Market Conditions Will Limit Tanzania's Natural Gas Sector

Tanzania finally passed a petroleum bill July 5 regulating the country's growing hydrocarbon sector, the first major bill of its kind since Tanzania's emergence as a potential source of significant natural gas production. The petroleum law establishes several key parameters for new investment in the sector, including prioritizing natural gas production for the country's domestic market where it can be used to support the city of Dar es Salaam's manufacturing and industrial potential.

The law is part of Tanzania's attempts to cement its place as one of the Indian Ocean Basin's next major natural gas exporters. Reaching this goal will be challenging, however, given that others — including Australia, Mozambique, Canada and the United States — are pursuing the same goal on a similar time frame. These competitors will prove more appealing to investors, limiting the expansion of the Tanzanian natural gas sector, at least in the next decade. But even small natural gas export growth could have a tremendous impact on Tanzania.