The Tanzanian government has changed its terms in its Production Sharing Agreements (PSAs) by toughing some of the terms and conditions for those companies that seek to cash in on the bonanza of gas that has been discovered off its shores
The Model Production Sharing Agreement has detailed the bonus to be paid by firms to the government upon the sharing of a contract, specified capital gains tax obligations, and outlined a new royalty structure. According to some experts, the new PSA mean higher fees for some companies in offshore areas.
"It's a significant toughening of the fiscal terms," Bill Page, energy and resources leader at Deloitte Consulting Tanzania, told Reuters of the new model agreement. "They have also indicated that they will expect to see more extensive exploration work obligations in the initial periods of the PSA," he said.
The model agreement for 2013, released by the state-run Tanzania Petroleum Development Corp. (TPDC), introduces a minimum signature bonus payment of $2.5 million and a production bonus of at least $5 million payable when production starts. The new PSA also calls for a new royalty rate of 12.5% of total oil or gas production for onshore or shallow operations and a 7.5% royalty rate for offshore production. Previously, special terms for deep water gas was set at a royalty rate of 5%.
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