The oil and gas sector is huge. As any other industry has its own value chain
Oil and gas value chain is the series of events from where oil and gas are founds until they delivered to end users.
The value chain in the oil and gas divided into three parts include upstream, midstream and upstream.
The intention is to explain the entire value chain in Tanzania oil and gas sector.
But in today’s article, I will only talk about upstream,
characteristics of the upstream business, players in the upstream business in Tanzania, and local opportunities in the upstream part in Tanzania
Table of content
1.What is an Upstream?
2.Main activities in Upstream part of oil and gas value chain
3.Characteristics of the upstream part of the industry
4.Local opportunities in the upstream part of Tanzania
5.Players and Participants In the upstream business in Tanzania
what is an upstream?
This is the beginning of the oil and gas value chain, It involves findings and extraction of the oil and gas resources out of the ground
Main Activities in Upstream
Now you know the meaning of the upstream, now let’s talk about the activities in the midstream
The activities of the upstream part of the oil and gas value chain are:
1. Identify “
The first activity in the upstream is searching for the areas that oil and gas resources might be. To find the oil and gas resources you must get government approval.
Since in Tanzania the land is owned by the government so you should reach out to the government to get the legal right to find or extract oil and gas resources in Tanzania
In the identified stage is where a team of talented engineers, IT specialist, geologists, and petroleum geoscientists work together to identify an area where oil and gas are.
They use a very sophisticated technology and tools to study the structure of the earth deep below the surface level.
Once they have identified possible areas oil and gas resources might be, we dig a hole (well) so to become confident on how successful will find oil or gas in particular area.
Is at this stage we drilling an exploration well to confirm if there are sufficient oil and gas resources in the area. In this stage,
risk assessment, safety, and environmental concern become very crucial. Also, they begin to bring manpower and equipment to the field.
Drilling can be done whether by drilling contractor or service companies.
For example, recently Statoil, Tanzania announce to drill its offshore well in the first quarter of 2018. So Statoil won’t drill the well on its own. Instead, they hired a drilling contractor to help them with the drilling services of the well.
Once we have identified oil resources, drilled an exploratory well, and are confident to find sufficient oil and gas resources in an area, we start producing crude oil and gas out of the well, bringing it to the surface.
Here‟s where revenue generation begins and where there is a potential for suppliers and contractors to thrive. There are many supplier opportunities in the production activity.
Characteristics of the upstream part of the oil and gas
The nature of the upstream segment is highly regulated. For example. If you need to search or extract for the oil and gas resource in Tanzania, you have to get the legal right from the government of Tanzania.
The government that regulates and monitor upstream segment of the oil and gas in Tanzania is named Petroleum Upstream Regulatory Authority (PURA).
PURA formed under new petroleum Act, 2015. So if you need to lease land for finding oil and gas resources in Tanzania, PURA is an authority that can grant, process, renew or cancel license to explore, develop or produce oil and gas resources in Tanzania
2.Highly and Financial and Physical Risk
The upstream segment is associated with high financial risk and physicals of risk. This is because the company put millions of dollar into exploration project and getting years to start producing oil and gas where is stage actually start to see Return on Investment.
Once you lease land and start searching for the oil and gas resources if you strike you will have profit up to 10 times for what you invested.
That is a reason investors who put money In this business are multi-millionaire. But if you don’t strike oil you lose everything. This business has high risk. But it is suitable for companies having high-risk tolerance.
3.Affected by Global Market
The upstream oil and gas resources is affected by oil price at the international market.
When the oil prices are high, the oil and gas activities increases, but when the prices drop companies slow down their activities in searching and extracting oil and gas resources.
Local Opportunities In The Upstream part Of Oil and Gas Value Chain
At exploration stage: Opportunities for local service providers and workforce in this activity are a limited and short-term. This is because during searching for the oil and gas resources advanced technology and sophistic tool and equipment are used. Opportunities in this activities require high expertise So safety and experience are critical at this stage.
Since the oil and gas in Tanzania are just started, I don’t expect to see local companies that have competence and capability to provide seismic services. Although local supplier can make money in this stage by providing supportive services such as catering, supply of uniforms and safety equipment and other oil and gas tools
At production stages: This is a stage where there is a potential for suppliers and service providers and local workforce.
There are unlimited business opportunities, many services and goods are needed at this stage. In production, activity is where local services providers and manpower can reap substantial reward in the oil and gas sector
Participants In Upstream In Oil and Gas Value Chain In Tanzania
The oil and gas might be complex because it involves a lot of players and stakeholders. So in this section, you will be aware of players in Tanzania oil and gas sector
Operators: These are companies that lease lands from the government to find and extract the oil and gas.
The table below highlight the list of operators in Tanzania.
1.Operators: These are companies that lease lands from the government to find and extract the oil and gas.
Follow the link operating companies in Tanzania oil and gas. (List of oil and gas operating companies in Tanzania)
2.Services companies: These are companies that do not search or produce oil and they also do not own gas or oil block but they have the technology and highly trained manpower to help operating companies in developing and producing natural gas and crude oil.Here list of service companies in Tanzania.
- Baker Hughes
3.Drilling contractor. These are companies that assist operator in the drilling of oil and gas wells,
- Carol drilling Rig
- Ocean Rig Poisedon