Development Partners meeting, April 9, 2013 Natalia Kulichenko-Lotz World Bank

 March 2013: BG/Ophir finished appraisal program on Jodari field (Block-1): flow rate of 70mcf with better than expected reservoir properties  Potential in Block 1 (BG-Ophir) and Block 2 (Statoil) fields sufficient to underpin LNG development  March 2013: Statoil and BG Group assess plans to build a US$10-14 billion East African LNG terminal for exports to Asia  Investment decisions are at least three years away (Statoil), not before early 2016  The LNG plant would have at least two trains to process gas from Statoil’s Block 2 and BG’s Block 1

 GoT plans to develop four new gas-to-power plants with total capacity of 1,300 MW by 2015  Current non payments (∽US$50 million) by TANESCO to Songas –operator and owner of 180 MW plant (22.5% of the total generation), and the pipeline from Songo-Songo Island. Songas also delivers gas to another 225MW plant. Songas threatens to stop gas deliveries  Estimated arrears from TANESCO to IPPs are US$ 300 million (December 2012)

 A NG pipeline (542 km) and processing plant are under construction from Mtwara to Dar es Salaam. EPC contractor is a consortium of China Petroleum Pipeline Bureau (CPP) and China Petroleum Technology & Development Corporation (CPTDC)  Financed by China ExIm Bank – US$1.2 billion, 33 year loan, 2% interest rate. Completion is expected in early 2015  Gas sales contracts are yet to be negotiated and signed between NG producers and TPDC as 'aggregator' (shipper)  Gas transport agreements are yet to be concluded and signed

 At the request of GoT a high-level scoping missions visited TZ on October and December 10-13,  Participants: AfDB, PRC, UK DFID, EU, Germany, IMF and WB  Mission discussed: ◦ A set of 5 suggestions for urgent action on issues that have immediate effect; ◦ A set of 5 suggestions that require action now but whose potentially beneficial impact comes only in the future

I. Develop a communications strategy for the gas sector and define clear responsibilities for communications II. Insure inter-agency cooperation: a strong champion with the authority to act to ensure policy coherence for gas development III. Strengthen negotiation, legislative, contract management and monitoring capacity IV. Create a fiscal regime to ensure efficient development and to maximize retention of revenue in Tanzania V. Unbundle short from medium to long term gas issues to prevent diverting attention from immediate opportunities to increase domestic gas use in the power sector

I. Steering clear of “Dutch Disease” -diversification to offset the worst effects of Dutch Disease; II. “Investing in investing” – building capacity to invest efficiently and profitably through public financial management, public investment management, and a demand-driven human capital accumulation. III. Investing efficiently and effectively in strategic infrastructure and growth poles - attracting private investment and catalyzing economic diversification IV. Updating institutional and governance frameworks - establishment of a coordination mechanism to drive “whole of government” work on gas development V. Managing environmental downside risks – setting up effective environmental management systems throughout the development and production chain

 Competitive Licensing  Preference for Domestic Use over Exports  Revenue management - a Natural Gas Revenue Fund responsible for “collection, allocation and management of the natural gas revenue”  Economic linkages and local content: encourages gas industry be linked with other sectors of the economy  Regional co-ordination: development of cross- boarder projects

 Transparency and accountability: TZ joined Extractive Industries Transparency Initiative (EITI), but is yet to fulfill the requirements ( candidate status)  Public Private Partnership: to share risk and benefit investors  Legal and regulatory framework: to develop legal and regulatory framework  TPCD: recognition for the need to separate commercial and regulatory functions

 Approved by the WB Board of Directors on March 26, 2013; US$100 million  Objectives: ◦ (i) Strengthen the country’s ability to bridge the financial gap in its power sector; ◦ (ii) Reduce the cost of power supply and promote private sector participation in the power sector; ◦ (iii) Strengthen the policy and institutional framework for the management of the country’s natural gas resources.

 Approved by the WB Board of Directors on March 26, 2013: IDA US$21.46 million and US$13.54 million co-financing from the Canadian International Development Agency  Objective: to strengthen the capacity of the GoT for development its natural gas sector and PPP for the power generation sector  Includes four components: ◦ (i) Development of gas sector strategies and policies and support for preparation of bankable investment opportunities; ◦ (ii) Further development of legal, regulatory, fiscal and institutional framework for the gas sector; ◦ (iii) Enhancement of institutional capacity - education and technical skills development; ◦ (iv) Capacity building for GoT