Mawalla
Director of Finance &
Administration

Mr. D. Fuko
Director of Marketing
& Investments

Alhaj Jaafar Misonge

Chief Accountant

Mr. P. Kisimbo
Chief Internal
Auditor
5

LETTER OF TRANSMITAL

To:

Hon. Pius Msekwa

The Speaker of The National Assembly
United Republic of Tanzania
Parliament House
DODOMA

In accordance with the Public Corporations Act (CAP 257 R.E. 2002 of the Laws of
Tanzania) I have the honour of submitting the 29th Annual Report and Audited Accounts
of Tanzania Petroleum Development Corporation for the year ended 30th June 2005.

Dr. Ibrahim Msabaha (MP)

Minister of Energy & Minerals

NOTABLE MILESTONES IN THE HISTORY OF

THE SONGO SONGO GAS DEVELOPMENT

1974

Natural Gas was first discovered in Tanzania by AGIP Spa

during the drilling of the well SS # 1. By then the Gas deposits
were found to be uneconomical and M/S AGIP SpA later
relinguished the block.

1975 - 1979

TPDC took over the field and with the assistance of the Oil and
Natural Gas Commission (ONGC) of India drilled onshore wells
SS # 2, 3 and 4.
The wells confirmed the presence of a large
reservoir of gas. SS # 2 blew out after encountering shallow gas at
850 meters depth.

1978/79

M/S Fertilizer (Planning & Development) India Ltd (FPDIL)

were commissioned by the Government of United Republic of
Tanzania to carry out a study on the best economic use of natural
gas. The FPDIL study recommended the production of fertilizers
as the best use of natural gas and recommended a small plant for
the production of ammonia and urea.

1980

M/S Agrico Chemical Company of USA proposed to the

Government of the United Republic of Tanzania and TPDC for the
construction of a World scale ammonia/urea plant to be operated
by a joint-venture company (Kilwa Ammonia Company Ltd or
KILAMCO). The proposal was accepted and the project company
formed. The planned plant capacity was 1560MT per day of
Ammonia and 1725 MT per day of urea.

1980s

The KILAMCO project stalled and was later shelved because

of high capital costs, failure by the Government of Tanzania to
raise the required equity and worldwide slump in the price of
fertilizers in the mid 1980s to early 1990s.

1981 1983

With World Bank funds SS # 5, 6, 7, 8, & 9 were drilled and

completed as appraisal wells. Out of these, wells SS # 5, 7, & 9
confirmed the presence of gas and were completed as gas
producers.

1990

TPDC commissioned M/S Hardy BBT to undertake two

studies for the use of Songo Songo natural gas namely,

manufacture of fertilizer on the one hand and conversion into
liquid fuels and use in power generation on the other. The study
concluded that it would be feasible to use the gas to generate
electricity for the national grid and that the most viable option
would be to pipe the gas to Dar es Salaam, generate power in Dar
es Salaam and supply some gas for
industries in Dar es Salaam, and later extend the pipeline north
ward to supply gas to Tanga and Mombasa.
The outcome of the two studies was the basis of the interest
expressed by M/S Ocelot International of Canada in the
development of the Songo Songo gas field.
April 1993

TPDC and the Government of the United Republic of Tanzania

invited proposals from different companies for the generation of
electricity using Songo Songo gas. M/S Ocelot International won
the tender and invited M/S TransCanada Pipelines as co-investor in
the project. The project, initiated by Ocelot is now the current
main project The Songo Songo Gas to Electricity Project. The
project main objective was to generate electricity in accordance
with the Power Purchase Agreement, entered into between the
generating company (SONGAS) and Tanesco; meet energy
requirements in the production of cement at the Wazo Hill Cement
Plant in accordance with the Tanzania Portland Cement Factory
Wazo Hill Gas Sales Agreement and generate electricity for
villages along the pipeline right of way. All these are collectively
referred to as the Base Project. This portion of the Songo Songo
gas is referred to as Protected Gas. Natural Gas that is produced
from the Songo Songo Gas Field that is in excess of Protected Gas
is called Additional Gas.

1994 - 1997

Negotiations for the implementation and financing of the project

were conducted and finally all contracts were initialed in 1997.

1999

M/S Transcanda Pipelines sold their share in Songas to M/S

AES of USA.

11th October 2001

The financial closure of the Songo Songo Project was achieved.

March 2004

TPDC entered into an agreement for joint marketing of additional

gas with M/S Pan African Energy (Tanzania) Limited (PAET).
This agreement outlines the joint responsibilities in marketing of
additional gas and set terms for one of the partners to become Lead
Seller without affecting the rights and obligations of the other
partner in the PSA and Gas Agreements.

May, 2004

M/S AES sold their shares in Songas to M/S CDC Globeleq

June 2004

Project construction activities were completed

21st July, 2004

Commercial operations date for the project commenced with

gas sales to Ubungo Power Plant and Wazo Hill Cement Plant.

Bulk of 2004

Phase-1 of Dar es Salaam Ringmain distribution pipeline

construction activities completed.
This enabled the taping of gas from the main supply pipeline into a
system for the supply of additional gas to interested customers in
Dar es Salaam.

September 2004

TPDC and PAE as partners in the Songo Songo Production

Sharing Agreement started to sell gas to Tanzania Breweries and
Kioo Limited on the basis of terms incorporated in their March
2004 Joint Marketing Agreement.

4th October, 2004

Official inauguration of the Songo Songo Gas to Electricity Project

by His Excellency Benjamin William Mkapa, the President of the
United Republic of Tanzania.

THE CHAIRMANS STATEMENT

Honorable Minister for Energy and Minerals
It is my privilege to submit to you the Annual Report of Tanzania Petroleum
Development Corporation (TPDC) covering the year ended 31st June 2005 together with
the Report of the Auditors and Annual Accounts of the year under review. In my
statement only a summary of the activities of the Corporation is presented. Details of the
activities of the corporation are given in the Management Report and in the Directors
Report.
Substantial progress was made in the field of hydrocarbon exploration in the country. As
in previous years, bearing in mind that this constitutes the lifeline of the Corporation,
open-acreage promotional campaigns were carried out by TPDC through exhibitions,
publications in international journals and presentation of papers in international meetings
and conferences. These campaigns elicited a very encouraging response from oil
companies indicating their interest in acquiring exploration licences on open acreages or
to maintain already acquired licences. M/S Shell International, Antrim Resources Inc.,
Ndovu Resources (T) Limited, Petrobras, Maurel and Prom and Artumas Group Inc.
concluded or already had Production Sharing Agreements with the Government of the
United Republic of Tanzania and TPDC while M/S Dominion Oil and Gas applied for an
exploration licence in Mandawa and Kisangire Blocks.
Honourable Minister, TPDCs dream, indeed the whole nations dream since the
inception of exploration for hydrocarbons in the country in the 1950s finally became a
reality. Following the conclusion of negotiations for the Songo Songo Gas to Electricity
Project, implementation of the project commenced. The construction of a gas processing
plant at Songo Songo Island, laying of a marine and land pipeline from Songo Songo to
Dar es Salaam and installation of turbines and other infrastructure were completed. The
aim of the parties was to have the project assume commercial operations by May 2004
but a few hitches dictated postponement to 20th July 2004. Gas finally flowed into Dar es
Salaam, its first use being in the generation of electricity at Ubungo and firing of cement
kilns at Wazo Hill. Gas was also put to use in other industries based in Dar es Salaam
which include Tanzania Breweries Limited, Kioo Limited, NIDA Textiles, and Karibu
Textiles, while studies for the utilization of the gas in vehicles and domestically were
undertaken.
The project was officially inaugurated by His Excellency Benjamin Mkapa the President
of the United Republic of Tanzania on 4th October 2004.
At the same time having concluded a Production Sharing Agreement with the
Government and TPDC m/s Artumas Group of Canada proceeded to re-enter the well at
Mnazi Bay for purposes of ascertaining the quantities of gas together with the integrity of
the well and to acquire more seismic data in preparation for the drilling of additional
wells in its PSA area.

10

The findings of the re-entry were quite encouraging having affirmed that the well has
good integrity and that there are sufficient quantities of gas to meet the requirements of
the envisaged project.
TPDC participated in the sixth East African Community Energy Consultative Meeting on
harmonization of policy, legal and fiscal regimes for the energy sectors of the East
African Community partner states held in Arusha from the 18th to 20thAugust, 2004, and
at the second conference on the Petroleum Potential and Investment Opportunities in East
Africa scheduled to be hosted under EAC sponsorship in Entebbe, Uganda from the 2nd to
4th March, 2005.
TPDC also participated in the Tanzania Drilling Project an undertaking which has been
ongoing now for a period of seven years being a collective endeavor of a team of
researchers from the U.K. U.S.A, Ireland and Tanzania and presented papers on the
progress of the project at a meeting of the Tanzania Geological Society held in Mwanza
from 1st to 3rd July 2004.
TPDC continued with its drive to transcribe its technical data using modern technology.
The drive included making several applications for funding and initiating talks that would
lead to the revival of electronic copying and reformatting of seismic data tapes at TPDC.
Internal working capabilities using computers were as in previous years under continuous
review and upgrading in terms of hardware and software with a view to staying abreast of
the latest technological developments in our field of specialization.
Compilation, editing and proof reading of corporate records progressed well by
recording all the work done into a database. Users will be able to access them from their
respective workstations.
The Corporation continued to motivate its employees with a view to enabling them to
achieve self-realization as well as achieve corporate and national goals. Employees
through their TUICO TPDC Branch, the Workers Council and Staff Meetings were
actively involved in ensuring reciprocity of responsibility for both the employee and the
employer as a result of which a harmonious working relationship was maintained
throughout the year.
The Board of Directors met regularly.
Honorable Minister, TPDC received invaluable support in recording most of its successes
from various National and International Agencies and friendly Governments of which I
mention only a few namely the,. the Ministry of Energy and Minerals, the Ministry of
Finance, the Office of the Attorney General, the World Bank, NORAD, PETRAD,
Norwegian Petroleum Directorate (NPD), and all contractors who executed TPDC
projects during the year under review.

11

May I also take this opportunity to thank the TPDC Board of Directors, Management and
all employees for their contribution and commitment to the efficient administration of the
search and ultimately the production of this very scarce and expensive national resource.

General (Rtd) R.P. MBOMA

Ag. CHAIRMAN
OCTOBER 2005

12

EXPLORATION, PRODUCTION AND TECHNICAL SERVICES

EXPLORATION PROMOTION
Promotional Meetings in Tanzania
In-house technical presentations were made to oil company representatives who
visited TPDC. A major presentation was made in Mwanza, Tanzania at the
Tanzania Geological Society (TGS) conference in July 2004, where a number of
technical papers were presented by TPDC geoscientists. This meeting was
attended by 77 participants from different organizations that included mining
companies, government departments and universities from within and outside the
country.
Promotional Meetings abroad
TPDC attended the meetings of the Petroleum Exploration Society of Great
Britain (PETEX) in London in September, and in November 2004. During the
November meeting TPDC announced its intention to launch the 3rd Deep Sea
Licensing Round an announcement followed by the actual launching on 26th
November 2004. The launching was attended by 72 delegates, with participants
from major oil companies.
Three further promotional presentations were made at the Africa Upstream
meeting in South Africa, the Association of Afro-Asian Petroleum Geochemists
(AAAPG) conference in China and at the Society of Geophysicists (SEG) in
Denver, Colorado, USA. TPDC also participated at the Tanzania Business
Opportunities and Investment Conference in Johannesburg and Investors Forum
in Dubai.

LICENCE OPERATIONS
Nyuni (East Songo Songo) Licence
M/S Ndovu Resources, drilled an exploration well-named Nyuni-1, which was
spudded on 26th September 2003.
The well developed technical problems and deviated severely, which necessitated
its being side tracked and drilled ahead to a revised total depth of 3900metres
below mean sea level. The well encountered oil and gas shows and after it was
logged several zones were selected for testing. The well was tested but no oil or
gas flowed. It was suspended awaiting results of data evaluation.
As a consequence, M/S Ndovu Resources submitted Nyuni-1 well completion
report to TPDC. A 50% relinquishment programme and Exploration Programme

13

for the First Extension Period was also presented for which the First Extension
period of the Licence was granted on 7th February, 2005.
Exploration Licence within the Songo Songo Gas Development
Area
M/S Pan African Energy (PAE) submitted an exploration program for the year
2005. The program involved the acquisition of 550 kilometers of seismic data
within the discovery block as well as in the adjoining blocks.
Deep Sea Block-5
M/S Petrobras Tanzanias Deep Sea Block-5 PSA holder presented their model
Charts of Accounts, 2004 Work Programme and Budget for TPDCs review
which was followed by the first Advisory Committee Meeting which was held in
Dar es Salaam.
The second Advisory Committee Meeting was held in Dar es Salaam on the 20th
September, 2004. The main agenda involved year 2004 Budget review and
approval of the proposed 2005 Work Program and Budget.
New PSA Applications
In February 2005, the Ministry of Energy and Minerals, TPDC and DOMINION
Oil and Gas Ltd of the UK signed a Memorandum of Understanding over
Mandawa and Kisangire Blocks. DOMINION Oil and Gas later on in May 2005
submitted PSA proposals for exploration in Mandawa and Kisangire Blocks.
Completed Production Sharing Agreement (PSA) Negotiations on Deep Sea
Blocks 9,10, 11 & 12
Negotiations with M/S SHELL International of Holland over Blocks 9, 10, 11
and 12 in the Deep Sea were concluded and initialed and continue to await
Government approval.
Bigwa Rufiji and Mafia Licence Area
An Advisory Committee Meeting was held in Dar es Salaam between TPDC and
the contractor, M /s Maurel & Prom towards the end of year 2004 with the aim of
approving the Work Program and Budget for year 2005. Maurel & Prom have
firmed up drilling of their commitment well at Mkuranga prospect before the end
of year 2005.

14

SONGO SONGO GAS DEVELOPMENT AND POWER GENERATION

PROJECT
Construction of Infrastructure for Gas Production, Processing and
Transportation.
All construction work for the gas processing plant and pipeline to Ubungo Power
Station and Wazo Hill Cement Plant were completed by the end of June.
Commercial Operations Date (COD)
Trial runs of firing turbines with natural gas to produce electricity at Ubungo and
firing cement kilns with natural gas at Wazo Hill started on the 14th July, 2004.
Both trials were successful, and as a consequence the Commercial Operations
Date (COD) stipulated in the Songo songo Project Implementation Agreement
became a reality on the 20th July, 2004.
The Songo Songo Gas Development and Power Generation Project was officially
inaugurated by the President of the United Republic of Tanzania, His Excellence
Mr. Benjamin W. Mkapa on 4th October 2004.
Construction of the Dar es salaam gas Ringmain pipeline to selected industries in
Dar es Salaam continued in the course of which M/S Kioo Limited and Tanzania
Breweries Limited (TBL) started using natural gas in September, 2004 and M/S
Aluminium Africa were connected to the Ringmain later during the year.
Gas Production
Gas production from the Songo Songo field went on smoothly. Production was from
SS-3 and SS-7 while wells SS-4 and SS-5 were on standby ready for production when
required. Gas production was as summarized in the Table below.

Period

Gas
Produced
(MMscf)

July-04 4,374.85
to Dec04
Jan-05
3,649.77
to Apr05
Total
8,024.62

Gas
used as
Fuel
(MMscf
)
54.17

Gas
Flared
(MMs
cf)

Gas to
Pipeline
(MMscf
)

Gas Sold
(MMscf)

243.36

4,180.76

4,293.21

356,160

31.11

41.19

3,577.17

3,531.89

392,160

85.28

284.55

7,757.93

7,825.10

15

Gas
Stock in
Pipeline
(MMscf
)

- 67.17

Condensate
Produced
(Litres)

748,320

Table : Natural gas and condensate production at Songo Songo

MNAZI BAY GAS TO ELECTRICITY DEVELOPMENT PROJECT

The permit allowing Artumas Group to commence operations in Msimbati was
granted by marine parks authorities on the 2nd August, 2004 following acquisition
of this permit, during the last quarter of 2004 M/S Artumas continued with
preparations for re-entry at Mnazi Bay 1 well.
During the last quarter of year 2004, Artumas also embarked on an accelerated
seismic data acquisition campaign with the objective of identifying further drilling
locations in the area. Well re-entry and completion operations commenced on the
19th February, 2005 followed by logging which showed that the Well had good
integrity. Well Completion commenced on the 15th April, 2005 after which postcompletion flow tests were performed. These were completed on the 14th May,
2005. Initial indications pointed to the existence of adequate quantities of gas to
meet the requirements of the envisaged project.
A total of 142.400 line kilometers out of the total 222.600 kilometers of the
seismic acquisition program were recorded by year end.
GEOSTUDIES
Geophysical & Geological Fieldwork
A field trip was conducted to study and understand fault trends and sedimentation
processes in the eastern arm of the East African Rift System. The area covered
included Olduvai-Gorge, Ngorongoro Crater and Lake Natron. This field trip was
undertaken as part of the preparations for the forthcoming EAPC 2005.
Geophysics
Interpretation of key Mandawa seismic lines was reviewed to recommend
structures which could be the most likely leads towards the location of structures
which are embedded with a reservoir. This was looked into to develop an
exploration strategy for the future.
Geochemistry
Results of various geochemical analyses were presented at a number of
conferences during this period. Relevant Papers and venues included,
Hydrocarbon Occurrences and its Source in Tanzania submitted at The Tanzania
Geological Society Conference in Mwanza 1-2nd , July 2004;The Geochemical
Analysis for Apparent Bitumen Samples Obtained in Tanzania Drilling Project
(TDP) Wells, in Kilwa Area. Submitted at TDP Presentation, Ngorongoro, in
July, 2004; Hydrocarbon Occurrences in East African Basins and Their
Significance to Petroleum Discovery, submitted at the Afro-Asian Association of

16

Petroleum Geochemist Conference (AAAPG) Beijing China, in October

2004;The Source of Hydrocarbons Discovered in Tanzania Based on
Geochemical Correlation of Source Rocks, Oil, Bitumen / Oil Seeps and Natural
Gas, submitted at the 2nd Conference on the Petroleum Potential and Investment
Opportunities in East Africa, Entebbe, Uganda 2-4 March, 2005; and, The Origin
of Petroleum and its Occurrence in Tanzania submitted during a seminar
conducted in Kilwa Masoko for Government Officials in Lindi Region, March,
2005.

A tar sands deposit was located in Msimbati Peninsula by TPDC geoscientist

during a
Mtwara-Lindi palynological field trip, while shale outcrop samples
were collected from a Tendaguru excursion.
Biostratigraphy
Type Specimen Reference Collection
In-house duration of key species of foraminifera needed for stratigraphy in
Tanzania continued with the addition of well preserved specimens from the Early
Oligocene to Late Eocene from outcrop and cored samples from Pande. Some
excellent specimens from the Mastrichtian to Miocene planktonic foraminifera of
the newly drilled Nyuni-1 were scanned using Scanning Electron Microscope at
the University of Cardiff.
Core Storage
The TPDC Core storage facility was maintained.
Tanzania Drilling Project (TDP)
Over the past seven years Biostratigraphy personnel together with a team of
International researchers from the U.K., U.S.A., and Ireland (collectively known
as the 'Tanzania Drilling Project', or 'TDP') has produced a new high resolution
integrated bio- and litho-stratigraphy of the onshore mid Cretaceous to Recent
sediments of southern coastal Tanzania. Continuous coring of shallow boreholes
between Kilwa and Lindi, allied with new detailed field mapping has shown that
the sedimentary package is dominated by clays and claystones. Within this
interval there are now several recorded occurrences of oil as traces in Eocene
cores, residual spots in Cretaceous outcrop or as oil seeps at the surface. These
results have added significantly to the worlds knowledge of coastal Tanzania
sediments and will contribute significantly to the cause of hydrocarbon
exploration.
As a result of these projects, preparation of new geological maps for Kilwa and
Lindi areas based on outcrop sampling began.

17

Geoscientists presented papers on the Progress of the Tanzania Drilling Project at

the 2nd East African Petroleum Conference held in Entebbe, Uganda from the 2nd4th March, 2005.

Scientific Publications
Palaeogene and Cretaceous sediment cores from the Kilwa and Lindi areas of
coastal Tanzania: Tanzania Drilling Project Site 1-5, was published in the Journal
of African Earth Sciences in the year 2004. Another manuscript (publishing
findings of TDP boreholes 6-10) was in preparation for publication in the Journal
of African Earth Sciences.
PETROLEUM ENGINEERING
TPDC Petroleum Engineers were involved in activities related to the Songo
Songo Gas Development and Power Generation Project, and monitoring of the
Mnazi Bay-1 Well re-entry and Completion Programme

TECHNICAL COOPERATION
East African Community Energy Consultative Meeting
TPDC participated at the 6th East African Community Energy Consultative
Meeting which took place in Arusha from the 18th to 20th August, 2004. These
consultative meetings are held quarterly and they draw delegates from Ministries
responsible for Energy, Electricity Utility Companies and National Oil
Companies who meet to report on progress made towards harmonization of
policy, legal and fiscal regimes for the energy sectors of the East African
Community partner states.
DATA BANK MANAGEMENT
TPDC authorized National Petroleum Directorate (NPD) of Norway, to copy and
deliver 87MW & 88MW-serie Mandawa field seismic data to BRUMBY OIL
TANZANIA LIMITED, a company currently engaged in mining activities in
Tanzania, for reprocessing. TPDC also delivered to BRUMBY OIL 99MW-serie
Mandawa field seismic data together with 97KIS & 98KIS-serie Kisangire
seismic data including Surveyors Notes and Observers Logs for reprocessing. In
return, TPDC received copies of the same data on modern DVD tape media in
SEG-D format. It is TPDCS intention to follow up on, and, ensure receipt of all
reprocessed tapes (migrated tapes in SEG-Y format) for all the lines in digital
format to be loaded onto the workstation.

18

Seismic field tapes for lines 9484-87, 9486-87, 9488-87 and 9488A-87 which were
recorded earlier in the Pemba Channel on old half-inch 9-track tapes were
forwarded to JEBCO SEISMIC of the United Kingdom for transcription onto
modern IBM-3590 tape media and reprocessing. TPDC received copies of the
same data on modern tape media.
TPDC received all the equipment (software & hardware) required to update the
seismic tape-copying system on 16th May 2005.
ARCHIVES & DRAFTING
All TPDC documents continued to be registered, recorded verified and
computerized for easy access. Photocopying and drafting of various reports, maps
and seismic sections continued to be provided to investors and TPDC
geoscientists as requests were received.

19

MARKETING AND INVESTMENTS.

GAS DISTRIBUTION NETWORK IN DAR ES SALAAM.
Gas Marketing:
Protected Gas:
Table 1 below shows sales of protected gas from July 2004 to April 2005.

Month

Jul-04
Aug04
Sep-04
Oct-04
Nov04
Dec04
Jan-05
Feb-05
Mar05
Apr05

PROTECTED GAS
Gas Volume
Revenue
Sold (scf)
US$

Revenue
TSh.

271,770,659.90

279,851.99

295,212,908.00

591,895,499.37
590,699,419.91
907,899,420.57

300,502.78
299,341.27
462,139.50

318,097,217.77
316,197,176.91
489,322,545.39

921,172,240.54

467,118.34

494,454,105.26

889,187,259.57
596,139,002.46
608,149,479.60

450,468.67
302,244.05
309,414.44

479,280,646.13
320,378,693.00
327,979,306.40

1,191,644,702.33

605,618.74

641,955,864.40

1,008,373,738.93

511,035.30

541,697,418.00

7,576,931,423.16

3,987,735.08

4,224,575,881.26

Table 1: Protected Gas Sales volume and revenue for the period July 2004 to
April 2005

20

Additional Gas:
Table 2 below gives a summary of the Additional gas sales volume and revenues for
the period under review:
Month

Gas
Volum
e
Sold
(MMs
cf)

Jul-04
Aug04
Sep-04

13.52

Oct-04

41.62

Nov04
Dec04
Jan-05

37.66

30.06

Feb-05

31.54

Mar05
Apr05

32.91

Gross

Songas

Gas
Revenue

Revenue

Pipeline
tariff

Net of
Songas

Profit
gas

US$

US$

costs
(US$)

US $

0
0

27.79

33.07
248.17

ADDITIONAL GAS
TPDC
TPDC share
share of
of

Assumed

Net TPDC

Profit gas

Royalty

Add gas rev.

TSh.

Sh.

TSh.

0
0
73,087.29

10,969.3 62,117.99
0
216,934.5 32,476.6 184,457.8
5
8
6
207,139.2 31,284.9 175,854.2
0
6
4
141,340.5 21,071.6 120,268.9
4
1
3
144,799.6 21,377.0 123,422.5
0
9
1
176,466.0 26,724.4 149,741.6
7
3
4
174,105.6 26,130.7 147,974.9
2
0
2
174,972.1 26,260.7 148,711.3
1
3
8
1,308,844. 196,295. 1,112,549.
98
50
48

11,402.1
4
34,587.7
3
32,972.6
7
22,788.1
3
23,141.7
4
28,076.5
6
27,745.3
0
27,883.3
8
208,597.
65

12,351,137.
60
36,678,559.
00
34,968,175.
30
24,167,264.
40
24,135,914.
20
29,761,150.
56
33,840,940.
03
35,547,969.
09
231,451,110
.18

0
0

0
0

5,150,091.
13
15,851,40
2.94
14,342,01
7.46
10,582,26
3.65
11,448,54
0.00
12,009,84
6.73
12,531,73
7.47
12,594,15
9.47
94,510,05
8.85

7,201,046.4
7
20,827,156.
06
20,626,157.
84
13,585,000.
75
12,687,374.
20
17,751,303.
83
21,309,202.
56
22,953,809.
62
136,941,051
.33

Table 2: Additional gas sales volume and revenue from September 2004 to April
2005
During the period under review, gas sale and purchase agreements were
signed with six industries which were ready to convert to gas namely
Messrs Kioo Limited, Aluminium Africa, Karibu Textiles, Bora
Industries, Friendship Textiles, Murzah Oil , Lakhani Textiles, NIDA
Textiles, and TANESCO for UGT6

21

Industrial Gas Market Research

During the period under review TPDC and Pan African Energy continued
identifying industries which could be connected to the gas ring-main and followup on those industries which earlier showed interest to use gas.
CNG for Vehicles
During the period under review PAET and TPDC jointly carried out
prequalification exercise on companies interested to participate in a bid for
implementing a CNG project in Dar es Salaam. The deadline for submitting
prequalification documents was 30th March 2005. The bids were opened
on 1st April 2005. Six companies submitted bids. After evaluation,
four companies were pre-qualified.
Dar es Salaam North Gas Project Study
The planned study to assess the viability of supplying gas to Dar es
Salaam North areas to meet household, institutional and industrial
requirements for cooking and heating respectively, started in May 2005
Taxation
During the year under review, the Government waved excise duty on natural gas.
The only tax that was to be paid on gas was VAT. The Government has not yet
gazetted the royalty (tax) rate. TPDC uses an assumed rate of 12.5% of the wellhead price on additional gas.
Sale of Condensate
During the year under review 748,320 litres of condensate was produced
from the processing of natural gas at Songo Songo 500,160 of which had
already been lifted at year end by a buyer obtained
through a tender process..
Gas Seminars
During the period under review, TPDC organized two seminars, one on gas
utilization, and another one on natural gas pricing.

22

DAR-MWANZA PIPELINE PROJECT

On 30th June 2004, the Ministry of Energy and Minerals signed a Memorandum
of Understanding with M/s Richmond Development Company of USA giving the
latter 18-month exclusivity over the Dar es Salaam-Mwanza oil pipeline project.
The MOU expires in December 2005.
MANAGEMENT OF COPEC/TPDC ASSETS
Petrol Stations:
Petrol stations dealers operating TPDC- owned petrol stations were for
some
time supplied by M/S NATOIL under an arrangement organized by TPDC
whereby TPDC used to get a percentage of M/S NATOILS proceeds from sales
as consideration for letting them supply TPDC clients. NATOIL withdrew from
this arrangement necessitating TPDC to resort to charging rental fees.
MARKETING ISSUES
STUDIES ON THE PETROLEUM DOWNSTREAM SUBSECTOR AND
REGULATION
The Government assigned TPDC to carry out a study to see if petroleum products
into the country can be imported through a single point. The study was carried out
and in principle recommended that at present, all petroleum products can
adequately be imported through Dar es Salaam port, via flow meters. However, as
a long term plan, multiple entry points can be allowed to include Tanga and
Mwanza, when flow meters are installed.
The Corporation participated in the Task Force which was formed by the Minister
for Energy and Minerals to address challenges in the liberalized petroleum
downstream sub-sector in Tanzania. The report was concluded and submitted to
the Government.
The Corporation was appointed to the to the Regulatory Technical Team (RTT)
which is finalizing required steps for operationalization of the Energy and Water
Regulatory Agency (EWURA), Fair Competition Commission (FCC) and the Fair
Competition Tribunal (FCT). During the period under review, it participated in
several retreats on the same. .
MOVEMENT OF PETROLEUM PRODUCTS PRICES IN THE WORLD
MARKET
During the period under review, petroleum products and crude oil prices in the
world market have been on a continuous rise. The period experienced the highest
23

prices in the market in more than 20 years. At times, refined products prices were
close to $600/MT in the Mediterranean market. The major reason attributed to the
abnormal rise is increased demand because of the increased consumption by the
Far East countries, especially China, whereas, OPEC production is limited.
The following Graph and Table illustrates actual prices on monthly averages for
the past one year.
Petroleum Products Prices in the World Market
(Platts quotations - Med
Basis)
MSP
($/MT)
Apr04 383.84
May04 449.33

JET/IK
($/MT)

GO
($/MT)

FO
($/MT)

333.19

290.32

161.01

369.93

328.78

183.16

Jun-04 385.46

344.48

317.69

175.94

Jul-04 425.07
Aug04 401.35

455.08

348.09

175.25

404.69

357.36

160.98

Sep-04 429.65

445.86

402.57

169.89

Oct-04 471.90
Nov04 419.93
Dec04 344.28

499.50

461.24

189.97

452.97

427.89

176.91

400.79

382.40

170.37

Jan-05 392.57

416.24

384.92

188.93

Feb-05 416.40
Mar05 460.98
Apr05 505.87

440.85

406.46

195.94

528.04

482.31

233.81

553.98

474.54

253.66

24

Petroleum Products Prices in the World Market

600

Price ($/MT)

500
400
300
200
100

Apr-05

Mar-05

Feb-05

Jan-05

Dec-04

Nov-04

Oct-04

Sep-04

Aug-04

Jul-04

Jun-04

May-04

Apr-04

Month
MSP ($/MT)
GO ($/MT)

JET/IK ($/MT)
FO ($/MT)

PETROLEUM PRODUCTS PRICES IN THE LOCAL MARKET

During the period under review, petroleum products prices in the local market
continued to rise. To a greater extent, this rise was influenced by high prices in
the World Market.
Average prices (Dar es Salaam) for the years 2002-2004 and part 2005 are
included in the table below.
Product

(Shs./Lt.)

Average Price
Average Price
Average Price
2004 -May 2005
(Shs./Lt)

(Shs./Lt)

Average Price
2002
2003
(Shs/Lt)

Super

570.00

634.00

881.00

982.00

Diesel

520.00

593.00

803.00

945.00

Kerosene

420.00

480.00

660.00

797.00

REPORT OF THE DIRECTORS FOR THE YEAR ENDED 30TH JUNE, 2005
1.0

In compliance with the Public Corporations Act 1992 and the Tanzania Financial
Accounting Standard No. 12 on Directors Report, the Directors submit their report
and the audited financial statements of the Corporation, Tanzania Petroleum
Development Corporation, for the year ended 30th June, 2005.

25

2.0

DIRECTORS
The Directors of the Corporation (all of whom are Tanzanians), who have served
during the year are:A. The following Directors of the Corporation served during the year up to
November, 2004.
NAME

29th

STATUS

General Robert P. Mboma (Rtd)

Mr. Deusdedit Mtambalike
Mr. Mike Urio
Mr. Rashid H. Haji
Hon. Kate Kamba (MP-E.A.)
Mr. Frederick Werema
Hon. Mohamed Abdulaziz (MP)
Mr. Prosper Victus
Mr. Yona S. M. Killagane (Managing Director)

Deputy/Acting Chairman
Director
Director
Director
Director
Director
Director
Director
Secretary

B. The following served as Directors of the Corporation during the year beginning
30th November, 2004 following the reconstitution of the Board:
NAME

STATUS

General Robert P. Mboma (Rtd)

Ms. Agnes Bukuku
Mr. Yasser de Costa
Ambassador Fadhil D. Mbaga
Hon. Kate Kamba (MP-E.A.)
Dr. John P. Msindai
Hon. Mohamed Abdulaziz (MP)
Mr. Emmanuel Ole Naiko
Hon. Sophia Simba (MP)
Mr. Prosper Victus
Mr. Yona S. M. Killagane (Managing Director)

Chairman
Director
Director
Director
Director
Director
Director
Director
Director
Director
Secretary

26

3.0

DIRECTORS REMUNERATION
The Directors remuneration for services rendered as directors of the Corporation
for the year was T. Shs. 300,000 paid as sitting allowance to each Director. In
addition, each Director was paid T. Shs. 1,500,000 as Directors fees for the year
2004/2005.

4.0

DIRECTORS RESONSIBILITY FOR FINANCIAL REPORTING

The Directors are required, under the Public Corporations Act, to prepare annual
financial statements which consist of a balance sheet, profit and loss account and
cash flow statement together with accompanying note. The statements prepared are
to give a true and fair view of the state of the affairs of the Corporation at the end of
the financial year and of the surplus/deficit of the Corporation for that year. The
Corporations accounts during the year have been prepared in conformity with
International Financial Reporting Standards issued by International Accounting
Standards Board.
In order to meet the requirements of the International Financial Reporting Standards
(IFRS), the Directors confirm that in preparing these financial statements, suitable
accounting policies have been selected and then applied consistently and that
prudent judgements and estimates have been made. The Directors further confirm
that applicable accounting standards have been followed and that the financial
statements have been prepared on going concern basis.
The Directors recognize their responsibility for keeping proper accounting records,
which disclose with reasonable accuracy at any time the financial position of the
Corporation. The Corporation has internal control systems, which provide
reasonable assurance that assets are safeguarded and fraud and other irregularities
are prevented or detected in time.

5.0

PRINCIPAL ACTIVITIES
The Corporation is charged with the functions of:

developing an adequate industrial base for the oil industry

exploring and producing oil

acquiring interests in projects or enterprises associated with exploration and

production of petroleum

holding exploration and production rights

contracting, holding equity or participating in oil concessions, franchises

and licences

27

6.0

REVIEW OF BUSINESS
SOLVENCY EVALUATION
The Directors have reviewed the current financial position of the Corporation and
the existing long and short term borrowings. On the basis of this review, the
Directors are of the opinion that the Government decision to acquire the Tanzanian
and Italian Petroleum Refining Company Limited (TIPER) outstanding liability had
greatly improved the financial standing of the Corporation. The Directors believe
that for the Corporation to perform effectively and efficiently need additional
external source of financing. The commencement of commercial exploitation of
Songo Songo natural gas is a reliable source of financing and the decision by the
Government to direct the Corporation to remit this revenue to the Government
beginning financial year 2005/2006 has to be reconsidered. In order to enable the
Corporation to carry out its operations effectively, the Directors highly recommend
the retention of the gas sales within the Corporation so as to provide a reliable
source of financing instead of relying on funding from Government through
Government budgetary allocations. The annual operating results are as shown in the
financial statements set out on pages 7 to 20.

7.0

PROSPECTS
The Songo Songo Gas to Electricity project commenced operations during the
year under review. The project entailed transporting gas through a 25km 12-inch
pipeline from Songo Songo to Somanga Funga, and from Somanga Funga through
a 207km
16-inch pipeline to Ubungo Dar es Salaam where natural gas had
replaced liquid fuel as feedstock in the generation of electricity for the national
grid. As at 30th June, 2005 the total generation was 191MW. A 16km 8-in
pipeline has been extended northwards to provide natural gas to the Wazo Hill
cement plant where it replaced fuel oil as feedstock in the manufacture of cement.
The gas is also used in other industries to replace liquid hydrocarbon.
Project investors are CDC Globeleq, Pan African Energy, Tanzania Electric
Supply Company Limited (TANESCO), Tanzania Petroleum Development
Corporation (TPDC), Tanzania Development Finance Company Limited (TDFL),
European Investment Bank (EIB) and World Bank, the later two through the
Government of Tanzania. The project is being implemented by SONGAS
Limited, a local joint venture company formed by CDC Globeleq, TANESCO,
TPDC and TDFL. PanAfrican Energy Tanzania Limited is operating the gas
field.

8.0

DIRECTORS INTEREST
The Corporation is wholly owned by the Government.
directors interest existed within the Corporation.

28

During the year no

9.0

RELATED PARTY TRANSACTIONS

There were no related party transactions during the year.

10.0

EMPLOYEES WELFARE
The Corporation has the following employees welfare arrangements:

Training
The Corporation offers sponsorship to its employees both in short and long
term courses within and outside the country on various disciplines.
Promotional seminars and workshops are also undertaken in various parts of
the world to market exploration data in order to attract investors in oil
prospecting, exploration and production.

Savings and Credit Co operative Society

The Corporation has a Savings and Credit Co-operative Society that provide
loans, both short and long term loans to staff. This arrangement reduces
greatly the burden of issuing loans and advances to staff by the Corporation

Medical Facilities
The Corporation meets fully the cost of medical consultation and treatment
for all employees and their immediate family dependants.

Financial Assistance
This is available to all employees depending on the merit of each case as
assessed by management as well as liquidity position of the Corporation.

29

Retirement Benefits
The Corporation contributes statutory deductions towards employees
pension scheme administered by the Parastatal Pensions Fund (PPF) on
behalf of all permanent employees.

Relationship between Management and Employees

The Corporation has entered into an agreement with the workers trade
union TUICO for the establishment of a Workers Council. The Workers
Council provides a link between management and employees.

Disabled Persons
It is the Corporations policy to give equal opportunities to disabled persons
for vacancies they are able to fill.

11.0

AUDITORS
In accordance with section 30(1) of the Public Finance Act (No. 6) of 2001, the
Controller and Auditor General is the statutory auditor of the Corporation.
However, pursuant to section 32(1)(c) of the same Act, the Controller and Auditor
General appointed M/s SBC Consultancy Services, a firm registered with NBAA,
to audit TPDC on his behalf for the year 2004/2005. The appointment was done
through competitive tendering procedures whereby in accordance with the Public
Procurement Act, 2001 and Public Finance Act, 2001 section 46 (1) an open tender
was floated and amongst the auditing firms which tendered, a competitive selection
of auditors was made and SBC Consultancy Services won the tender.

12.0

BOARD MEETINGS
The Board of Directors held four Ordinary meetings during the year under review.

BY ORDER OF THE BOARD

--------------------------------CHAIRMAN

DATE..2005

30

-----------------------------------DIRECTOR

INDEPENDENT AUDITORS REPORT TO THE SHAREHOLDERS

We have audited the attached financial statements on page 7 to page 20 of Tanzania
Petroleum Development Corporation as at 30th June, 2005 and the related income statement,
statement of changes in equity and the cash flow statement for the year ended on that date.
The statements have been prepared under the historical cost convention and the accounting
policies set out on pages 11 to 16.
Respective Responsibilities of the Members of the Board of Directors and the Auditors
The responsibility for the preparation and presentation of the financial statements rests with
the Directors of the Corporation as provided for under the provisions of the Tanzania
Petroleum Development Corporation (Establishment) Order, 1969. Our responsibility is to
form and issue an independent opinion on these financial statements based on our audit.
Basis of Opinion
We conducted our audit in accordance with International Standards on Auditing. Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free from material misstatement. An audit includes
examination, on a test basis, evidence relevant to the amounts and disclosures in the financial
statements. It also includes an assessment of the significant estimates and judgements made
by the Directors in the preparation and overall presentation of the financial statements, and
whether the accounting policies are appropriate to the business circumstances, consistently
applied and adequately disclosed.
We planned and performed the audit so as to obtain all the information and explanations
which we considered necessary in order to provide us with sufficient evidence to give
reasonable assurance that the financial statements are free from material misstatement,
whether caused by fraud or other irregularity or error. In forming our opinion we also
evaluated the overall adequacy of the presentation of the information in the financial
statements. We have obtained all the information and explanations we consider necessary for
the purpose of our audit. We believe that our audit provides a reasonable basis for our
opinion.
Opinion
In our opinion, proper books of account have been kept and the financial statements are in
agreement with the books of account as presented to us and that the financial statements
present fairly, in all material respects, the financial position of the Tanzania Petroleum
Development Corporation as at 30th June, 2005 and its surplus, changes in equity and cash
flows for the year then ended in accordance with International Financial Reporting Standards.

31

...........................................................
SBC CONSULTANCY SERVICES
CERTIFIED PUBLIC ACCOUNTANTS
DAR ES SALAAM
DATE:DECEMBER, 2005

BALANCE SHEET AS AT 30TH JUNE, 2005

32

30.06.2005
T. SHS.
ASSETS

30.06.2004
T. SHS.

NOTE

Non - Current Assets

Property, Plant and Equipment
Petroleum Station Outlets
Shares in Oil Companies

7,966,683,291
709,438,641
3,292,241,036
11,968,362,968

8,506,488,800
709,438,641
370,436,761
9,586,364,202

8,800,640
1,545,275,541
599,984,017
2,154,060,198
14,122,423,166

8,405,300
330,385,657
236,059,603
574,850,560
10,161,214,762

6
7
8
9

2,208,000,000
3,292,241,036
300,000,000
5,606,582,969
305,067,415
11,711,891,420

2,208,000,000
450,000
0
5,614,535,945
(4,911,432,916)
2,911,553,029

10

2,410,531,746
2,410,531,746
14,122,423,166

7,249,661,733
7,249,661,733
10,161,214,762

3
4

Current Assets
Inventories
Trade and Other Receivables
Cash and Cash Equivalents

TOTAL ASSETS
EQUITY
Capital and Reserves attributable to the
Corporations Equity holders
Share Capital
Capital Grant
Motor Vehicle Loan Revolving Fund
Revaluation Reserve
Retained Earnings
Total Equity
LIABILITIES
Current Liabilities
Trade and Other Payables
Total Liabilities
Total Equity and Liabilities

NOTES 1 TO 15 FORM PART OF THESE ACCOUNTS

-------------------------CHAIRMAN

----------------------DIRECTOR

----------------DATE
INCOME STATEMENT FOR THE PERIOD ENDED 30TH JUNE, 2005

33

2004/2005
T. SHS.

2003/2004
T. SHS.

11,764,100,901
5,792,636,763
1,435,291,403
18,992,029,067

1,346,779,196
0
2,794,968,659
4,141,747,855

3,697,798,677
4,143,669,838
4,321,876,498
565,223,817
376,973,145
369,986,761
13,475,528,736

3,364,164,562
9,728,733
0
0
763,640,411
14,387,048,707
18,524,582,413

5,516,500,331

(14,382,834,558)

NOTE
REVENUE
SUBSIDY INCOME
GAS REVENUE INCOME
OTHER INCOME

Administrative and Establishment

Expenses
Financial Costs
Legal Charges
Exchange Rate Loss
General Expenses
Impairment Loss
TOTAL EXPENSES
SURPLUS/(DEFICIT) FOR THE
PERIOD

11

12
13

14

NOTES 1 TO 15 FORM PART OF THESE ACCOUNTS

.........................
CHAIRMAN

......................
DIRECTOR
DATE:................

STATEMENT OF CHANGES IN EQUITY

34

Attributable to Equity Holders of the Corporation

Balance at 1st July

2003
Deficit for the Year

Share
Capital

Capital
Grant

T. SHS.

T. SHS.

2,208,000,0
00

Addition during the Year

Change in Revaluation
Reserve
2,208,000,0
Balance at 30th June
00
2004
Balance at 1st July
2004
Motor Vehicle Loans
Revolving Fund

Motor
Vehicle
Loans
Revolving
Fund
T. SHS.

2,208,000,0
00

Revaluatio
n
Reserves
T. SHS.

T. SHS.

3,236,431,29 9,471,401,642
7
(14,382,834,55
8)
450,000

450,000

450,000

5,614,535,94 (4,911,432,916
5
)
300,000,00
0

(7,952,976)
5,516,500,331
3,291,791,0
36
2,208,000,0 3,292,241,0 300,000,00 5,606,582,96
00
36
0
9

305,067,415

NOTES 1 TO 15 FORM PART OF THESE ACCOUNTS

.......................
DIRECTOR

DATE:................
CASH FLOW STATEMENT FOR THE PERIOD ENDED 30TH JUNE, 2005

35

T. SHS.
14,915,832,9
39
(14,382,834,5
58)
450,000

2,911,553,02
9
300,000,000

(300,000,000)

........................
CHAIRMAN

Total Equity

,378,104,648
2,378,104,648
5,614,535,94 (4,911,432,916 2,911,553,02
5
)
9

Change in Retained
Earnings
Change in Revaluation
Reserve
Profit for the Period
Addition During the
Year
Balance at 30th June
2005

Retained
Earnings

(300,000,000)

(7,952,976)
5,516,500,33
1
3,291,791,03
6
11,711,891,4
20

30.06.2005
T. SHS.
CASH FLOWS FROM OPERATING ACTIVITIES
Surplus/(Deficit) for the Period
Adjustments:
Depreciation
Write off of Property, Plant and Equipment
Transfer of Investment in Oil Companies to the
Treasury Registrar
(Gain)/Loss on Sale of Fixed Assets
Dividends from Associate Companies
CASH FLOWS BEFORE CHANGES IN
WORKING CAPITAL ITEMS
(Increase)/Decrease in Stocks
(Increase)/Decrease in Trade and Other Receivables
Increase/(Decrease) in Trade and Other Payables
Net Cash Flows From/(Used in) Operations (A)
CASH FLOWS FROM/(USED IN) INVESTING
ACTIVITIES
Purchases of Fixed Assets
Proceeds from Sale of Fixed Assets
Dividend Received from Associate Companies
Acquisition of Shares in Songas Limited
Net Cash Flows From/(Used) in
Investing Activities
(B)
CASH FLOWS FROM/(USED IN) FINANCING
ACTIVITIES
Capital Grant Received from Government for
acquisition of shares in Songas Limited
Net Cash Flows From/(Used in
Financing Activities
(C)
NET INCREASE/(DECREASE) IN CASH
AND CASH EQUIVALENTS
(A +
B + C)
Cash and Cash Equivalent at the Beginning of the Period
CASH AND CASH EQUIVALENT AT THE END
OF
THE PERIOD

36

30.06.2004
T. SHS.

5,516,500,331

(14,382,834,558)

378,585,301
0

429,337,056
14,138,032,451

369,986,761
(58,498,655)
(792,664,455)

145,814,252
0
0

5,413,909,283
(395,340)
(1,214,889,884)
(4,839,129,988)
(640,505,929)

330,349,201
(2,222,036)
(79,349,228)
(864,444,132)
(615,666,195)

(77,386,612)
289,152,500
792,664,455
(3,291,791,036)

(36,801,622)
0
0
(450,000)

(2,287,360,693)

(37,251,622)

3,291,791,036

450,000

3,291,791,036

450,000

363,924,414

(652,467,817)

236,059,603

888,527,420

599,984,017

236,059,603

NOTES 1 TO 15 FORM PART OF THESE ACCOUNTS

...........................
CHAIRMAN

.....................
DATE

37

........................
DIRECTOR

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1.0

GENERAL INFORMATION
(a)

Tanzania Petroleum Development Corporation is wholly owned by the

Government. The Corporation was established by the Tanzania
Petroleum Development Corporation (Establishment) Order No. 140 of
1969 made under the Public Corporations Act No. 2 of 1992. The
Corporation is domiciled in Dar es Salaam, Tanzania. The address of
the registered office is 37/38 Ali Hassan Mwinyi Road, Upanga, Dar es
Salaam, Tanzania.
The Corporation is charged with the following functions of:
Developing an adequate industrial base for the oil industry
Exploring and producing oil
Acquiring interests in projects or enterprises associated with
exploration and production of petroleum
Holding exploration and production rights
Contracting, holding equity or participating in oil
concessions, franchises and licences.

(b) The overall management of TPDC is vested in the Board of Directors as

the Governing body under the supervision of the Minister for Energy
and Minerals. The Managing Director carries out the day to day
operations of the Corporation.
NOTE 2.0

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these
financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.

2.1

Basis of Preparation
The financial statements of Tanzania Petroleum Development
Corporation have been prepared in accordance with International
Financial Reporting Standards (IFRS). The financial statements have
been prepared under the historical cost convention, as modified by the
revaluation of land and buildings, plant and equipments and motor
vehicles at fair value through profit or loss.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
38

requires management to exercise its judgement in the process of

applying the Corporations accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions
and estimates are significant to the financial statements are separately
disclosed in a note.
2.2

Property, Plant and Equipment

Valuation
Land and buildings comprise mainly of residential houses located
in Dar es Salaam, and plots over a five acres area acquired by the
Corporation at Mbezi Juu- Dar es Salaam. Land and buildings are
shown at fair value based on valuations carried out in June 2004 by
external independent valuers, M/s UCLAS of Dar es Salaam less
subsequent depreciation for buildings. Plant and equipment is also
stated at fair value based on the same revaluation. Any
accumulated depreciation at the date of the revaluation was
eliminated against the gross carrying amount of the asset and the
net amount was restated to the revalued amount of the asset.
Historical cost includes expenditure that is directly attributable to
the acquisition of the items and depreciation charge is applied as
appropriate.
Subsequent costs are included in the assets carrying amount or
recognized as a separate asset, as appropriate, only when it is
probable that the future economic benefits associated with the item
will flow to the Corporation and the cost of the item can be
measured reliably. All other repairs and maintenance are charged
to the income statement during the financial period in which they
are incurred.
Increases in the carrying amount arising on revaluation of
property, plant and equipment are credited to other reserves in
shareholders equity. Decreases that offset previous increases of
the same asset are charged against fair value reserves directly in
equity, all other decreases are charged to the income statement.
The net increase in value as a result of the valuation has
been reflected in the revaluation reserve which is reflected at
T. Shs 5,606,582,969 as at 30th June, 2005.
Depreciation
Land is not depreciated. Depreciation on other assets is calculated
using the straight line method to allocate their cost or revalued
amounts to their residual values over their estimated useful lives,
as follows:
39

Asset Description
Buildings:
Furniture and Equipment
Computer/Servers
Motor Vehicles, Cycles and Bicycles
Tanker Lorries Tanker Fleet

Rate per Annum

4%
10%
25%
25%
25%

Assets that have an indefinite useful life are not subject to

amortisation and are tested annually for impairment. Assets that
are subject to amortisation are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount may not be recoverable.
2.3

Intangible Assets
Costs that are directly associated with identifiable and unique
software products, that the Corporation controls are recognized as
intangible assets. Expenditure that enhances or extends the
performance of computer software programmes beyond their
original specifications is capitalized. Computer software
development costs recognized as assets are amortized using straight
line method over their useful lives, not exceeding four years.

2.4

Stocks
Stocks are valued at the lower of cost and net realizable value. Cost
is determined on First In First Out (FIFO) basis. Any obsolete
items are provided for in full in the year they are detected.

2.5

Revenues
Revenue of the Corporation comprises of allocations received from
the Government and funds from sales of exploration data which are
accounted for as they are received. Rental income and gas sales net
of VAT are accounted for as they accrue. Sale of stores is
accounted for as they are sold.

2.6

Financial Instruments
The Corporation does not hold non-derivative financial assets with
fixed or determinable payments that are not quoted in active market.
Non derivative assets arise when the Corporation provides goods
and/or services directly to a debtor with no intention of trading the

40

receivables. The receivables are included in trade receivables in the

balance sheet.
2.7

Provision for Impairment of Receivables

Trade receivables are recognized initially at fair value and
subsequently measured at cost less provision for bad and doubtful
debts. Specific provision is made in the accounts against trade
receivables when it is able to collect all amounts due according to
the original terms or receivables. The amount of the provision is
recognized in the income statement. Bad debts are written off after
all steps to recover them have failed.

2.8

Employees Benefits
The Corporation has a defined benefit contribution plan scheme for
its employees with PPF. A defined contribution plan is a pension
plan under which the Corporation pays fixed contributions, 20% of
employees salary, to Parastatal Pensions Fund on a monthly basis.
The Corporation has no legal or constructive obligation to pay
further contributions if the Fund does not hold sufficient assets to
pay all employees the benefits relating to employee service in the
current and prior periods.

2004/2005
T. SHS.
Employers PPF
Contribution

2.9

258,849,054

2003/2004
T. SHS.
251,674,385

Related Party Transactions

There were related party transactions, which represents the
following:
2004/2005
T. SHS.
(a) Directors
remunerations
(b) Key management
remunerations
(c) Loans to key
management

41

2003/2004
T. SHS.

37,500,000

37,500,000

163,830,362
11,460,633

117,690,694
9,431,992

2.10

Foreign Currency Translation

(a)

Functional and Presentation Currency

The financial statements are presented in Tanzania Shillings,
which is the Corporations functional and presentation
currency.

(b)

Transaction and Balances

Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing at
the dates of the transactions. Foreign exchange gains and
losses resulting from the settlement of such transactions and
from the translation at year-end exchange rates of monetary
assets and liabilities denominated in foreign currency are
recognized in the income statement.

2.11

Grants
Grants received in monetary form for capital expenditure, recurrent
expenditure or in form of non monetary assets are recognized as
deferred income in the balance sheet and are released to income
statement during the useful life of the respective non-monetary
assets or when recurrent expenditure is incurred.

2.12

Cash and Cash Equivalents

Cash and cash equivalents are carried in the balance sheet at cost.
For the purpose of cash flow statement, cash and cash equivalent
comprise cash on hand, demand and call deposits if they exist at the
balance sheet date.

2.13

Impairment of Assets
Assets are reviewed for impairment losses whenever events or
changes in circumstances indicate that the carrying amount may not
be recoverable. An impairment loss is recognized for the amount

42

by which the carrying amount of the assets exceeds its recoverable

amount.
2.14

Capital Commitments
The Corporation had no capital commitments that had been
contracted for as at the balance sheet date. It also had no approved
projects that were not contracted for.

2.15

Contingent Liabilities
There is a contingent liability arising from the award given to
Addax Limited in a case which was under arbitration filed by
Addax Limited, on premature termination of crude oil supply
contract which ended on 31st December, 2000 instead of 31st March,
2001. The contingent liability involves an amount of USD
10,561,170.39 million being final award given by ICC International
Court of Arbitration dated 19th April, 2004. The Government of
Tanzania as at 30th September, 2005 had paid USD 7,950,000 of the
award. Further, to this there is another contingent liability
pertaining to TIPER amounting to T. Shs. 10,477,291,708.20 of
which the Government of Tanzania will pay in three staggered
installments. The First installment of T. Shs. 3,250,000,000 was
paid to TIPER on 5th August, 2005. The liability to TIPER which
was taken over by the Government as agreed on arbitration had
been written back into the books of account for the year ended 30th
June, 2005.

2.16

Deferred Tax
The Corporation did not make provision for deferred tax in the
accounts since there are no temporary differences to the extent that
it is probable that taxable profit will be available against which the
deductible temporary difference can be utilized as required by IAS
12. Moreover, the Corporation does not intend to sale its houses in
the open market in the near future.

2.17.

Group Accounts
No group accounts have been prepared since the Corporation is
holding the shares in Songas Limited in trust for the Treasury
Registrar. There is no effective control of the shares in the
concerned Company.

43

NOTE 3.0

PROPERTY, PLANT AND EQUIPMENT

Land and
Building

Motor Vehicles
and Machinery

T. SHS.

T. SHS.

Furniture,
Fittings
and
Equipment
s

TOTAL

T. SHS.

T. SHS.
st

At 1 July 2003
Cost or Valuation
Accumulated Depreciation
Net Book amount
Year ended 30th June, 2004
Opening Net Book Amount
Additions
Revaluation Surplus/(Loss)
Adjustments
Depreciation Charge for the
Year
Closing Net Book Amount
Period ended 30th June,
2005
Opening Net Book Amount
Adjustment on Land and
Equipment
Adjustment on Accumulated
Depreciation
Additions
Disposals/Transfers
Depreciation Charge for the
Year
Closing Net Book Amount

3,073,490,75
0
160,003,899
2,913,486,85
1

1,740,463,038

2,913,486,85
1
0
3,906,633,65
4
1,305,977,19
4
(160,003,899)

1,629,256,634

672,198,907

230,000,000

310,395,000

7,966,093,80
0

7,966,093,80
0
21,691,200

7,486,980
0
(267,785,000)
(287,886,980)
7,439,600,00

44

893,035,702

111,206,404 220,836,795
1,629,256,634 672,198,907

5,706,989,49
0
492,047,098
5,214,942,39
2

5,214,942,39
2
0 36,801,622
36,801,622
(1,295,703,780) (232,825,22 2,378,104,64
5)
9
0
0 1,305,977,19
4
(103,552,854) (165,780,304 (429,337,057)
)
230,000,000 310,395,000 8,506,488,80
0

0
0
0

8,506,488,80
0
21,691,200

0
7,486,980
77,386,612
77,386,612
0 (267,785,000
)
(57,500,000) (33,198,321) (378,585,301
)
172,500,000 354,583,291 7,966,683,29

NOTE 4.0

SHARES IN OIL COMPANIES

Name of
Company

No. of
Shares

(At Cost)
Nominal
Value
('000)

T. SHS
TIPER
BP (T) LTD
TAZAMA
S0NGAS LTD
TOTAL

2,500,000
50,000
1,320,000
6,600
3,000,000
30,000
30,000 USD3,000

50.00
50.00
33.33

30.06.2005

30.06.2004

T. SHS.

T. SHS.

0
0
0
3,292,241,036
3,292,241,036

78,872,571
206,400,000
84,714,190
450,000
370,436,761

The investments in oil companies have been determined on cost basis on the date
the shares were transferred to TPDC on trust by the Treasury Registrar. All shares
held on trust in BP (T) Limited, TIPER and TAZAMA by the Corporation have
now been returned to the Treasury Registrar as requested. The value of shares had
been written off by charging the same to income and expenditure account during
the period.

NOTE 5.0

TRADE AND OTHER RECEIVABLES

30.06.2005
T. SHS.
Trade Receivables
Staff Receivables
Sundry Receivables
Prepayments

NOTE 6.0

30.06.2004
T. SHS.

LESS: Provision for Doubtful Debts

1,328,989,893
31,463,583
26,600,000
184,822,065
1,571,875,541
26,600,000

158,694,614
38,573,893
26,600,000
106,517,150
330,385,657
0

TOTAL

1,545,275,541

330,385,657

SHARE CAPITAL

Authorized Share Capital

45

2,500 Ordinary Shares @ par value

T. Shs. 1,000,000

2,500,000,000

2,500,000,000

2,208,000,000

2,208,000,000

Issued and Fully Paid Up Share Capital

2,208 Ordinary Shares @ par value
T. Shs. 1,000,000

The issued and paid up share capital are through conversion of retained
earnings, transfer of ownership in local oil companies and conversion of funds
extended to the Corporation as capital and development grants in 1988. The
shares are held by the Treasury Registrar.

NOTE 7.0

CAPITAL GRANT
The capital grant represents grants received from the Government for the
acquisition of equity shareholding in oil companies. As at 30th June, 2005 the
amount of the grant represents investment in the shares of Songas Limited.

NOTE 8.0

MOTOR VEHICLE LOANS REVOLVING FUND

The motor vehicle loans revolving fund represents a fund set up in 2004/2005
to cater for motor vehicle loans to members of staff. Loans are to be given in
accordance with conditions laid down and bear a service charge of 3%.A
Motor Vehicle Loans Committees has been set up to administer the granting
of the loans to employees. As at 30th June, 2005 no loans were granted.

NOTE 9.0

REVALUATION RESERVE

Revaluation Reserve Brought Forward

Revaluation Surplus/(Loss)
Balance at 30th June 2005

30.06.2005
T. SHS.

30.06.2004
T. SHS.

5,614,535,945
(7,952,976)
5,606,582,969

3,236,431,296
2,378,104,649
5,614,535,945

The revaluation reserve is made up of the excess value over cost resulting
from the revaluation of fixed assets comprising of buildings, motor vehicles
and machinery and furniture, fittings and equipment which were valued as at
30th June, 2004 by professional valuers, the University College of Lands and
Architectural Studies (UCLAS), Dar es Salaam. The revaluation was based
on current market value in respect of buildings and current depreciated
46

replacement cost in respect of motor vehicles and machinery and furniture,

fittings and equipments. The revaluation reserve is not available for
distribution as dividends.

47

NOTE 10.0

TRADE AND OTHER PAYABLES

30.06.2004
T. SHS.

30.06.2005
T. SHS.
Trade Payables
Songo Songo Project Fund
Provisions for Other Liabilities and
Charges
TOTAL

9,059,476
43,233,105

7,134,865,243
44,353,105

2,358,239,165
2,410,531,746

70,443,385
7,249,661,733

SONGOSONGO PROJECT FUND

The Songo Songo Project Fund was established to raise funds to finance
Songo Songo Gas Project. The source of the Fund was a levy of T. Shs.
20.00 per litre on all petroleum products. The fund is managed by the
Ministry of Energy and Minerals and was established by Government Order
of 1st September, 1996. The Funds were initially collected by the
Corporation up to 1997, when thereafter, collection of the funds was
transferred to the Tanzania Revenue Authority. The funds have been
transferred to the Government except for the related cash balance which is
held at Citibank (Tanzania) Limited.

NOTE 11.0

OTHER INCOME
2003/2004
T. SHS.

2004/2005
T. SHS.
House Rent Recoveries
Dividends from Associate Companies
Interest on Fixed Deposits
Sale of Stores
Refund from Tanzania Revenue Authority
Write off of Provision on Impairment of
Receivables
Write Back of Liabilities Mafuta House
Write Back of Retention Money Mavji
Construction
Refund of Insurance Premium
Adjustment on Subsidy Income
Year 2003
Adjustment of PAYE Account
Gain on Sale of Fixed Asset
Income from Sales of Services
Miscellaneous Income

48

325,378,149
792,664,455
78,291
120,000
0

193,999,701
0
1,277,706
0
1,027,758,325

0
0

753,468,868
401,636,068

0
0

260,707,441
95,000,225

0
0
58,498,655
248,465,898
10,085,955

37,847,242
8,869,389
0
0
14,403,694

TOTAL
NOTE 12.0

1,435,291,403

ADMINISTRATIVE AND ESTABLISHMENT

EXPENSES

Salaries and Wages

Traveling and Conveyance
Postage, Telephone and Telex
Electricity and Water
Repairs and Maintenance
Printing, Stationery and Books
Rent
Rates and Taxes
Insurances and Licences
Audit Fees and Expenses
Advertisement and Publicity
Board Meeting Expenses
Provision for Bad and Doubtful Debts
Depreciation
TOTAL

NOTE 13.0

2004/2005
T. SHS.

2003/2004
T. SHS.

1,870,030,067
407,920,335
71,956,197
46,375,532
352,322,514
71,520,682
30,825,796
238,162,465
26,868,320
5,340,000
47,607,621
123,683,847
26,600,000
378,585,301
3,697,798,677

1,318,854,315
331,156,668
86,177,388
36,869,474
417,316,441
89,787,232
16,986,993
457,967,671
39,722,112
7,920,000
16,337,078
115,732,134
0
429,337,056
3,364,164,562

FINANCIAL EXPENSES
2004/2005
T. SHS.
Bank Charges
Interest on Credit Supplies
TOTAL

NOTE 14.0

2,794,968,659

8,578,918
4,135,090,920
4,143,669,838

2003/2004
T. SHS.
9,728,733
0
9,728,733

IMPAIRMENT LOSS ON INVESTMENT

The impairment loss on investment of T. Shs. 369,986,761 represents value of
shares held by the Corporation in TIPER, BP (T) Limited and TAZAMA in
trust of the Treasury Registrar. The shares have been handed over to the
Treasury Registrar and hence their value written off to profit and loss as
impairment loss on investment.

NOTE 15.0

POST BALANCE SHEET EVENT

49

Following Government decision on gas sales revenue beginning July 01, 2005
financial year, the entire proceeds from the sale of gas shall be collected and
remitted to the Treasury through the Ministry of Energy and Minerals as
opposed to being retained by the Corporation as was the case for the current
year.
NOTE 16.0

COMPARATIVE FIGURES
Previous year's figures have been re-grouped wherever considered necessary
in order to make them comparable with the current years figures.

50