Despite news that many international oil companies have been discovering huge quantities of natural gas in Tanzania, the general public is unaware of how the oil and gas companies really function. And when it comes to how they make money, even their employees cannot pinpoint.
Oil and gas companies differ, but this article will focus only on international companies that discover, refine, and produce oil and natural gas in Tanzania such as Shell, Stat oil, Aminex, just to mention a few.
They are often called Exploration and Production Companies.
Now let’s discuss how they make money.
They make money from:
1. Internal Sources:
These earnings come from the inside companies. This includes: selling natural gas .
Once they discover and extract natural gas, they sell them to the local market.
For example, Maurel & Prom, which operates the Mnazi Bay field. They started to produce gas in 2015. They sell the gas to the state utility, the Tanzania Electricity Supply Company (TANESCO).
2. External Sources:
These involve earning from outside the companies. They include stocks, joint venture money and borrowings .
They may earn money from selling stock to investors or other oil and gas companies.
For example, Swala oil and gas has been selling stock to individuals in the Dar is Salaam Stock Exchange market.
Also recently, Canada-based Orca Exploration announced the sale of 40 percent interest to local firm Swala Oil and Gas. The deal was worth $130 (million?)
Joint venture money is another external source of income for oil and gas companies. They invest in another company to operate more wells and spread the profit-loss risks.
For example, Norwegian Stat oil partnered with Exxon Mobil has found 22 trillion cubic feet of natural gas solely in block 2 offshore Tanzania. Other external earnings are from borrowings.
To summarize, the oil and gas companies operating in Tanzania generate income from internal sources such as the sales of oil and natural gas and external sources which includes joint venture profits and from borrowings; .