By Nicholas Bariyo
DOW JONES NEWSWIRES
The Zanzibar government has reached a deal on the sharing of
future oil and gas revenue with mainland Tanzania, overcoming a
long-running dispute in a move that will spur exploration
activities on the semi-autonomous archipelago.
Tanzanian President Jakaya Kikwete and his Zanzibar counterpart
Ali Muhamed Shein struck a deal last week, allowing the Zanzibar
government to commence preparations for legal and institutional
arrangements to manage its oil and gas reserves, according to Seif
Ali Iddi, Zanzibar's second vice president.
"The agreement has been reached between the two presidents; its
only awaiting ratification from the union parliament" Mr. Iddi
said.
The deal marks a major breakthrough for oil and gas companies
operating in the region's fast-growing sector. The dispute has
delayed a number of exploration activities, including a drilling
program in four offshore blocks operated by Royal Dutch Shell PLC
(RDSA.LN), which acquired the licenses in 2002.
According to Mr. Iddi, under the deal, oil and gas activities
will be removed from union affairs and placed under the Zanzibar
government which will be responsible for regulating the sector,
including issuing new licenses.
Tanzania's energy and minerals ministry confirmed the tentative
deal but added that details would be worked out by cabinet before
the actual signing.
A flurry of new natural gas discoveries have pushed Tanzania's
gas reserve estimates to up to 28.7 trillion cubic feet from 10
trillion cubic feet, attracting dozens of international oil and gas
majors in the East African nation which is promising to become a
regional energy hub.
Under the union deal between Zanzibar and Tanzania signed in
1964, oil and gas are under control of the union government, which
is also in charge of national security, education and
infrastructure.
Following recent discoveries however there has been pressure
from Zanzibar politicians and activities to wrestle the control of
the sector from the union government. The U.S. Geological Survey
estimates that east Africa's coastal region holds up to 441
trillion cubic feet of natural gas.
Only last week, anti-riot police fought street battles with
separatist protesters in Zanzibar who say that the union agreement
doesn't favor the archipelago.
Write to Nicholas Bariyo at Nicholas.Bariyo@dowjones.com
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