The Government of Tanzania (the “Government”) is reviewing Production Sharing Agreements (“PSAs”) entered into with the view of renegotiating terms of existing contracts where they are deemed to be unconscionable and/or detrimental to Tanzania. We have been made to understand, that the Government is reviewing all PSAs that it has entered into in the oil and gas sector.
The Government has stated that it is reviewing outline areas such as revenue and revenue sharing, fiscal regimes and fiscal stability clauses, international arbitration provisions and other provisions in general that are considered to be disadvantageous to Tanzania and need to be changed in the upstream oil and gas agreements, and may possibly include at some later stage midstream and downstream agreements as well. Accordingly, the Government began reviewing such contracts in three phases, these being:
- The first phase started around October 2018;
- The second phase started around January 2019 and is due completion sometime in February 2019; and
- The third phase is scheduled to commence around late February or early March 2019.
Further, the Permanent Secretary of Energy has stated in a recent interview that the review process is being undertaken by the Attorney General’s office and that upon completion, the Government will hold talks with licensees and investors regarding contractual terms that seem unfavourable to Tanzania. This comes after a Parliamentary Probe Committee which was formed last year, to assess Tanzania’s progress and the accrued benefits in the oil and gas sector. The Committee recommended that a review of PSAs be undertaken to see how greater benefits may be achieved.
It is worth noting, that pursuant to the National Wealth and Resources Contracts (Review and Re-negotiation of Unconscionable Terms) Act 2017 the Parliament of Tanzania, where necessary, may direct the Government to renegotiate any unconscionable term(s) identified in contracts that the Government enters into or is a party too. We believe that the provisions contained in this legislation will allow/trigger such review and permit the Government to negotiate any terms that are felt to be unconscionable or detrimental to Tanzania as long as it follows the procedures contained therein.
If you have any questions regarding this legal update, please contact Amish Shah by email on aks@arslaw.co.tz or Aisaa Kisamo apk@arslaw.co.tz.
