Tanzania struggles to align gas policies with market signals

In recent years, much attention has been paid to how ‘new oil’-producer countries can avoid the resource curse that has marred the established petroleum economies on the African continent.

The focus has been on improving the governance of petroleum revenues. This however only tells one part of the story about the challenges a new oil country may face when extractive resources have been found. The adjustment of contracts that reflects changing international oil price environments is equally important. This is the conclusion in a recent article by DIIS researcher Rasmus Hundsbæk Pedersen and the Dar es Salaam-based consultant Peter Bofin that has just been published in the Journal of Eastern African Studies.

In the article Muted market signals: politics, petroleum investments and regulatory developments in Tanzaniathey analyse the development of the country’s natural gas sector and contractual regimes.

They argue that for a new oil country it is a constant struggle to keep abreast of market signals. Changes to contractual and regulatory regimes tend to come rather late in the price cycle, both when high global oil prices allow for tougher fiscal terms and when falling prices call for downward adjustments. This is no less the case after the radicalisation of resource nationalism in Tanzania that largely coincided with the fall in global oil prices around 2014 onwards.