UNITED REPUBLIC OF TANZANIA

DRAFT ONE

LOCAL CONTENT POLICY OF TANZANIA

FOR OIL AND GAS INDUSTRY - 2014

Dar es Salaam
April, 2014
ABBREVIATIONS and ACRONYMS
AIDS Acquired Immune Deficiency Syndrome
BCF Billion Cubic Feet
CBOs Community Based Organizations
CSOs Civil Society Organizations
CSR Corporate Social Responsibility
DPs Development Partners
EWURA Energy and Water Utilities Regulatory
Authority
FBOs Faith Based Organization
HIV Human Immune Deficiency Virus
IOCs International Oil Companies
LGAs Local Government Authorities
LNG Liquefied Natural Gas
LPG Liquefied Petroleum Gas
MDAs Ministries, Departments and Agencies
M&E Monitoring and Evaluation
NGOs Non-Governmental Organizations
NSGRP/MKUKUTA National Strategy for Growth and Reduction of
Poverty
PPP Public Private Partnership
TCF Trillion Cubic Feet
TPDC Tanzania Petroleum Development Corporation

i
 DEFINITIONS OF TERMS

Contractor/Operator The contracting party (parties) with

Government and TPDC in a Production
Sharing Agreement or equivalent.
Delivery Point The point at the wellhead or at an inlet
flange of a processing plant for the case of
deep-water well.
Downstream The marketing and distribution of natural
Activities/ gas and liquid petroleum products derived
Operations from natural gas and crude oil. Such
products include LPG, diesel, plastics,
fertilizers, pesticides and pharmaceuticals.
Goods Commodities that are tangible usually
movable and generally not consumed at the
same time as they are produced.
Lead Sub Contractor The providers of services or works (including
EPC/EPMc/EPIC contractors) where the
awarded contract sum is greater than $10
million for contracts in the exploration and
development phases, or greater than $2
million for contracts in the operational
phase.
Liquefaction The process of converting gas into liquid.
Liquefaction is usually achieved by
compression of vapours (provided the
temperature of the gas is below critical
temperature), by refrigeration or by adiabatic
expansion.

ii
Liquefied Natural A liquid form of natural gas, after been
Gas (LNG) cooled to about minus 1620C (minus 260oF)
at normal atmospheric pressure. The
liquefaction converts the gaseous phase into
an easily transportable liquid whose volume
is approximately 600 times less than the
original volume of natural gas.
Local The Tanzania Mainland and its people.
Local Business Business which is incorporated under the
applicable laws of Tanzania and is wholly
owned by Tanzanians or with at least 51% of
shares owned by Tanzanian Nationals and is
registered to offer goods or services in the oil
and gas industry.
Local Content The added value brought to the country in
the activities of the oil and gas industry in
the United Republic of Tanzania through the
participation and development of local
Tanzanians and local businesses through
national labour, technology, goods, services,
capital and research capability.
Local Content Plan A plan agreed between the Ministry
responsible for petroleum affairs, the
Contractor and TPDC, which forms an
integral part of the approval for an
Exploration License, Development License
and Operational License, and which guides
the activities and eligibility for recovery of
costs of Contractor and Lead Contractors in
their use and development of Local Content.
Local Goods Refer to goods obtained, produced or
manufactured and have after-sales services
in Tanzania Mainland.

iii
Liquefied Petroleum Light hydrocarbon material, gaseous at
Gas (LPG) normal atmospheric temperature and
pressure, held in the liquid state by pressure
to facilitate storage, transport and handling.
Commercial liquefied gas consists essentially
of either propane, butane or a mixture of
both.
Local Services Services provided in Tanzania Mainland
Marshal Plan Refer to the educational plan in oil and gas
related subjects prepared to bridge the
observed gaps for fast and successful
operations in the oil and gas industry.
Midstream Refer to the gathering, compression and
Activities processing functions required between the
wellhead and the transmission system. Mid-
stream facilities and activities are found at
any location where natural gas is produced,
transported or sold.
National Oil and Gas An oil and gas company established under
Company the laws of Tanzania in which the
Government or its agent owns majority
shares.
Natural Gas A fossil fuel naturally occurring as a gaseous
mixture of light hydrocarbons in sedimentary
rocks. Main constituents of natural gas are
methane, ethane, propane, butane and
pentane with other non-hydrocarbons
compounds including carbon dioxide,
hydrogen, sulphide, nitrogen and rare gases
found in small quantities.

iv
Offshore An area away from the shore located in water
depth equal to or greater than 200 metres.

Onshore Located on land.

Services Action performed by individuals or
organisations (need to be improved further).
Tanzanians United Republic of Tanzania Nationals.

Upstream Activities Include exploration, appraisal, development

and production stages of oil and gas
operations of wells that recover and bring
the crude oil and/or raw natural gas to the
delivery point.
Value Chain All activities involved in ensuring that the
natural gas and its products are produced
and ready for use by final consumers. These
activities include exploration, production,
processing, transportation and marketing.

v
MEASUREMENTS AND CONVERSION FACTORS

Symbol Unit Conversion

CF cubic feet = 0.02822 cubic metres

Atmospheric = 760mmHg
Pa Pressure

vi
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1. INTRODUCTION

1.1. BACKGROUND

Delivering local benefits to the communities where oil and gas

companies operate is no longer an option. It is a commercial necessity
— and one that is increasingly mandated by law in many countries. In
the new competitive landscape of diminishing supply and increasing
demand for energy resources, companies in the oil and gas industry
face rising expectations to do more than simply mitigate negative
impacts, serve as sources of tax/royalty revenue and act as good
neighbours.

To respond to the above, this policy outlines that among other things,
the oil and gas industry in collaboration with the Government needs to
do the following:
(i) Develop a baseline data/information to identify the current
capacity and capabilities for Tanzanians to be employed and
owned companies to become suppliers;
(ii) Develop needs assessment of the required capacities to deploy the
Tanzanian experts in the oil and gas industry;
(iii) Identify the areas in which there is no capacity and capabilities
and it will not be sustainable for Tanzania to have such a
category in place;
(iv) Identify potential partner companies who support our strategy
and will help deliver it; and
(v) Identify ways in which this development will be reported,
monitored, measured and evaluated through a regulated
framework for local content with aim of continuous improvement.

This policy defines the Local Content as the added value brought to a
host nation (and regional and local areas in that country) through the
activities of the oil and gas industry. This may be measured (by project,
affiliate, and/or country aggregate) and undertaken through two main
attributes:
(i) Workforce development, through employment and training of local
workforce; and
(ii) Investments in supplier development through developing and
procuring supplies and services locally;

While the main National Energy Policy 2003 addresses issues pertaining
to local content, related policies in oil and gas sub-sector have all
emphasized broadly on enhanced local content, without detailing on the

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level of participation of Tanzanian nationals and Tanzanian owned

companies.

The Natural Gas Policy of 2013 came up even more precisely by

anchoring itself on a principle pillar that “Natural gas resource found in
Tanzania belongs to Tanzanians; and must be managed in a way that
benefits the entire Tanzanian society”. This strong statement and other
provisions of the Natural Gas Policy are the basis of this local content
policy for the oil and gas industry.

Thus, the Local Content policy aims at:

(i) Devising Local Content implementation strategies for the

development of competitive, capable, and sustainable
Local labour. The policy aims at generating and promoting
adequate supply of Local workforce with the necessary
knowledge and skills.

(ii) Developing strategies for fostering the transfer of technology

and knowledge. The Government will also need to invest
heavily in research and development if it has to seize the
high calibre opportunities in the oil and gas industry.

(iii) setting a mechanism that will enable Tanzanians and their

businesses to tap the opportunities to manage, supply
goods, services and labour

1.2. CURRENT STATUS OF LOCAL CONTENT IN THE OIL AND

GAS INDUSTRY IN TANZANIA

The current status of the Oil and Gas Industry in Tanzania is as

described in the subsequent sub chapters:

1.2.1. Oil and Gas Resource Potentials

The Petroleum exploration activities in the country have led to the

following gas discoveries:
(i) Songo Songo in Kilwa District – Lindi – which is under
exploitation for power generation in Dar es Salaam and for use in
industries;
(ii) Mnazi Bay in Mtwara – which is also under limited exploitation
for power generation;
(iii) Mkuranga, Coast region – which is under appraisal;
(iv) Kiliwani/East SongoSongo area also under appraisal;

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(v) Deep-sea Blocks 1, 3 and 4 by Ophir/BG South East of Mafia

Island and East of Mnazi Bay- some fields are still under
exploration while others are under appraisal;
(vi) Deep-sea Block-2 East of Lindi town by Statoil/ExxonMobil- some
fields are still under exploration while others are under
appraisal;
(vii) Ntorya in Mtwara by Ndovu Resources/Aminex- the field is
planned for appraisal.

Up to 2013, the total discovered natural gas reserves in the country

amounts to 46.5 trillion cubic feet (TCF) of which about 8 TCF are from
onshore fields of Songo Songo, Mnazi Bay, Mkuranga, Kiliwani North
and Ntorya. The remaining resources were discovered offshore in deep
waters between years 2010 and 2013.

1.2.2. Human Resource Capacity and Availability

Tanzania has few local experts in the oil and gas industry, most of
whom are serving in public sector. These experts are capable of
operating and maintaining the respective facilities e.g. the wells and gas
processing plants in the producing gas fields of Songo Songo and Mnazi
Bay.

Following the huge discoveries of natural gas, skill shortages across the
industry value chain has become apparent. It is important for Tanzania
to develop more local experts in the oil and gas industry who will be
capable of operating and maintaining the imminent gas facilities
resulting from these new discoveries. This policy aims at devising Local
Content implementation strategies for the development of competitive,
capable, and sustainable Local labour. The policy aims at generating
and promoting adequate supply of Local workforce with the necessary
knowledge and skills. The companies and government entities will be
expected to work together to support the development of adequate local
skills that are necessary to fulfil the strategic and operational objectives
of the oil and gas sector.

1.2.3. Technology Availability and Application

Because of the technological advancement in the petroleum sector and

its use of specialized input, technology and knowledge, Tanzania has
adopted the use of Production Sharing Agreements (PSAs) that allows
the International Oil Companies (IOCs) to transfer their technology,
knowledge and finance. Tanzania hires multinational companies in the
oil and gas industry on merits of their technological and financial
capabilities. Apart from the PSA requirement for the IOCs to endeavour
to transfer technology, Tanzania has not put in place Local Content

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implementation strategies for the transfer of technology and knowledge.

This Local Content Policy aims at developing strategies for fostering the
transfer of technology and knowledge. The Government will also need to
invest heavily in research and development if it has to seize the high
calibre opportunities in the oil and gas industry.

1.2.4. Financing Options (Credits/Loans/Insurance/etc.)

Exploitation of oil and gas is a risky undertakings and capital intensive

business that local financial institutions and insurance companies
cannot support. Currently, all financing of operations in exploration of
oil and gas in Tanzania are through risky capital paid for by either oil
companies’ own equity or by international multilateral banks. On the
other hand, Oil Companies also insure their assets, operations and
equipment with insurance brokers through reinsurance with ‘A’ rated
International Insurance Companies.

Local businesses that provide services to oil companies are currently

necessitated to raise the required operating capital through commercial
loans from local commercial banks under difficult financing terms. The
lack of concessionary loans for equity financing of local businesses have
made expansion of local businesses to match their foreign counter-part
in provision of goods and services to the oil and gas industry a difficult
undertaking.

In addition, the current PSAs in force require oil companies

(Contractors) to oblige their sub-contractors to carry insurance of such
type and in such amount as is customary applicable in accordance with
Good Oilfield Practices. Further to that, oil companies at all times are
also required to effect insurance to cover any loss or damage to all
assets during petroleum operations. This practice denies opportunities
to local insurance companies to participate in the oil and gas industry
in Tanzania.

Tanzania need to develop a mechanism to support Tanzanians to

participate in the provision of goods and services in the oil and gas
industry. This policy is intended to set a mechanism that will enable
Tanzanians and their businesses to tap the opportunities to manage,
supply goods, services and labour.

1.2.5. Current Local Content Practices

(Employment, Capacity Building & Supply of Goods
and Services)

Local content requirements for the upstream operations in the oil and
gas industry are currently enshrined in the Model Production Sharing
Agreement (MPSA). The MPSA is the basis for the individual contracts
(PSAs) signed between the operators and the Government/TPDC for
exploration and production of oil and gas. The local content provisions
are stipulated under Article 20 and 21 of the MPSA 2013 and are
periodically improved to reflect the development in the industry.

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The MPSA 2013 contains the latest local content requirements, but they
are so far not yet adopted into any effective contract.

TPDC has the obligation to monitor compliance to the PSA Local

Content provisions on behalf of the Ministry of Energy and Minerals in
accordance to the Petroleum (Exploration and Production) Act, 1980.
However, the provisions allow for alternative sourcing if the local market
is unable to meet the standards and quantities demanded by the
industry.

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2. JUSTIFICATION/rationale FOR LOCAL CONTENT POLICY

2.1. OVERVIEW OF LOCAL CONTENT IN TANZANIA

Based on the rapid growth in its oil and gas industry, the exploration
activities in large part of the country, discovery of remarkable amount of
natural gas both on and off – shore are anticipated to significantly
contribute to the socio – economic development of the country and
certainly raise the living standard of Tanzanians. For Tanzania to
attain middle income status by 2025, it has to increase its GDP per
capita of about $600 in 2014? to around $3000 in 2025?. This can be
achieved by, among others, rationalising the exploitation of its oil and
gas industry resource and increased local participation in the value
chain.

The Local Content Policy is intended to provide guiding principles for

the participation and transformation of Tanzanians in the development
of the oil and gas industry to ensure optimal benefits to Tanzanians and
attain sustainable national economic development in the short, medium
and long terms perspectives.

The formulation of this Policy is aligned with existing strategies as well

as policies and legislation, including the National Development Vision
2025, the National Energy Policy [2003], the Empowerment Policy and
Act 2004, the Natural Gas Policy, 2013, the Five Year Development Plan
(2011/12 - 2015/16) and the Second National Strategy for Growth and
Reduction of Poverty 2010/11 - 2014/15 (NSGRP/MKUKUTA II).

Despite of having all the above instruments, the local content policy is
meant to link and enable those policies to be achievable and create the
impact they were intended for.

Additionally, this Local Content Policy is a tool to implement the Natural

Gas Development Road Map, 2013 (Item 7) of which objective is to
develop the capacity of Tanzanians to participate strategically in the
natural gas value chain. A Local Content Policy Road Map will be
developed.

2.2. KEY FOCUS AREAS

The policy has identified five key focus areas to address, namely;
 Capacity Building and technology transfer;
 Participation of Tanzanians and Tanzanian owned entities;
 Procurement and usage of locally produced goods and services;
 Fabrication and manufacturing in-country; and
 Socio-economic responsibilities.

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2.3. VISION AND MISSION

Vision

A developed oil and gas industry with several local firms providing
goods and services, including fabrication and manufacturing as well as
huge workforce employed in the entire industry to maximize benefits
arising from oil and gas value chain.

Mission

To create an enabling environment and opportunities for Tanzanians to

benefit from the economic wealth derived from the oil and gas industry
in the course of local participation in the ownership, operations, control
and management.

2.4. OBJECTIVES OF THE LOCAL CONTENT POLICY

This Policy recognizes that oil, natural gas and minerals are National
resources that belong to the people of the United Republic of Tanzania.
It is therefore inherent that Tanzanians must be engaged in the entire
value chain in order to ensure its benefits to the entire Tanzanian
society, for present and future generations.

2.4.1. Main Objective

The main objective of the Local Content Policy is to provide the guiding
principles for maximum engagement of local content and local
participation in the development of the oil and gas industry to ensure
optimal benefits to Tanzanians.

To achieve this goal, the Government and people of Tanzania shall

participate in the oil and gas industry activities and where necessary
engage foreign companies in specific operations.

This main objective is supported by seven (7) specific objectives

mentioned below and further elaborated under Chapter Three. The
specific objectives address issues emanating from the challenges in the
oil and gas industry.

2.4.2. Specific Objectives

 To develop Tanzania local businesses to become internationally
competitive through the empowerment of local suppliers to meet
the needs of the oil and gas industry;
 To have appropriate technology transferred to Tanzania for
managing and operating the oil and gas industry;
 To enable local training institutions run requisite curriculum
relevant for oil and gas industry;

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 To maximize participation of skilled and unskilled Tanzanians in

the oil and gas supply chain and value chain activities;
 To enhance value addition and job creation through the use of
local businesses.
 To have local goods and services procured by operators in
accordance with terms and conditions of their operating
Licenses; and
 To support activities in the oil and gas industry based on gender
issues and addressing HIV & AIDS and other infectious diseases;

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3. POLICY ISSUES AND STATEMENTS

3.1. Capacity Building and Transfer of Technology

Issue: Enhancing capacity of local firms to participate.

Very few Tanzanians are currently involved in activities of the oil and
gas industry. The Government is therefore committed to ensuring
Tanzanians participate in this industry.

The ownership structure of businesses will be carefully scrutinized to

determine the authenticity of the Tanzanian owned shares taking
lessons from other countries that have faced the challenge of “shadow
shareholders”. Local content will therefore aim to identify the source of
manufacture of components that make each piece of equipment and
service. It will entail the local content of goods excluding the value of
imported parts as well as the local content of services taking into
account salaries and additional taxes of Tanzanian citizens.
In the case of non-Tanzanian citizen ownership and operations, the
entity will be encouraged to provide for the participation of a Tanzanian
Entity with a specified minimum share of interest in the oil and gas
industry value chain activities. The interest of the Tanzanian entity
shall not be transferable to a non-citizen of Tanzania.

All goods, services and materials imported for upstream, midstream and
downstream oil and gas industry activities will have to be of certified
standards and in addition to international standards also be in
accordance with Tanzanian Authorities responsible for Standards,
Foods and Drugs or any other relevant authority established and
operating under the Law.

Objective: To develop Tanzania local businesses to become

internationally competitive through the empowerment of
local suppliers to meet the needs of the oil and gas
industry.

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Policy Statements:

The Government shall:

(i) Ensure every player in the oil and gas supply chain and value
chain puts emphasis on local participation;
(ii) Ensure that there will be specified thresholds for local
participation in each stage in the value chain; and
(iii) Ensure local firms have full and reasonable access to
procurement opportunities.

Issue: Adopting new and appropriate technologies.

Technology and innovation are crucial for sustainable development of

the oil and gas industry. Tanzania has depends technologies from
multinational companies which are hired on merit of their technological
advancement and financial capability. To address that gap, contractors,
subcontractors, licensees or other allied entities shall support and
facilitate local capability development aspects of the local content
framework.

An Operator, while carrying out operations in the oil and gas industry is
therefore expected to prepare and implement plans for the transfer of
technological know-how and skills relating to oil and gas operations to
Tanzanians. Emphasis may also be put on establishing in country any
necessary facilities for technology transfer.

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Objective: To have appropriate technology transferred to Tanzania to

enable Tanzanians to manage and operate the oil and gas
industry.

Policy Statements:
The Government shall:
(i) Ensure Tanzanians have adequate capacity to manage modern
or requisite technology;
(ii) Ensure that all players in the industry prepare capacity building
programmes for training of Tanzanians;
(iii) Ensure affordable technologies from multinationals are available
to develop oil and gas industry;
(iv) Ensure adoption of relevant information technology in all oil
and gas operations by local businesses; and
(v) Ensure there is an obligation to Licensees and their
subcontractors to support local capacity building by direct
financing.

Issue: Getting skilled and qualified personnel locally.

Tanzania Universities have started offering degrees in oil and gas

sciences. However, training institutions have shortage of experienced
trainers and training facilities.

To enhance competency of Tanzanians in provision of full range of

services required in the oil and gas industry, the local training and
technical institutions will need to be supported by both Government
and operators. The support will be required to develop the requisite
capacity for these institutions to train Tanzanians to comparable higher
levels as required by the industry.

This measure may focus on all aspects of training, including the

following:
(i) Lower skill artisanal training such as catering services, transport
logistics, drill ship training etc.;
(ii) Middle-level skill training of technicians to provide maintenance
services in the oil and gas industry, etc.;
(iii) High level skill training including general management,
engineering design, procurement , business strategy development
Environmental Management and Emergency preparedness,
Response and Recovery Plans.

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Seminars and workshops could be used to create the necessary

awareness and interest of local businesses in the development of the
requisite technologies, provision of technical support for the oil and gas
industry and provision of support functions for the oil and gas industry.
Further, Tanzania has to adopt the use of Production Sharing
Agreements (PSAs) that allows the International Oil Companies (IOCs) to
transfer their technology, knowledge and finance.

Objective: To enable local training institutions run requisite

curriculum relevant to oil and gas industry.

Policy Statements:

The Government shall:

(i) Ensure support to local training and
technical institutions;
(ii) Encourage the use of specialized input,
technology and knowledge through adoption
of the use of (PSAs) to allow participation of
the International Oil Companies (IOCs)
(iii) Ensure establishment of Centre of Excellence
in oil and gas; and
(iv) Ensure that Research and Development
functions in the country are strengthened to
accommodate needs of the oil and gas
industry.

3.2. Participation of Tanzanians and Tanzanian Owned

Entities
Issue: Creating employment opportunities to Tanzanians.

The oil and gas industry is a new phenomenon in Tanzania, and

therefore the country has had limited exposure to the sector in terms of
local expertise for both employment and provision of goods and services.
Developing capacity, competence and skills at the enterprise level is
crucial to enhance local content.

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The Operator in the oil and gas industry is expected to prepare on job
training programme in all aspects of the oil and gas industry activities,
which may be carried out in or outside the country. The
Contractor/Operator shall also facilitate recruitment of the same in
their supply chains in Tanzania. Furthermore, such an Operator is
therefore expected to ensure that opportunities are given as far as
possible for the employment of Tanzanians having the requisite
expertise or qualifications in the various levels of the operations.

Such programme shall provide field training to Tanzanians in all

aspects and phases of petroleum activities and as many staff categories
including (a) senior management positions, (b) supervisory positions, (c)
skilled positions and (d) semi/unskilled positions, and shall be
reassessed and revised on an annual basis (the “Annual Recruitment
and Training Programme) and may include scholarships, industrial
training for students and other financial support for education.
Scholarships should only be given to Tanzanian nationals and should
be publicly advertised.
To enhance transparency and effectiveness in the implementation of
this policy direction, an operator, contractor, subcontractor, service
provider etc. shall publicly advertise and give preference to the
employment of citizens of Tanzania who have the requisite qualification,
competence and experience required to carry out the required work.
Where a foreign national is being given employment a succession plan
to a Tanzanian national needs to be submitted with the work permit
application.

The implementation of this succession plan will influence the extension

of work permit application. This will give effect to the operator,
contractor, subcontractor, service provider etc. to take every reasonable
effort within a reasonable time frame to empower the Tanzanian
national to be able to perform the same job that the foreign national
was brought to perform.

With respect to employee training, an operator, contractor,

subcontractor, service provider etc. shall prepare a scheme for the
training of its Tanzanian employees both inside and outside of
Tanzania including to conferences, workshops and seminars. For the
effectiveness of this policy the scheme shall be submitted to the relevant
Regulatory Authority for approval as part of the Annual Recruitment
and Training Programme.

Objective: To maximize participation of skilled and unskilled

Tanzanians in the oil and gas supply chain and value chain
activities;

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Policy Statements:

The Government shall:

(i) Ensure foreign experts have limited and non renewable
work permits;
(ii) Ensure maximization of number of skilled Tanzanians in
every oil and gas operation along the supply and value
chains;
(iii) Ensure deliberate preference is made for Tanzanians
during recruitment;
(iv) Ensure that certain employment cadres are reserved for
Tanzanians only; and
(v) Work with oil and gas companies and service companies to
ensure implementation of approved employment and
succession plans.

Issue: Creating business opportunities to local firms.

In order to ensure increased economic benefits to Tanzanians, all

operators in the oil and gas sector, shall as far as practicable use goods
and services produced by or provided in Tanzania by Tanzanian owned
businesses for their operations in preference to foreign goods and
services provided in Tanzania by foreign registered businesses in
Tanzania or foreign businesses not registered in Tanzania.

Where Tanzanian owned businesses can meet the quality, quantity and
time required but higher on price then Tanzanian owned businesses
shall receive a margin of price preference as prescribed by legislation.

Where bids are being evaluated, and where bids are otherwise equal,
the bid containing the highest level of Tanzanian content shall be
selected. Where a foreign entity is to provide goods and services for the
licensee, the foreign entity shall operate from Tanzania and partner with
a Tanzanian owned and registered company.

After the commencement of operations the participation of Tanzanians

for the first 3-5 years of operations shall be at least ten (10%) percent
by value in the provision of goods and services or as may be prescribed
by regulations.

Objective: To enhance value addition and job creation through the use
of local businesses.

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Policy Statements:

The Government shall:

(i) Promote provision of quality goods and services demanded
by the oil and gas industry;
(ii) Ensure usage of local goods and services; and
(iii) Ensure procurement of local goods and services are given
preference.

3.3. Procurement of Locally Produced Goods and Services

Issue: Creating market opportunities for local goods and services.

The development of an oil and gas industry in Tanzania brings many

challenges that must be overcome as well as opportunities that should
be utilized. Legislative and regulatory frameworks will need to be in
place in administering nationwide oil and gas development. This will
enhance enforcement and compliance in oil and gas production,
processing, marketing, standards, testing, and certification, right to
access and use oil and gas products.

To date, Tanzania has fairly little Local Content requirements in

procurement notice. Local Content commitments have been offered by
interested parties in their respective bids. Hence, such offer could not
be subjected to monitoring or measurable criteria.

However, it is a global tendency now to set Local Content minimum and

maximum percentages in the procurement notice for the phases of
exploration, development and other operations, as well as minimum
percentages for items defined by the bidding party.
The overall aim is to increase value addition to Tanzanian commodities
by introducing similar measures as practised elsewhere in the world.

Objective: To enhance the value addition and job creation through use
of local firms to provide goods and services.

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Policy Statements:

The Government shall:

(i) Ensure a compulsory Local Content requirement in every
Invitation to Bid;
(ii) Ensure that contractors and Lead Sub Contractors
manage risks of local businesses to allow their
participation; and
(iii) Ensure transparency, value for money and
competitiveness in every procurement process undertaken
by Contractors and sub-contractors.

3.4. In-country Fabrication and Manufacturing.

Issue: Increasing local capacity to weld, fabricate, manufacture gadgets,
equipment, service and maintenance for the oil and gas related
installations.

In quest of enhancing the level of use of Tanzanian local expertise, goods

and services, people, businesses and financing in oil and gas activities,
we need to adopt an industrialization strategy in order to capitalize on
the opportunities brought about by the oil and gas industry.

It is understood that much effort is needed to build sufficient capacity

for the locals to supply adequate inputs to satisfy the industry demand.
However, it is also believed that the best way to ensure success and
quickly, is to do it “in country” first, and doing it with locals, will
naturally follow. This belief, which has been realized by our
predecessors in the oil and gas industry, provide comfort to Tanzania to
pursue the same.

In view of that, sufficient thrust need to be given in promoting all metal

related works including in-country manufacturing, fabrication, welding
and assembling.

Objective: To maximize in-country fabrication, welding, assembling,

manufacturing and repairing works.

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Policy Statements:

The Government shall:

(i) Ensure availability of equity financing to local business
engaging in country fabrication and manufacturing;
(ii) Ensure that Tanzanian with required skills are available to
participate in fabrication and manufacturing;
(iii) Encourage multinationals to bring their global oilfield
services and equipment to Tanzania; and
(iv) Ensure development of consolidated domestic fabrication
industry.

3.5. Socio-economic Responsibilities

Issue: Addressing gender issues and HIV & AIDS.

The Government provides equal opportunities to all citizens of the

country. However, most of such opportunities are usually dominated by
men. Active participation of female in the oil and gas industry is thus
encouraged.

HIV and AIDS are associated with other infectious diseases which have
greatly affected socio-economic development and livelihoods. Like many
other large scale projects, oil and gas industry projects will attract the
concentration of people looking for employment and other related
activities. In the process, this may escalate the HIV and AIDS infections.
Awareness and education on HIV and AIDS to all stakeholders is
important to reduce its impacts on communities surrounding such
projects.

Objective: To support activities in the oil and gas industry based on

gender issues and addressing HIV & AIDS and other
infectious diseases.

Policy Statements:

The Government shall:

(i) Ensure that all projects in the oil and gas value chain including,
training opportunities are based on gender equality and equity;
and
(ii) Work with IOC to facilitate provision of preventive and curative
education on HIV & AIDS and other infectious diseases to
stakeholders in the oil and gas industry.

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Issue: Maintaining safe working conditions and the environment.

Oil and gas operations may have adverse effects on the environment,
health and safety of people. Adherence to good industry standards and
practices will contribute significantly to preventing or mitigating such
effects. It is important to plan for remedial measures prior to any
operation. Regulations of these operations are necessary to ensure that
activities in the oil and gas industry are conducted taking environment,
health and safety issues into serious consideration.

High level of mechanization limits the number of jobs created as they

often require specialized labour that may not be available. On the other
hand, pure manual labour may not be economically competitive,
environmentally sustainable or safe. However, a properly designed oil
and gas industry is expected to create jobs for both skilled and
unskilled labour-force in Tanzania.
Objective: To ensure compliance with Health, Safety and Environment
standards in the oil and gas industry.

Policy Statements:

The Government shall:

(i) Ensure that operators in the oil and gas industry adhere to
statutory and international best practices on environment
management and protection; and
(ii) Ensure that the industry establish and adopt sound
environmental management systems.

Issue: Maximizing benefits to the local communities.

The primary business reasons for developing Local local content are to
secure:

1. Social License to operate and meet in local community

expectations.

2. Sustainable Development – Contribute to the growth and to

the development of local communities to achieve a mutually
beneficial and sustainable environment for carrying out Oil
and Gas operations.

The aim is to facilitate local community business development,

contribute to human capability development and stimulate productivity
in the local community economy. The scope will be to as far as possible
to procure materials and contracting of services locally; hiring and
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development of the local community personnel; improving the capacity

and capability of for sustainable commercial benefits for the
communities in which the oil and gas projects operate.

Objective: To substantially improve Corporate Social Responsibility in

communities neighboring oil and gas facilities and
operations.

Policy Statements:

The Government shall:

(i) Ensure that there is a contractual obligation to all
investors and contractor in the natural gas activities to
undertake locally prioritised community development
programmes;
(ii) Ensure companies in the oil and gas industry submit
credible Corporate Social Responsibilities action plans to
the appropriate Authority ; and
(iii) Ensure availability of monitoring mechanism that aim to
achieve local priorities supported by CSR in a responsible
and value for money approach

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4. FISCAL, LEGAL AND REGULATORY FRAMEWORK

4.1. FISCAL, LEGAL AND REGULATORY FRAMEWORK

In order to give effect to the implementation of the local content and
local participation policy, the policy directions given herein need to be
legislated by Regulations and other such legal instruments. This may
require strengthening of fiscal, legal and regulatory framework to
comprehensively orient the governance of the natural gas industry
towards local content objectives. Therefore, the development of an oil
and gas industry in Tanzania brings many challenges that must be
overcome as well as opportunities that should be utilized. Legislative
and regulatory frameworks will need to be in place in administering
nationwide oil and gas development. This will enhance enforcement and
compliance in oil and gas production, processing, marketing, standards,
testing, and certification, right to access and use oil and gas products.
The enactment and amendment of specific legislations to address the
situation is inevitable including, but not limited to Local Content Act,
Natural Gas Act, Natural Gas Revenue Management Act, Income Tax
Act (Cap. 332) and EWURA Act (Cap. 414), PEPA 1980, MPSA 2012,
Petroleum Act 2008.

4.2. FISCAL REGIME

Fiscal regime is defined differently for upstream and

downstream operations in the oil and gas industry. For the
purpose of local content and local participation, the two
regimes will be defined precisely by the relevant regulations
established pursuant to the governing laws. However, the
regulations may establish preferential rates for the purpose of
promoting and supporting Tanzanian SMEs and individuals
participating in the industry.

The Minister shall consult with relevant Government agencies

to propose fiscal incentives to assist:
i. foreign companies which aim to develop technological
capacity and skills of citizens; and
ii. local Tanzanian companies which establish factories and
production units in the country.
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4.3. LEGAL AND REGULATORY FRAMEWORK

A dedicated Petroleum Regulatory Authority, with the assistance of

independent National Local Content Committee, is foreseen. This will be
mandated to oversee and ensure the full implementation of the local
content and local participation policy.

The National Local Content Committee shall be comprised of competent

and able public and private sector stakeholders that may include:
(i) Tanzania Government relevant Ministries, Departments and
Agencies;
(ii) Non-Governmental Organizations;
(iii) Representative of Petroleum industry Operators, Non-Operators,
Contractors and Sub- contractors; and
(iv) Representatives from the Private Sector

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5. INSTITUTIONAL FRAMEWORK, MONITORING AND

EVALUATION

5.1. INSTITUTIONAL ROLES AND FRAMEWORK

The successful implementation of the local content policy and other

national development policies depends crucially on the institutional
framework that is in place to develop tools for operationalizing,
enforcing, monitoring and evaluation to ensure desired outcomes. The
institutional framework articulates major roles of key institutions
direction towards a transformed economy and sustainable growth and
development. The key institutions include Central Government, Local
Government Authorities, National Oil and Gas Company, Regulatory
Authority, Central Bank of Tanzania (BoT), Private Sector, Academic
and Research Institutions, Media, Civil Societies and Communities.
5.1.1 Role of the Government

The rapid growth in the oil and gas industry in Tanzania requires the
involvement of the Government in directing resources and leading other
players towards a desired development direction. The Government has
vowed to build the gas economy in Tanzania which can only flourish
with the Tanzanians participating adequately in the oil and gas
business. The role of the Government shall therefore be:
(i) To prepare and periodically review Policies, Strategies, Acts and
Regulation as well as to administer their implementation;
(ii) To attract foreign direct investment in capital intensive and
technologically demanding oil and gas projects;
(iii) To facilitate national enterprises and Tanzanians to participate
actively in the oil and gas industry;
(iv) To strengthen the capacity of Government’s institutions
responsible for the oil and gas industry;
(v) To strengthen legal and regulatory framework for oil and gas
industry; and
(vi) To set targets and monitor results of oil and gas projects and
programmes.

5.1.2 The Role of the Local Government Authority

Local Government Authorities are important link between Central

Government and Communities. In liaison with the relevant Regulatory
Authority and the Local Content Committee, the role of Local
Government Authorities in the oil and gas activities shall be:

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(i) To administer and enforce Acts and Regulations;

(ii) To prepare guidelines for Local Content practices within their
localities;
(iii) To oversee the implementation of the Local Content regulations;
and
(iv) To provide awareness to the public on oil and gas projects in their
areas.

5.1.3 The Role of the National Oil and Gas Company

The designated National Oil and Gas Company (NOC) will have to take
new roles and responsibilities in the light of new developments and
reforms in the oil and gas industry. Oil and gas activities including
commercial and regulatory roles shall be carried out separately by
relevant entities. The role of the NOC shall therefore include:
(i) To acquire mandatory participating interest in each license issued
in the upstream activities at a percentage as may be determined
by the relevant authority.

(ii) To demonstrate full implementation of the local content principles

and regulations as stipulated herein and in the subsequent
legislations.
(iii) The established Upstream regulatory Authority shall regulate and
enforce implementation of the general principles in this Policy
Framework.

As regards to mid - and down-stream natural gas activities, the National

Oil and Gas Company shall work in close liaison with Downstream
regulatory Authorities and the National Local Content Committee
established under section 5.1.11.

5.1.4 The Role of the Regulatory Authority

The potential size of the natural gas resources in Tanzania and its
expected multiple uses require a robust regulatory regime. Depending
on prudent industry practice, the Upstream and Downstream segments
will be regulated separately, but compliance to local content
requirements shall be mandatory. The role of the Regulatory
Authorities, in close liaison with the local content committee shall,
therefore, include:
(i) To enforce Acts and Regulations;
(ii) To establish standards for goods and services in their jurisdiction;
(iii) To regulate rates and charges in according to prudent industry
practices;

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(iv) To monitor and evaluate performance in the oil and gas activities
including levels of investment, cost of services and availability of
regulated services; and
(v) To facilitate the resolution of complaints and disputes.
(vi) To perform other functions conferred to them by the relevant
legislation;

5.1.5 The Role of the Central Bank of Tanzania

The primary responsibility of the Central Bank of Tanzania (BoT) is to

establish monetary conditions conducive to price stability over time. It
is expected that the oil and gas industry may fuel inflation in the
country if conducive conditions are not put in place timely.

With respect to local content in the oil and gas industry, the BoT, in
addition to managing and administering the Natural Gas Revenue
Fund, BOT will release and monitor expenditure of the requested and
approved funds for the local content purpose.

5.1.6 The Role of the Private Sector

Private sector players are important in implementing local content

regulations. The Private Sector will continue to work with the
Government to promote, build capacity and facilitate PPP projects or
other arrangements in the oil and gas value chain. The sector is
expected to champion compliance in local content regulations.

As a way of good industry practice and with respect to this policy, the
private sector shall:
(i) Invest in business improvement and training to enhance quality;
Health, Safety and Environment (HSE); employment practices
and environmental impact.
(ii) Avoid opportunistic pricing which may increase project costs
(iii) Create non-state sponsored industry groups to improve
knowledge and capabilities
(iv) Be transparent.

5.1.7 The Role of the Academic and Research Institutions

Academic and Research Institutions are important for development of

the oil and gas industry. Development of the industry has increased
demand for knowledge and skills in Tanzania. In order to meet the
demand, the Government has taken measures to introduce and expand
training in relevant fields in the oil and gas industry. These institutions
will work with Government and IOCs to promote education, training

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and research in the oil and gas industry, recruitment and retention of
the human resources required in the industry.

5.1.8 The Role of the NGOs and Civil Societies

This Policy recognizes the role of NGOs and other civil society
organisations in enhancing advocacy, mobilization and dialogue with
communities, investors and the Government. These entities will
contribute to improve HSE and information dissemination related to oil
and gas activities, and to collaborate with Government in designing,
monitoring and implementing socio-economic programmes related to
the natural gas industry.

NGOs are expected to be instrumental in advocating opportunities in

the oil and gas by implementing awareness programmes to the public.

5.1.9 The Role of the Media

The role of the media in providing accurate and balanced information

on the oil and gas industry issues to the public is important. In this
regard, the Media need to strengthen their capacity in understanding
the local content issues (including Policy, regulations, practices,
opportunities, risks) in order to deliver information accurately and
timely. This will increase public awareness and involvement,
transparency and accountability on matters pertaining to the local
content in the oil and gas industry.

5.1.10 The Role of the Community

Local communities have a great opportunity to participate in activities

related to oil and gas operations. However, they need to be prepared in
terms of building requisite capacity to seize opportunities arising in the
industry. Hence the community has to seek information and make use
of it in order to participate fully and timely. The other crucial role of the
community is to safeguard the integrity of oil and gas installations
erected in their neighbourhood and beyond since they are meant to
benefit them.

5.2. ESTABLISHMENT OF THE NATIONAL LOCAL CONTENT

COMMITTEE
In order to effectively coordinate amongst the different institutions and
stakeholders on the implementation of the policy, a National Local
Content Committee shall be established. This will be a dedicated and
independent National Local Content Committee mandated to oversee
and ensure the full implementation of the local content policy.

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The National Local Content Committee shall be chaired by Ministry

responsible for oil and gas development and will be comprised of public
and private sector stakeholders, including:

(i) Ministry Responsible for Oil and Gas

(ii) Ministry of Trade and Industry
(iii) Attorney General
(iv) Ministry of Finance
(v) Ministry of Labour and Employment
(vi) President office Policy Reform Unit
(vii) Prime Ministry Office
(viii) Tanzania Procurement Authority
(ix) Tanzania Revenue Authority
(x) Tanzania Investment Centre
(xi) Ministry of Home Affair-Immigration
(xii) Tanzania Private Sector Foundation
(xiii) Tanzania Chamber of Commerce, Industry& Agriculture
(TCCIA
(xiv) Two Representatives from Civil Society

5.2.1. Roles of the National Local Content Committee

The committee shall have the following roles and responsibilities;

(i) Supervise, coordinate and monitor the implementation of this

policy in liaison with sector operators and institutions,
(ii) Appraise, evaluate and endorse for approval the local content
plans and reports submitted by the operators. The plans
submitted shall include, but may not be limited to; feasible
Business Plan, Capital Plan, Procurement Plan, Imports Plan,
Employment and succession Plan and Capacity Building Plan.
(iii) Coordinate with the private sector to enable Tanzanians to take
advantage of the available opportunities,

5.3. MONITORING AND EVALUATION FRAMEWORK

The local content Policy M & E Plan shall be developed through a

consultative process as part of the Policy Implementation Strategy, and
outline milestones and key performance indicators under each of the
specific objectives of the Policy. Specifically, the Plan shall be a tool to
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manage the process of monitoring, evaluating and reporting progress

towards the objectives, and serve the following main functions:
(i) Explain in detail how and what the Ministry and other
Government institution will (a) monitor to determine whether
implementation is on track to achieve the intended Policy
objectives, and (b) evaluate / assess the adequacy of
implementation strategies, provide lessons learned, determine
cost effectiveness and estimate the impact of individual
involvement;
(ii) Develop and provide all indicators that must be reported to the
stakeholders on regular basis;
(iv) Provide early warning signals about the required development and
subsequent change and/or review; and
(v) Serve as a communication tool, so that all stakeholders clearly
understand the objectives being sought through this Policy and
Government’s actions emanating thereunder.

5.3.1. Institutional Arrangement for Monitoring and

Evaluation System

The institutional framework for monitoring and evaluation consists of

the institutional organizational set-up and its environment of operation.
It covers the framework for reporting, supporting and coordination
systems for monitoring and evaluation.

This Policy has been developed with a primary focus on one main
objective: The main objective of the Local Content Policy is to provide
the guiding principles for maximum engagement of local content and
local participation in the development of the oil and gas industry to
ensure optimal benefits to Tanzanians.

Its implementation is therefore expected to generate impacts over and

beyond those emanating from existing programmes and projects. It is
this understanding that underpins the need for a distinct Monitoring
and Evaluation (M & E) Framework to be applied in conjunction with
this Policy. The framework shall seek to answer the question, “has
implementation of the local content Policy met the objectives and
benchmarks as outlined in this Policy document?”

The multi-dimensional challenges and opportunities from the emerging

natural gas industry require systematic monitoring and evaluation
framework for Policy implementation and performance assessment. The
monitoring process will generate and supply data and information on
the progress made in the implementation processes while evaluation

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will determine the relevance, effectiveness, efficiency, sustainability and

impact of the Policy.

While the main responsibility for monitoring and evaluation framework

will be vested in the Ministry responsible for oil and gas, a coordination
mechanism will be established to allow for multi-stakeholder
consultations involving key stakeholders including MDAs (including
Ministries responsible for finance, law, security, safety and
environment), LGAs, Members of Parliament, the Private Sector, NGOs,
FBOs, CSOs, CBOs, Media and DPs.

5.3.2. Monitoring and Evaluation Indicators

A list of smart indicators will be developed to meet information needs of

different stakeholders at all levels. They will be reviewed from time to
time to meet additional information requirements necessitated by the
new developments. More specifically, baseline data will be collected as
benchmark of the Policy implementation tracking.

At each particular implementation period, monitoring and evaluation

will be undertaken to review the implementation of the strategy. The
general objective of evaluation is to determine the relevance,
effectiveness and impact of Policy on the social, political and economic
development of the country. Both qualitative and quantitative indicators
will be analyzed.

5.3.3. Monitoring and Evaluation Tools and

Deliverables

The output and deliverables of the local content Policy 2014 will be:
(i) Local Content Regulations
(ii) Implementation Strategy
(iii) The National Local Content Committee.
(iv) Communication Strategy with an interactive element to facilitate
ongoing feedback from stakeholders;
(v) Progress Report, using Monitoring and Evaluation System output
to both indicate progress and update on implementation of the
Local Content Policy; and
(vi) Analytical report of different studies (including feasibility and
researches) undertaken.

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6. The way forward

Upon finalization of the approval process, the relevant provisions shall

be reflected into the draft Gas Act and subsequently local content
regulations be prepared as per the Gas Act.

Launching and implementation of the Local Content policy shall take

place before negotiation of the major contracts relating to development
of the gas from deep sea.

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