Legal and Institutional Framework for Protection of Local Suppliers in the Oil and Gas Industry: Evidence from Tanzania
Keywords:
Local content, oil and gas, sustainable development, natural resources, legal and institutional frameworkAbstract
This article explores the Tanzanian institutional and legal framework for local content implementation in the Oil and Gas Industry. A comparative analysis is drawn from other natural resources endowed countries such as Ghana, Nigeria, Angola Malaysia, and Norway have been selected to be comparators because they are all endowed with oil and gas and started extraction long before Tanzania. Many countries that are richly endowed with oil, gas, ores, and other minerals are currently introducing requirements for (local) participation commonly referred to as ‘local content. Tanzania is no exception. The development of local content has been a result of the fact that a relatively very small share of the proceeds from the natural resources sector is transferred to the citizens in the form of technology, economic, and employment benefits.
References
For instance, in Tanzania, the Local Content Policy, 2014 provides that, 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, 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. See item 3.2 on issue: Creating business opportunities to local firms on p.20 accessed from https://mem.go.tz/local-content-policy-of-tanzania-for-oil-and-gas-industry-2014/ on 5/8/2019.
Magela P Gwayaka, Local Content in Oil and Gas Sector: An assessment of Uganda’s Policy and Legal Regime, Kampala, (2014) ACODE Policy Briefing Paper Series, No.28, 2014 at p.1.
Ibid.
Rabiu Ado, Local Content Policy and the WTO Rules of Trade Related Investment Measures (TRIMS): The Pros and Cons; International Journal of Business and Management Studies, (2013) pp137-146 at p143.
ibid p.138.
Frederick Van De Ploeg, Natural Resources: Curse or Blessings? Journal of Economic Literature (2010) American Economics Association 49(2):366 – 420.
Ibid 367.
Ibid p 367.
Amoako-Tuffour et al, Local Content and Value Addition in Ghana’s Mineral, Oil, and Gas Sectors: Is Ghana Getting It Right? (2015) Available at www.acetforafrica.org accessed on 14/01/2019 p. 6.
Tordo Silvana, et al Local content in the oil and gas sector (2013) A World Bank study. Washington DC; World Bank. Available at: http://documents.worldbank.org/curated/en/2013/01/17997330/local-content-oil-gas-sector
United Republic of Tanzania, Local Content Policy 2014, Definition of Terms.
Mining (Local Content) Regulations, GN 3 of 2018.
See for example See Article 3(2) of Tanzania – Netherland BIT available at http://unctad.org/sections/dite/iia/docs/bits/tanzania_Netherlands.pdf ; See also Article 3(1) Tanzania – Sweden BIT available at http://unctad.org/sections/dite/iia/docs/bits/tanzania_Sweden.pdf and Article 3(1) Tanzania Italy BIT available at http://unctad.org/sections/dite/iia/docs/bits/tanzania_Korea.pdf accessed on 20/03/2019.
Tanzania has been a WTO member since 1 January 1995 and a member of GATT since 9 December 1961. See https://www.wto.org/english/thewto_e/countries_e/tanzania_e.htm accessed on 10/10/2019.
The General Agreement on Tariffs and Trade (GATT) is one of the Basic Agreement of the WTO Marrakesh Agreement which came into force in 1995 upon the coming into operation of the WTO, the GATT can be accessed at www.wto.org/documents.
WTO General Agreement on Trade in Services (GATS), can be accessed at www.wto.org/documents.
WTO Agreement on Trade-Related Investment Measures (TRIMs), can be accessed at www.wto.org/documents.
Ibid.
Art. III.1of the GATT
Ibid Art. III.4.
Ibid Art. III.5.
Ibid Art. XVII.
Ibid Art. XVII.
Article 2(1) of the TRIMs Agreement.
Art. XVI of the GATS.
Ibid.
See Article III (8) (a) and (b) which allow discrimination for protection of nascent industry of the developing country.
Sospeter Muhongo, in the Foreword of the National Natural Gas Policy Government of Tanzania, (2013),p. ix
Paragraph 3.1.7 of the National Oil and Gas Policy 2013 p. 13.
Ibid p.14.
Ibid p 15.
Ibid National Oil and Gas Policy 2013, item 3.1.7 Policy statements (i) and (ii) p.15.
Ibid Paragraph 3.1 on Capacity Building and Transfer of Technology: Enhancing capacity of local firms to participate p.17.
Ibid Paragraph 3.1 on Capacity Building and Transfer of Technology: Enhancing capacity of local firms to participate p.16.
Ibid Paragraph 3.2 on Participation of Tanzanians and Tanzanian Owned Entities: Creating business opportunities to local firms p.20.
Ibid p.21.
Ibid Paragraph 3.3 on Procurement of Locally Produced Goods and Services: Creating market opportunities for local goods and services p.21.
Ibid p. 22.
Ibid paragraph 3.4 on In-country Fabrication and Manufacturing: Increasing local capacity to weld, fabricate, manufacture gadgets, equipment, service and maintenance for the oil and gas related installations p.22.
Ibid Paragraph 3.4 on In-country Fabrication and Manufacturing: Increasing local capacity to weld, fabricate, manufacture gadgets, equipment, service and maintenance for the oil and gas related installations p.22.
[Cap 2 R.E. 2002].
[ Cap 328 R.E. 2002].
No. 21 of 2015.
Production Sharing Agreements of 2008, and 2013.
The Constitution of the United Republic of Tanzania of 1977 as amended from time to time.
Article 9(c).
Article 9(i) of the Constitution of United Republic of Tanzania.
Ibid Article 30(2)b.
Act No. 21 of 2015.
Cap 325 RE 2002.
Section 219(2) of Act No. 21 of 2015.
Ibid Section 219(4) of Act No. 21 of 2015.
Ibid see section 220(1).
Ibid section 220(2).
Ibid section 238.
Petroleum (Local Content) Regulations, 2017.
Ibid regulation 15.
Ibid Regulation 15(3).
See Article 1 of the Tanzania Model Production Sharing Agreement, 2013.
Art.18 of MPSA 2008 which has been refined in Article 20 of MPSA 2013 which mentions specifically the authorities responsible for certification of quality and standard as the Tanzania Bureau of Standards (TBS), Tanzania Food and Drugs Authority (TFDA). Again, the 2013 MPSA adds some important definitions that, “Tanzanian goods", means goods manufactured, obtained or produced in the United Republic of Tanzania; "Tanzania Services" means services provided by Tanzanians or Tanzanian companies; and "Tanzanian Materials "means materials obtained, produced or manufactured in the United Republic of Tanzania; “Tanzanian Companies” means companies incorporated in the United Republic of Tanzania and whose shares are wholly or at least 51% owned by in Tanzanian nationals.
Section 3 of Act No. 21 of 2015.
Ibid Section 5(1)d.
Ibid Section 8.
Ibid Section 9 (2)l.
Article 20 of MPSA 2013.
Section 11 of Act No. 21 of 2015.
Ibid Section 12 (2)e.
Section 4 of Act No. 11 of 2001.
Section 29(1) of Act No. 21 of 2015.
Ibid Section 30(2)(k) vi and vii.
Section 6 of Act No. 21 of 2015.
See section 7 of the Petroleum Act, 2015.
s. 4 of the Tanzania Extractive Industries (Transparency and Accountability) Act, No. 23 of 2015.
See section 4 of the Act.
s. 15 of Act No. 23 of 2015.
ibid s. 10(3).
Ishmael Setsoafia Amegah, Regulation of the Petroleum Industry; A Tale from the North Sea-Norway; Ghana Oil Watch, Friday, 10 February 2012 accessed on 29th January 2016 at http://ghanaoilwatch.org/index.php/ghana-oil-and-gas-news/282-regulation-of-the-petroleum-industry-a-tale-from-the-north-sea-norway-by-ishmael-setsoafia-amegah p.19.
Isabelle Ramdoo, Unpacking Local Content Requirements in the Extractive Sector: What Implications for the Global Trade and Investment Frameworks?(2015) International Centre for Trade and Sustainable Development (ICTSD) Switzerland, available at http://www.e15initiative.org/
UNCTAD, (2014)Local Content Requirements and the Green Economy pp.8-9.
Ibid UNCTAD (2014).
World Bank. (2012). Increasing Local Procurement by the Mining Industry in West Africa: Road Test Version (2012) Washington, Version, p.7.
Op cit UNCTAD (2014).
Nigeria Oil and Gas Industry Content Development Act, Act No. 2 of 2010.
Zefaniah Kaplan, Policy Options for Strengthening Local Content in Mozambique (2013) USAID/Mozambique available http://www.acismoz.com/wp-content/uploads/2017/06/Speaker%2001%20-%20Presentation%20Local%20Content%20-%20Zac%20Kaplan.pdf accessed on 20/3/2019.
Adeoye Adefulu, Nigerian/Local Content Policy (2009) SCRIBD, available at https://www.scribd.com/doc/21132887/Nigerian-Local-Content-Policy accessed on 20/3/2019.
s.12 of the Nigerian Oil and Gas Industry Content Development Act, 2010, Act No. 2 of 2010.
ibid s.15.
ibid s. 104.
A list of the goods is provided in the Schedule to Act No.2 of 2010 of Nigerian laws.
John Anyanwu, Local Content in the Hydrocarbon Sector: Lessons of Experience, (2013) AFDB available at https://www.google.com/search?q=Anyanwu+J.C.%2C+(2013).+Local+Content+in+the+Hydrocarbon+Sector%3A+Lessons+of+Experience%2C&rlz=1C1CHBF_enTZ869TZ869&oq accessed on 13/08/2019.
Ghana Petroleum Commission Act 2011,available at https://www.google.com/search?q=Ghana+Petroleum+Commission+Act%2C+2011&ie=utf-8&oe=utf-8 .
Zefaniah Kaplan op.cit pp.19-20.
Amoako-Tuffour et al op.cit p. 15.
Ibid.
Angola Ministerial Order No. 127/03 on the Contracting of Services and Goods from Angolan Companies by Petroleum Industry Companies available at http://www.globaledgeconsulting.com/wpcontent/uploads/2011/11/ANGOLA-DECREE-127-03.pdf.
Tordo Silvana et al. op.cit p.39.
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