...it's all about the petroleum field in Tanzania.

Tanzania:Oil Down, Opportunities Are Up

 

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The oil price has been falling since  June 2014. And it continues to hit new bottom every day.

Recent global oil price drop   sign several years of $ 100 per barrel which has led to massive oil production coming online  and supply exceed demand. The low demand is the result of the slowdown in  China’s  economic  activities .And rapid increase in a number of shale wells in the US thanks to  technology’s improvement.

The price slump  hurt exporting countries but for Tanzania as an importer, it  brings prosperity.

In the positive sense,

Cheap price  minimizes the living costs. And  Tanzanians are more likely to use  kerosene, diesel and cooking  gas in place of firewood and charcoal that are popular with low-income earners.

However, it  reduces  transportation costs. Less costly  foods.  And low living costs for average Tanzanians.

Most importantly, production costs decrease. Many people available globally at low  costs than ever. Pipelines firms are in need of work. Major construction organizations  have little tasks.So the project should get low investment  costs than similar projects from 2-3 years in the past.

In the context of low price, upstream activities are decreased and there’ll be easy availability of  drilling rigs  and other supporting activities with cheap costs.

 

In the negative side.

Undermine investment: Exploration  and production companies cut  costs range. So, going into the new finding works won’t be of interest in their strategy. And they’ll  be wanting to postpone important investment project, which will take years to show valuable earnings.  If the project has a risk, It might be better to get the same cash in a known project field, than try to create in a new, unknown field  with lots of business risks.

However, some exploration and production companies  such as BG and Swala energy claim that the drop in costs is a short-term issue and won’t considerably impact their  investment plan in Tanzania.

Australia based  oil and gas exploration firm  (Swala energy) lately stated that it’ll continue with its exploration projects across Tanzania in 2016 despite the fall in oil price. Also low-level prices are damaging Tanzanian  Graduates who strategy career in oil and gas sector. Sadly,  Tanzanians  get laid off as the  oil firm’s strategies  to deal with a price drop.

Conclusion

The price has fallen dramatically and some supply  will go off-line finishing the gap until the price improves again. But the time of that process is incredibly uncertain and is expected  to persist in 2016 and maybe beyond. But for policymakers in Tanzania, the fall in oil price provides a period to execute economic plan and structural changes as well as finance social program.

Hussein Boffu

Graduate In Petroleum Geoscience

Hussein.Boffu@tanzaniapetroleum.com

0655 37 65 43

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