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Begin New Search Topic Tax Systems Author Thomas Scurfield

1. How Tanzania Can Secure a Good Deal for its Offshore Gas

Author:
Thomas Scurfield and David Manley
Publication Date:
09-2019
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
The Tanzanian government and a consortium of companies are negotiating the regulatory terms for a game-changing liquefied natural gas (LNG) project. In this brief, the authors update a previous analysis of some of the key decisions that will be made in the negotiation and their potential impact on whether the LNG project proceeds and the levels of revenues that the project could generate for the government. This update accounts for new information and changes in company planning. There is a reasonable chance that foreign investment in the LNG project will not happen under current conditions. NRGI’s economic model and specific assumptions of the project suggest that a long-term LNG price of USD 11 per mmBtu is needed for investors to earn the return they usually require from LNG projects. Current forecasts by the IMF and World Bank are $7-8 per mmBtu. As the authors discuss in the brief, the chances of investment will shrink further if, during the negotiations, the government increases taxes and requires companies to share a greater portion of the gas with Tanzania’s home market. Government officials could wait and hope that conditions improve, and perhaps then impose stricter terms. However, this would delay the point at which the country would start generating benefits from the project. If officials want to accelerate development, without harming long-term gains for the country, they could: adopt a more progressive tax regime, avoid raising the share of gas to be sold to the home market, and establish a legal framework that both company managers and future generations of Tanzanians will trust.
Topic:
Gas, Regulation, Legislation, Tax Systems, Commodities, and State-Owned Enterprises
Political Geography:
Africa and Tanzania

2. Lessons for Generating Government Revenue for New and Prospective Liquefied Natural Gas Producers

Author:
Thomas Lassourd, Amir Shafaie, and Thomas Scurfield
Publication Date:
12-2019
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
The market for liquefied natural gas (LNG) is changing fast, with increasing demand, new sources of supply, and a growing spot market. Over the last decade (2008 to 2018), LNG prices in the three main markets of North America, Western Europe and East Asia have diverged significantly at times, creating arbitrage opportunities for sellers. This briefing presents two case studies of developing countries that have faced challenges in securing public revenue from their natural gas industries. Trinidad and Tobago and Peru offer two examples of developing countries that faced challenges in maximizing government revenue from LNG sales during that time. Although LNG markets are evolving, these examples offer lessons for new and prospective LNG producers, especially in sub-Saharan Africa. A key area (and the focus of this briefing) is the valuation of LNG sales and the corresponding impact on government revenues. Governments should pay close attention to LNG project structure and the long-term LNG sale and purchase agreements between LNG producers and offtakers, especially when they are related companies. Governments should push for these agreements to maximize the price flowing back to the LNG plant and the upstream producer and should favor project structures that facilitate this. In particular, the practice of diverting LNG cargos to more lucrative export markets than the ones initially designated in offtake agreements should be regulated and monitored by governments to balance the financial incentives to LNG sellers with the interests of LNG-exporting countries. This will become increasingly important as the market becomes more liquid and sellers have more options.
Topic:
Government, Gas, Tax Systems, Commodities, and Revenue Management
Political Geography:
South America, Caribbean, Peru, and Trinidad and Tobago