AS Tanzania is making progress towards development of the massive natural gas reserve resources discovered in recent years both offshore and onshore, a local consortium has been set up to explore the sector in the insurance industry.
The discovery and production of natural gas on a commercial scale in Tanzania is already paying off. As of 2021, Tanzania had an installed power generation capacity of 1,608 MW.
Of the total installed capacity, 60 per cent or 893 MW was based on natural gas and with big natural gas discoveries, the country plans to start power exports to its energy-starved east African neighbours after the completion of a gas pipeline.
Tanzania is also pushing to supply households with Compressed Natural Gas (CNG) for cooking as well advising car owners to convert their petrol or diesel-fuelled vehicles to natural gas, so as to save cost and reduce carbon emissions.
Now, the country is looking forward to exploit fully, the natural gas reserves that are estimated at 57 trillion cubic feet with a total annual production of 110 billion cubic feet from three fields in Songo Songo, Mnazi Bay, and Kiliwani North.
In fact, the global market for natural gas is ripe, making the next month’s signing agreement between the government and major oil investors worthwhile and timely.
Recently, the government said it envisaged signing the key 40 billion US dollars agreement for Liquefied Natural Gas (LNG) project with Equinor ASA and Shell Plc to pave way for exports after completing the fiscal package discussions. Others in the project are ExxonMobil, and Pavilion Energy.
The Minister for Energy January Makamba was quoted recently saying that the accords will include a final Host Government Agreement (HGA), setting out the project terms, as well as the project law and benefit-sharing agreement.
A final investment decision could be reached in January 2025, allowing exports to start before 2030, Mr Makamba said.
And, sniffing out the prospects, fortunes and getting set to capitalising on the local content provisions, the association of 22 local insurance companies has teamed up to provide insurance coverage into the rich oil and gas sector. They will also enter strongly together, into competition against foreign insurance companies to provide cover against special risks in the oil and gas sector.
The government has lauded the association of 22 insurance companies for setting rigorous strategies that will see them strongly together, entering into competition against foreign insurance companies.
It (government) said, teaming up, allows for economies of scale and increased efficiencies since the groups that are part of the consortium can spread out the cost of administration and obtain better discounts through volume.
The compliments were given by the Deputy Minister for Finance and Planning, Mr Hamad Chande, at the official launch of the first Tanzania Energy co-insurance Consortium or Consortium of oil and gas held in Dar es Salaam on Wednesday evening.
Mr Chande said that the consortium was yet another milestone that will see the government earning income through insurance fees, which will now remain in the country, contrary to the past, when foreign companies were reaping the chunk.
He said previously, the capital capacity for the individual insurance companies in the country could not meet the criteria of the risk insurance fees and make the oil and gas project to acquire foreign companies on risky insurance.
“The country was losing revenue due to the fact that most of the investors in the oil and gas sector had to opt engaging foreign companies on risk insurances due to their financial muscles, but now I believe through this consortium, outsourcing companies will now be able to take out their insurance in the country,” said Mr Chande.
He explained that the union increases the ability to withstand such risks and help the retention of fee funds in the country for the development of the nation.
“The need for this union began in 2019 towards 2020, after large projects such as the East Africa Crude Oil Pipeline worth 3.5 billion dollars and the envisioned LNG (Liquefied Natural Gas) processing plant project as well as several others, large projects in mining and agriculture sector.
Due to the high value of the projects, risk insurance led to the need for general insurance which was mostly purchased from foreign companies and thus led to a lot of money as a payment for the risk fee benefiting foreign companies,” said Mr Chande.
He said that due to the limited capital of local insurance companies, it led to the need for the creation of the consortium, aiming at boosting financial muscles against various oil and energy risks and enable to withstand those risks,” he the deputy minister.
For his part, Tanzania Insurance Commissioner, Dr Baghayo Saqware said that the union makes the 22 companies pool capital and be able to withstand the risks of the big projects.
Mr Saqware said that the merger will bring various benefits such as having greater financial and professional capacity for insurance companies, increasing internal storage and effective risk management among insurance companies.
It will as well help protecting the interests of Tanzanians and increasing internal capacity according to legal requirements (local content requirement) and increase employment.
He said another advantage is to provide a fair, transparent and balanced arrangement by involving other insurance stakeholders in the oil and gas sector and increasing the knowledge and expertise of registering special risks insurance through the experience that will be gained in the oil and gas industry.
At the same time, the Chief Executive Officer of Phoenix Assurance Mr Ashraf Musbally said that within the next few weeks, they will provide guidance to various stakeholders regarding their short and long term goals.
Mr Musbally said that they feel very proud to see that their idea has been supported by the stakeholders of the sector and they believe it will bring productivity in the development of the insurance sector, especially in terms of gas and oil.