Will ARA Petroleum Be the Next Gas Producer in Tanzania?

ARA Petroleum, a relatively new entrant into the Tanzanian oil and gas landscape, has piqued the interest of industry watchers with its aggressive exploration and development strategies. In light of Tanzania’s ambitious plans to become a major player in the East African energy sector, this article delves into the recent developments associated with ARA Petroleum in Tanzania, scrutinizes the strategic moves and challenges, and evaluates the prospects of ARA Petroleum as the next significant gas producer in the region.

Tanzania’s Energy Sector: An Overview.

Tanzania sits atop significant hydrocarbon resources, primarily in the deep offshore basins of the Indian Ocean and the eastern rift basins. The country’s proven natural gas reserves are estimated at around 57 trillion cubic feet, making it one of the most promising spots for exploration and production activities in East Africa.

Tanzania’s energy sector has seen rapid development over the past few decades, driven by the government’s initiative to attract foreign investment, modernize the legal framework, and improve infrastructure.

Read also: The Future of Oil and Gas Exploration and Production in Tanzania: Challenges, Opportunities, and the Path Forward

The Tanzanian government has outlined ambitious plans to leverage its vast natural gas resources for domestic power generation, industrial development, and export markets. As such, companies like ARA Petroleum are pivotal to realizing these objectives.

ARA Petroleum Tanzania Limited (APT): Background and Strategic Moves.

ARA Petroleum is a subsidiary of The Energy House Holding Company, established in 2011, and headquartered in Kuwait. The company’s operations span several countries, including Oman, where it has a strong track record of upstream oil and gas activities. In recent years, ARA Petroleum has turned its focus toward Tanzania, aiming to capitalize on the region’s gas potential.

Acquisitions and Licenses

One of ARA Petroleum’s key strategic moves was acquiring a stake in the Ruvuma PSA (Production Sharing Agreement), previously operated by Aminex. The Ruvuma Basin, located in southern Tanzania, is considered a highly prospective area for natural gas. ARA Petroleum has assumed operatorship and a significant working interest in the Ntorya gas development project within the basin. The company’s acquisition of these interests marked a consequential shift in its portfolio, signaling a strategic pivot toward East Africa.

Exploration and Development Activities.

Since gaining control over the Ntorya gas field, ARA Petroleum has embarked on an aggressive exploration and development campaign. The Ntorya project, covering several license blocks, has shown promising results. The recently drilled Ntorya-2 appraisal well confirmed the presence of substantial gas reserves and validated the geological model predicting high-quality reservoirs.

Seismic Surveys and Drilling Campaigns.

ARA Petroleum has undertaken extensive seismic surveys to map out the subsurface geology and identify additional drilling targets. By deploying state-of-the-art 3D seismic technology, the company has been able to refine its understanding of the Ntorya gas field and optimize well placement. Initial estimates suggest that the Ntorya gas field could contain up to 1.5 trillion cubic feet of recoverable gas, making it a significant asset.

 

Moreover, ARA Petroleum Tanzania Limited (APT), has initiated a multi-well drilling campaign aimed at appraising and developing the discovered resources. This campaign includes both vertical and horizontal wells to maximize reservoir contact and improve recovery rates. The company’s technical expertise and experience in similar geological settings, particularly in the Middle East, have provided it with a competitive edge in executing these complex operations.

Regulatory Environment

The company was  granted of the Development Licence  for a period of 25 years over the Ntorya gas discovery area by the Ministry of Energy in Tanzania in May 2024.  As the operator of the development, ARA Petroleum Tanzania Limited (APT), were presented with the Development Licence at a formal handover ceremony in Mtwara yesterday.

This indicates ARA Petroleum’s ability to effectively engage with government authorities, comply with regulations, and secure necessary approvals will be critical to its success.

 

 Market Dynamics.

ARA Petroleum’s journey to becoming the next major gas producer in Tanzania is not without challenges. The Tanzanian energy sector is influenced by a myriad of factors, including regulatory frameworks, market dynamics, and geopolitical considerations.

The global energy market is characterized by volatility, driven by fluctuations in oil and gas prices, changing demand patterns, and geopolitical tensions. ARA Petroleum must contend with these uncertainties while planning its development strategies. Additionally, the competitive landscape includes other major players such as Pan African Energy, and Maurel and Prom, which have already been producing gas  in Tanzania

Future Outlook: ARA Petroleum’s Prospects in Tanzania.

Given the recent developments and strategic initiatives undertaken by ARA Petroleum, the company is well-positioned to become the next significant gas producer in Tanzania. Several factors underscore this optimistic outlook:

Robust Resource Base

The Ntorya gas field, with its substantial recoverable reserves, provides a solid foundation for ARA Petroleum’s production plans. Continued exploration and appraisal activities are likely to identify additional reserves, further enhancing the project’s viability.

According to a Gas Sales Agreement signed with the Tanzania Petroleum Development Corporation in January 2024, APT expects to produce 40 to 60 million standard cubic feet a day (mmscf/d) in the first year of production, with an increase to 140 mmscf/d within a few years.

Such volumes will increase Tanzanian gas production by between 20-80 percent.

Technical Expertise.

ARA Petroleum’s technical expertise, honed through its operations in the Middle East, positions it favorably to handle the complexities of gas exploration and production in Tanzania. The company’s ability to deploy advanced seismic technology, innovative drilling techniques, and effective reservoir management practices are critical strengths.

Strategic Partnerships.

ARA Petroleum’s collaborative approach, including its partnerships with other industry players, service providers, and the Tanzanian government, is a key driver of its success. Joint ventures and strategic alliances can help mitigate risks, share knowledge, and pool resources to achieve common objectives.

 Favorable Market Conditions.

While the global energy market remains volatile, the long-term outlook for natural gas demand is positive, particularly in emerging markets and regions transitioning to cleaner energy sources. Tanzania’s strategic location, coupled with its abundant gas resources, positions it as a potential hub for natural gas exports to global markets.

Government Support

The Tanzanian government’s continued support for the oil and gas sector, including favorable policies, investment incentives, and infrastructure development initiatives, creates a conducive environment for ARA Petroleum’s operations. Strong government backing can facilitate project approvals, streamline regulatory processes, and attract additional investment.

Conclusion

In conclusion, ARA Petroleum’s strategic moves, robust resource base, technical expertise, and collaborative approach make it a strong contender to become the next significant gas producer in Tanzania. While challenges such as regulatory complexities, market volatility, and infrastructure constraints exist, the company’s proactive measures and commitment to sustainable development position it favorably to navigate these hurdles.

 

The success of ARA Petroleum in Tanzania will not only contribute to the country’s energy security and economic development but also bolster its standing as an emerging player in the East African energy landscape. As the company continues to advance its exploration and development activities, industry observers will keenly monitor its progress and the broader impact on Tanzania’s oil and gas sector.

 

Joint ventures partners believe there is potential to produce far greater volumes of gas from Ntorya, having conducted an extensive 3D seismic survey over the wider licence area.

This potential will require investment in a phased development of the Ntorya gas field and the maturing of domestic industries as gas offtakers, such as fertiliser, cement and plastics production plants, vehicle CNG stations, domestic LPG suppliers and additional gas-fired power stations for industrial and residential use.

ARA Petroleum’s journey in Tanzania reflects the broader trends in the global energy industry, where companies are increasingly focusing on regions with untapped potential and prioritizing sustainability and community engagement. By aligning its strategies with these trends, ARA Petroleum is poised to make significant strides and emerge as a key player in Tanzania’s energy future.

Hussein Boffu runs a consultancy helping entrepreneurs achieve their goals through business planning and consultancy support. Would you like to reach out to him? Contact him via email at hussein.boffu@tanzaniapetroleum.com or by calling, texting, or WhatsApp at +255(0)655376543.