Understanding the lie of the land: an institutional analysis of petro-governance in Tanzania

Abstract

Tanzania has recently discovered large petroleum and natural gas reserves, boosting its natural resource stocks and potential future revenue flows. Whether the country’s petroleum resources will translate into economic development will be determined by the institutions that the government puts into place to govern the petroleum sector, to include the legal institutions. This study reviews the most important provisions of the new legislative framework that the government has recently adopted to govern this newfound wealth. We examine the institutions and actors created by the legislation as well as the opportunities and challenges that may emerge in its future implementation. Specifically, we analyse the petro-sector institutions that the legislation creates and the types of authorities granted to them; the institutional constraints placed on authorities; the interaction between institutions; potential institutional overlaps, conflicts and gaps; and transparency and accountability mechanisms.

Keywords:

• petroleum
• governance
• legal regimes
• Africa

Notes

1 Nicholas Bariyo, ‘Tanzania Says Gas Reserves Rise 18% to Reach 55 Trillion Cubic Feet’ (2015) Wall Street Journal https://blogs.wsj.com/frontiers/2015/06/08/tanzania-says-gas-reserves-rise-18-to-reach-55-trillion-cubic-feet last accessed 16 May 2017 and Marta Tveit ‘The Oil Giants are Coming to Africa’ (2015) Africa is a Country http://africasacountry.com/2015/05/the-oil-giants-are-coming-to-tanzania/ last accessed 16 May 2017.

2 Fumbuka Ng'wanakilala, ‘Interview - Tanzania hopes for LNG plant agreement with oil majors by 2018’ (2017) CNBC www.cnbc.com/2017/01/24/reuters-america-interview-tanzania-hopes-for-lng-plant-agreement-with-oil-majors-by-2018.html last accessed 16 May 2017.

3 Tanzania's legislative framework for the oil and gas sector can be found on the website of the Ministry of Energy and Minerals at https://mem.go.tz/acts-policies.

4 Michael L Ross, ‘What Have We Learned About the Resource Curse?’ (2015) 18 Annual Review of Political Science 239.

5 Jeffrey Frankel, ‘The Natural Resource Curse: A Survey’ (2010) National Bureau of Economic Research, Working Paper 15836; Paul Collier and Anke Hoeffler, ‘Resource Rents, Governance, and Conflict’ (2005) 49 Journal of Conflict Resolution 625.

6 Michael L Ross, ‘Does Oil Hinder Democracy?’ (2001) 53 World Politics 325, 333.

7 See Collier and Hoeffler (n 5).

8 Victor Menaldo, The Institutions Curse: Natural Resources, Politics, and Development (Cambridge University Press 2016).

9 Douglass North, Institutions, Institutional Change and Economic Performance (Cambridge University Press 1990); Margaret Levi, ‘A Logic of Institutional Change’ in Karen Schweers Cook and Margaret Levi (eds), The Limits of Rationality (University of Chicago Press 1990).

10 Douglass North, John Joseph Wallis and Barry R Weingast, Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History (Cambridge University Press 2009).

11 Giles Atkinson and Kirk Hamilton, ‘Savings, Growth, and the Resource Curse Hypothesis’ (2003) 31 World Development 1793.

12 John Heilbrunn, Oil, Democracy, and Development in Africa (Cambridge University Press 2014).

13 Halvor Mehlum, Karl Moene and Ragnar Torvik, ‘Institutions and the Resource Curse’ (2006) 116 The Economic Journal 1, 16. See also Ivar Kolstad and Tina Søreide, ‘Corruption in Natural Resource Management: Implications for Policy Makers’ (2009) 34 Resources Policy 214, 215; Eleanor RE O’Higgins, ‘Corruption, Underdevelopment, and Extractive Resource Industries: Addressing the Vicious Cycle’ (2006) 16 Business Ethics Quarterly 235, 236–238; Carlos Leite and Jens Weidmann, ‘Does Mother Nature Corrupt? Natural Resources, Corruption, and Economic Growth’ (1999) International Monetary Fund Working Paper, WP/99/85.

14 See Kolstad and Søreide (n 13).

15 Stephen Haber and Victor Menaldo, ‘Do Natural Resources Fuel Authoritarianism?: A Reappraisal of the Resource Curse.’ (2011) 105 American Political Science Review 1. See also Menaldo (n 8).

16 Daron Acemoglu and James Robinson, Why Nations Fail: The Origins of Power, Prosperity, and Poverty (Profile Books 2013).

17 Natural Resource Governance Institute, ‘NRGI Primers: A Series About Resource Governance’ (2015) http://resourcegovernance.org/analysis-tools/publications/nrgi-primers-series-about-resource-governance last accessed 16 April 2017.

18 Bo Rothstein and Jan Teorell, ‘What Is Quality of Government? A Theory of Impartial Government Institutions’ (2008) 21 Governance 165; Francis Fukuyama, ‘What Is Governance?’ (2013) 26 Governance 347.

19 See Kolstad and Søreide (n 13).

20 See Menaldo (n 8).

21 James Otto, ‘Resource Nationalism and Regulatory Reform’ (Paper presented at the IBA/RMMLF Special Institute on International Mining and Oil & Gas, Cartagena de Indias, Colombia, 22–23 April 2013).

22 Beth A Simmons and Zachary Elkins, ‘The Globalization of Liberalization: Policy Diffusion in the International Political Economy’ (2004) 98 American Political Science Review 171; Amanda Perry, ‘Effective Legal Systems and Foreign Direct Investment: In Search of the Evidence’ (2000) 49 International and Comparative Law Quarterly 779; Aseem Prakash and Matthew Potoski, ‘Racing to the Bottom? Trade, Environmental Governance, and ISO 14001’ (2006) 50 American Journal of Political Science 350. There is a large literature on the determinants of FDI, and the role that rule of law plays in attracting FDI across sectors and types of countries. See, for instance, John Anyanwu, ‘Why Does Foreign Direct Investment Go Where It Goes? New Evidence from African Countries’ (2012) 13 Annals of Economics and Finance 425, 448, who argues that rule of law is associated with higher FDI inflows to Africa.

23 Ibironke T Odumosu-Ayanu, ‘Foreign Direct Investment Catalysts in West Africa: Interactions with Local Content Laws and Industry-Community Agreements’ (2012) 35 North Carolina Central Law Review 65, 71.

24 TPDC ‘Exploration History’ www.tpdc-tz.com/upstream.php last accessed 16 May 2017; Mbendi, ‘Extraction of Crude Petroleum in Tanzania’ www.mbendi.com/indy/oilg/ogus/af/ta/p0005.htm last accessed 16 May 2017.

25 David Ledesma, ‘East Africa Gas – Potential for Export’ (2013) Oxford Institute for Energy Studies Working Paper NG 74.

26 Peter Bofin and Rasmus Hundsbæk Pedersen, ‘Tanzania's Oil and Gas Contract Regime, Investments and Markets’ (2017) Danish Institute for International Studies Working Paper 2017:1.

27 Ibid.

28 Donald Mmari and Sufian Bukurura, ‘Strategic Significance of National Oil Companies: Lessons for Tanzania’ (2016) REPOA Working Paper 16/3.

29 See Ledesma (n 25).

30 Jonathan Demierre, Morgan Bazilian, Jonathon Carbajal, Shaky Sherpa and Vijay Modi, ‘Potential for Regional Use of East Africa's Natural Gas’ (Sustainable Development Solutions Network Briefing Paper, 2014); see also Ledesma (n 25).

31 Ibid.

32 Isis Gaddis, Jacques Morisset, Youdi Schipper and Elvis Mushi, ‘Managing Natural Resources: What Do Citizens Say?’ (Twaweza, Brief 11, 2014).

33 Mwema Felix and Shabbir H Gheewala, ‘A Review of Biomass Energy Dependency in Tanzania’ (2011) 9 Energy Procedia 338, 340.

34 BBC, ‘Tanzania closing hydropower plants’ (2015) www.bbc.com/news/world-africa-34491984 last accessed 16 May 2017.

35 Eric Adebayo, Benjamin K Sovacool and Sara Imperiale, ‘It's About Dam Time: Improving Microhydro Electrification in Tanzania’ (2013) 17 Energy for Sustainable Development 378.

36 AGN Kitula, ‘The Environmental and Socio-Economic Impacts of Mining on Local Livelihoods in Tanzania: A Case Study of Geita District’ (2006) 14 Journal of Cleaner Production 405, 408.

37 Natural Resource Governance Institute http://resourcegovernance.org/our-work/country/tanzania last accessed 16 May 2017.

38 Transparency International, ‘Corruption Perceptions Index 2016’ (2016) www.transparency.org/news/feature/corruption_perceptions_index_2016 last accessed 16 May 2017.

39 For instance, see Mark Anderson, ‘UK and international donors suspend Tanzania aid after corruption claims,’ (2014) The Guardian www.theguardian.com/global-development/2014/oct/13/uk-and-international-donors-suspend-tanzania-aid-after-corruption-claims last accessed 24 April 2017.

40 Samira Lindner, ‘Tanzania: Overview of Corruption and Anti-Corruption’ (U4 Anti-Corruption Resource Centre Expert Answer) www.transparency.org/files/content/corruptionqas/Country_profile_Tanzania_2014.pdf last accessed 24 April 2017.

41 See Gaddis et al (n 32).

42 Gudrun Østby, Ragnhild Nordås and Jan Ketil Rød, ‘Regional Inequalities and Civil Conflict in Sub-Saharan Africa’ (2009) 53 International Studies Quarterly 301, 307.

43 See Gaddis et al (n 32).

44 See Ledesma (n 25).

45 See Bofin and Pedersen (n 26).

46 These pieces of legislation can be accessed on the website of the Tanzania's Ministry of Energy and Minerals at https://mem.go.tz/acts-policies.

47 Natural Resource Governance Institute, ‘Tanzania's 2015 Extractive Sector Legislation: Recommendations for Effective Implementation’ (2016) www.resourcegovernance.org/analysis-tools/publications/tanzania-2015-extractive-sector-legislation-recommendations-effective last accessed 24 April 2017.

48 Norton Rose Fulbright, ‘A Snapshot of Tanzanian Natural Gas’ (2014) www.nortonrosefulbright.com/knowledge/publications/123532/a-snapshot-of-tanzanian-natural-gas last accessed 24 April 2017.

49 See n 47.

50 See n 13.

51 See Natural Resource Governance Institute n 47.

52 See nn 47 and 48.

Additional information

Funding

This article is part of the research programme on Tanzania as a future petro-state, hosted and managed by REPOA and Chr Michelsen Institute. Funding for the research was provided through this programme. See www.tanpetstate.org.