A New Business Model for the Oil and Gas Companies in Tanzania and East Africa
The price of crude oil is recovering gradually after going through a major slump in 2014–2017.
This has profound effect to everyone engaging in any aspect of the oil and gas business: from oil and gas professionals to oil companies that extracts oil and gas resources to those who providing supportive services.
For the service providers, efficiency is vital to surviving in the current oil and gas market. International oil companies are looking for better result at competitive prices and within a short period of time.
On the other hand, international oil companies are forced to adjust their business model to cope with these uncertain times.
In the oil and gas industry, two business models get most of the attention:
MODEL NUMBER ONE: Old School
An international oil company would hire a highly experienced expatriate from any part of the world and bring them to work in East Africa.
They could also buy goods and services from any part of the world, if that will get them the price and quality they want.
This model is outdated and not economically viable.
The cost of hiring an international oil and gas professional and bringing them to work in Tanzania outweighs the cost of training and employing local workforce. Also, relying on oversea workforce and suppliers can give the oil companies the following addition cost:
- Foreign exchange rates
- Extra paper work and documentation such as work permit, resident permit etc.
- Import duties
- Agent brokers and middlemen expenses.
- Import and customs fees*
This makes this model less effective and not commercially viable as most oil firms are seeking to cut cost to cope with the current environment.
MODEL NUMBER TWO: NATIONALIZATION MODEL
Model number two is an investment-driving model, which is typically focused on reducing cost, increasing local government revenue, generating value to government, communities and citizens, and improving the locally based economy.
This is a profitable model for international oil and gas companies that are searching, developing and extracting oil and gas resources in Tanzania and East Africa.
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