Mtwara protests expose gaps in oil, gas, mineral laws management

Saturday February 02 2013

Residents of Mtwara protest the government’s move to pump gas to Dar es Salaam for processing. Photo/Fidelis Felix

The push for a comprehensive overhaul of laws governing natural resources in East Africa gathered momentum this week after deadly protests hit Tanzania’s southern Mtwara region over a proposed gas pipeline, exposing the region’s unpreparedness in managing expectations and proceeds from the oil and gas exploration.

Mtwara, where Tanzania discovered large natural gas deposits, witnessed bloody violence as locals protested the government’s decision to pipe the gas to Dar es Salaam for refining and eventual sale, instead of building a refining plant in Mtwara.

The protests are said to have caused losses of over Tsh1.5 billion ($929,000) in vandalised property.

The incident gave the region an embarrassing peep into its unreadiness to handle issues around sharing of resources as oil and gas exploration activities intensify in the bloc.

ALSO READ: Locals turn to protests for a larger share of mining revenue

Already controversy is growing over the manner in which governments in Kenya and Uganda plan to spend revenues from oil and gas, with analysts warning of potential conflicts linked to revenue sharing and environmental protection among host communities in the resource-rich areas.


Historically, Africa has had bad experiences in managing natural resources whose discovery has turned out to be a curse as seen in several countries such as Cameroon, Nigeria and the latest South Sudan.

Already Kenya, Uganda and Tanzania have proposed new laws that will see their governments earn more from oil, gas and mining.

The changes include payment of higher royalties by exploration companies, increased taxes, and threats to revoke mining licences of companies that do not keep to their exploration schedule.

But the continued lethargy in rolling out laws that guarantee benefits for communities in the wake of new finds is raising fresh concerns. 

“All parties must recognise that mineral wealth belongs to the people. Government may end up managing the wealth, but these resources belong to the people. Transparency is critical,” said Prof Peter Eigen, a member of the Africa Progress Panel.

Both policy makers and politicians in Uganda are worried about potential conflicts.

“Uganda is not immune. We can only avoid such scenarios if we have a commitment by government to develop those areas [with mineral resources] for the benefit of the local people. Otherwise I don’t see our situation being different from that of Mtwara,” said parliamentarian Kasiano Wadri who also chairs the House Public Accounts Committee.

Uganda is nearing actualisation of oil extraction following major finds in western Bunyoro region, but the indigenous people have expressed concern about the growing number of immigrant communities since the discovery of oil.

In the Buliisa locality, immigrant families were recently evicted by locals who accused them of being fronted by politically connected speculators. 

Once production begins, the area is expected to become a business hub with cottage industries and other commercial activities.

“We have seen in the recruitment of workers where people coming from other regions are benefiting. Even when it comes to the supplies of goods and services, the food comes from Kampala. Where is the benefit to the local people?” Mr Wadri asked.

Recently, residents of Amuru in northern Uganda protested the government’s move to allocate huge chunks of land to industrialist Madhvani to open up sugar plantations in northern Uganda, insisting that the area is endowed with huge oil reserves and those behind the group are using it with ulterior motives. 

Local leaders have on several occasions asked Madhvani to directly negotiate with them instead of using the government.

Last year, MPs from the arid Karamoja region in the northeast also complained that their people were herded out of certain areas believed to be rich in minerals.

Under the Mining Act passed in 2003, an owner of land where resources are found is entitled to 3 per cent of the royalties while 17 per cent is supposed to go to the local government. 

These provisions, Mr Wadri said, are good enough to cater for the interests of local people were it not for the selfishness of some of the state actors.

Concerned about the secrecy surrounding the oil resource in his kingdom, the Omukama (king) of Bunyoro personally petitioned parliament as the House debated Oil Bill 2012 which was passed last December.

ALSO READ: Uganda’s new oil law is silent on transparency

The suspicion of government’s good faith characterised by high graft in public office saw the House and the Executive almost in a deadlock over who should control the licensing of extraction companies.

But the latter prevailed after the intervention of President Yoweri Museveni who marshalled the ruling party’s numbers on the matter.

Kenya plans to avert conflicts associated with discovery of crude oil and natural gas by putting in natural resources revenue sharing framework.

The Ministry of Energy is currently reviewing legal framework of oil and gas (hydrocarbons) exploration while the Association of Professional Societies in East Africa (Apsea) is a drafting a policy on natural resource management.

Kenya’s Energy Permanent Secretary Patrick Nyoike said the country’s Petroleum Exploration and Production Act is being reviewed to incorporate ways of sharing revenue between the central government and county governments on one side, and exploration firms on the other.

“The ministry is committed to fast tracking review of relevant petroleum statutes to make them conform to modern and best industry practices to address the country’s interests and those of oil companies,” he said.

The aim is to put in place mechanisms of compensation and resettlement of property for owners who may be affected by development of production facilities.

Kenya has not found commercial quantities of hydrocarbons but discovery of oil in Turkana county and offshore gas deposits has led to local communities demanding 25 per cent of revenue when commercial production of the fossil fuel starts. 

READ: Mineral discoveries put Kenya’s policies under the spotlight

Kenya Oil and Gas Working Group said hydrocarbons are national assets and the governments with other stakeholders need to create a mechanism of revenue sharing ahead of a commercial discovery.

“Oil and natural gas require decision making and revenue management to be above partisan interests to avoid resource curse witnessed in mineral-rich countries,” said executive director Hardey Becha.

KOGWG’s target is to build mutual confidence as well as trust between the executive, legislature, civil society and citizens as a foundation for effective policy and legislation in the oil and gas subsector.

“We are working with the government and prospecting firms with other stakeholders to communicate to people in exploration areas as a strategy to create harmony to manage community expectations,” said Mr Becha.

The Ministry of Environment and Natural Resources has already changed the law to demand that foreign mining firms in the country have to have 35 per cent local shareholding to encourage local participation. Foreign firms have argued that this is not practical.

In Mtwara, residents have called for the removal of the Mtwara Regional Commissioner Joseph Simbakalia as a condition before they negotiate with the government.

“The government should listen to Mtwara residents’ demand otherwise the gas will not be transported to Dar es Salaam and it will be a risk for the pipeline to be built,” said Uwesy Salum Hamisi, the chairman of Mtwara Elders, a group leading the talks.

The Tanzania government has said it is seeking to end the crisis in the gas-rich Mtwara region, ordering local governments to take over negotiations with foreign gas companies on behalf of the concerned communities.

As well as demanding a greater share of Tanzania’s gas wealth, the residents want local government reforms to give their communities more access to electricity and other amenities.

They also want the government to construct a 300 Megawatts power plant in Mtwara before it starts transporting the gas to Dar es Salaam.

The Mtwara Mnazi Bay gas has an estimated three to five trillion cubic feet of gas (TCF) and proven gas estimated to be 262 billions of cubic feet equivalent (BCF) while the Songo Songo well is estimated to have a probable gas presence of between one to two million TCF and proven of 880 BCF.

Kenya intends to use oil and gas revenue to create a sovereign fund, support the national and county budgets as well as ensure communities residing in oil production areas get a share of the money.

Industry analysts expect new policy on revenue sharing to come into effect earliest by September this year after the reviewed Petroleum Exploration and Production Act is approved by parliament in line with the constitution.

READ: Oil majors in jitters as Kenya brings in tough new rules

“The Ministry of Energy is finalising the review but parliament is not in session. This is an electioneering period and the new document is not likely to be approved by the Cabinet soon,” said industry sources.

Norway and the United Arabs Emirates have sovereign funds to ensure they get money when oil runs out. Over-relying on oil distorted Nigeria’s growth as farming, fishing and other sectors of the economy took a back seat.
According to World Wide Fund for Nature (WWF), the over-dependence system has to be avoided because oil and gas are finite resources that must not be allowed to affect other productive sectors in Kenya.

The Association of Professional Societies in East Africa is also pushing for a parallel legislation —the Draft Natural Resources Management and Development Policy 2012 — to address concerns of stakeholders in the mining, oil and gas business.

Drafting laws

“We informed the Office of the President of a plan to create the draft on management of minerals, water and forests with other natural resources as the constitution of Kenya is the over arching law of all laws,” said Apsea chairman Mr Daniel Ichang’i.

Kenya also plans to go for massive borrowing against the resource to raise funds needed to develop infrastructure like roads,  improve services in marginalised communities like Turkana, revamp the railways and upgrading the port of Mombasa.

“As a commission we are saying that  do not wait until you have $10 billion in the bank. Once there is confirmed flow of oil, we shall advise the government that we should not delay our infrastructure.

If the port of Mombasa requires $3 billion, we shall ask the government to borrow that money. That oil is security,” said Kenya’s chairman of the Revenue Allocation Commission, Micah Cheserem. 

However, experts meeting in Kampala recently at an East African regional forum under the theme Oil and Gas Management for Inclusive and Sustainable Development warned that governments should be cautious about borrowing against the natural resources because expending the revenues too quickly will accelerate inflation.

“Borrowing against anticipated future incomes depends on the rate of return on the investment. The investment should have the capacity to repay that money. If Kenya  plans to borrow to refurbish the port and the return is much higher, then such borrowing makes sense  than when you are borrowing to increase the size of administration,” said Lawrence Bategeka the acting principal research fellow at Uganda’s Economic Policy Research Centre.

There is growing scepticism that oil and gas revenues will be properly managed to benefit  the current and future generations because of lack of transparency  in the sector, corruption and extravagances  within government ranks, analysts said.  

“How do we get ourselves to have the capacity to know how much is being taken off the ground and stored, and how do we ensure that people whom we employ to supervise have the moral integrity to do the work, “ said Ezra Suruma, the presidential adviser on economic affairs. 

South Sudan, which is lobbying to join EAC  is not any better. It has very little to show for the revenues it has earned since the peace accord was signed in 2005. The country’s oil contributes 98 per cent to the national budget.

With temporal halt on production because Sudan in the north closed the pipeline, means that the country is suffering because it has no fall- back position.

Reported by Halima Abdallah, Emmanuel Mulondo, Kennedy Senelwa and Mike Mande