The politics of power and natural gas in Tanzania: How political settlement dynamics shapes deals in a ‘new oil’ country
Working paper 149
Peter Bofin, Rasmus Hundsbæk Pedersen and Thabit Jacob
While research suggests that the rise in global oil prices from 2004 to 2014 strengthens the bargaining position of new ‘oil country’ governments, this paper suggests that the structure of deals is also significantly influenced by domestic political dynamics. By analysing the development of the petroleum sector through three sets of deals in a new oil country, mainland Tanzania, it demonstrates how changes in domestic political and economic interests and institutions influence deals. First, greater control was exercised over rents generated from the petroleum sector as a moderate kind of resource nationalism emerged, driven by corruption scandals and intensified electoral competition. From 2010, resource nationalism became radicalised, enabled by major offshore gas finds and Chinese loan capital. However, when global oil prices crashed, the ruling coalition, which had since 2010 become both more vulnerable and more authoritarian, increasingly struggled to finance its plans to take increased control over the petroleum sector. At the same time, the oil and gas companies saw the terms of deals becoming more unpredictable and unstable. A complicating factor in this regard is the materiality of natural gas and its links to energy production, which opens the sector to a wider range of interest groups than oil per se, and created difficulties for the authorities in coordinating the development of the sector in the context of a shifting policy environment and weak institutions. In the paper we analyse three sets of deals for the commercialisation of natural gas, which cover much of Tanzania’s recent petroleum history.