Tanzanian president’s energy sector balancing act

Total and China National Offshore Oil Corporation have reached final agreements with Tanzanian and Ugandan authorities for the Lake Albert oil project, which includes the construction of the East African Crude Oil Pipeline (EACOP). The agreements were signed on 11 April and also cover the development of two related oilfields in Uganda namely Tilenga and Kingfisher. Both oilfields have a total projected output of 230,000 barrels per day, to be piped to Tanzania’s Tanga port for export, and investors aim to begin export by 2025. This project and other energy sector developments struck in recent days are clarifying the extent of continuity and difference between Tanzania’s new president and her predecessor.

Significance – Reshuffling the agenda

These are the first major business agreements that Tanzania’s president Samia Suluhu has signed since she took over from John Magufuli who passed away in March. The EACOP was a top project on Magufuli’s agenda and Suluhu’s commitment to the project aligns with her promise to continue in his footsteps. Even so, she has acknowledged that the policy environment under her predecessor was often unpredictable, and that the country needs to improve its relationship with investors.

On that note, Suluhu has reshuffled the cabinet she inherited from Magufuli. She has also changed senior management at key departments and agencies, including the Tanzania Revenue Authority and the Tanzania Communication Regulatory Authority. However, Magufuli’s closest associates remain in the cabinet. His foreign affairs minister Palamagamba Kabudi is now justice minister, his finance minister Philip Mpango is now vice president and the justice minister in Magufuli’s administration, Mwigulu Nchemba, is now the finance minister.

Suluhu has her own oil and gas priorities though. One of them is a project to build a liquefied natural gas plant in southeastern Lindi. The project is owned by Shell alongside Norway’s Equinor and was initiated during Jakaya Kikwete’s administration (2005 to 2015). But talks for a host government agreement reached a deadlock toward the end of Magufuli’s first term because there were disputes concerning profit repatriation and production sharing. Suluhu wanted to move the project forward while she was vice president but did not have a major role in the negotiations. Now, she has directed the energy ministry to accelerate the talks.

Outlook – Piecemeal reform

Tanzania’s political transition post-Magufuli has been stable so far, and there is renewed interest in smoothening the path for foreign investors. We note that this sentiment is significantly shared among decision-makers. For instance, forming a new investment plan was discussed when the prime minister Kassim Majaliwa presented the 2021/2022 budget to parliament last week.

However, actual steps toward reform will likely be slow and Magufuli’s statist methods will largely remain prominent, especially in negotiating production sharing contracts for oil and gas development. This is because the late president’s associates continue to play key roles in the current administration and these methods remain popular within the ruling Chama Cha Mapinduzi, which controls nearly all state institutions.

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*Photo Credit: Lake Albert. Gwalia-kid CC By SA 4.0

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