Written by
Geoffrey Gasper
VELMA Law, Dar es Salaam Tanzanian Law Firm
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Petroleum (Natural Gas Pricing) Regulations 2016 apply in Mainland Tanzania and govern pricing of natural gas for domestic and cross border markets.
The pricing of natural gas, in addition to the best international natural gas pricing practices, will take into consideration:
- investment and operations costs for natural gas exploration, appraisal, field development, plus a fair profit margin, also referred to as the “cost-plus appropriate profit margin”;
- pricing structure which provides incentives for promoting investments while sustaining supply and demand for natural gas;
- affordable and predictable pricing for strategic industries and domestic households;
- use of environmentally friendly fuels;
- encourages economic use of natural gas throughout the value chain; and
- such other considerations as may be determined by demand and supply forces within and outside Mainland Tanzania.
Domestic market includes power generation industry, commercial and non-commercial institutional customers, industrial heating and feed stock customers, transport sector, residential/household customers and strategic industry e.g fertiliser manufacturers.
Cross border markets include regional markets connected to the domestic market by pipeline.
Regulations impose penalties for prohibited acts which include:
- manipulation of the market to the detriment of the rights and interests of other licensees or consumers;
- dump the lower than cost price with the intention to disrupt the normal production and management order to the detriment of the public interests;
- manipulate natural gas price;
- lure consumers or other operators to conclude transactions by employing falsified or misleading natural gas pricing;
- practice natural gas price discrimination towards other licensees;
- procure, sell commodities or provide services at prices raised or reduced in disguised form by adopting such means as raising or lowering the grade.