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| The company’s ethos centers on supporting Tanzania with power provision and positively impacting its economy and society. Photo: Courtesy |
By Adonis Byemelwa
Orca
Energy Group Inc., a Toronto-listed company based in the British Virgin
Islands, has unleashed a legal storm by filing a jaw-dropping $1.2 billion
lawsuit against the United Republic of Tanzania and the Tanzania Petroleum
Development Corporation (TPDC).
The stakes are high as this dispute could
reshape the landscape of Tanzania's energy sector. Orca, through its
subsidiaries PanAfrican Energy Tanzania (PAET) and Pan African Energy
Corporation Mauritius (PAEM), claims significant breaches of contract and
investment agreements.
According
to Orca’s widely circulated press release, the dispute revolves around alleged
breaches of the Mauritius-Tanzania Bilateral Investment Treaty (BIT), the
Production Sharing Agreement (PSA), and the Gas Agreement (GA).
The
company argues that TPDC’s rejection of PAET’s proposals for additional gas
commercial terms and a new gas sales agreement, despite the expiry of certain
PSA provisions, breaches their contractual rights and expectations.
Dr.
Bonipace Luhende, the Chief Government Legal Advisor, confirmed receiving
notice of the dispute from Orca, as mandated by ICSID procedures. “Both parties
have a six-month period to resolve the issue. If this fails, legal proceedings
will commence,” he stated.
Energy
Deputy Minister Judith Kapinga, when approached by Pan African Visions,
indicated that the government is engaged in negotiations with Orca. She
expressed confidence that a resolution through dialogue is achievable,
reflecting the longstanding working relationship between the government and the
company.
“However,
if necessary, we will proceed to court, though I don’t anticipate it coming to
that,” she remarked.
Kapinga
noted that the contract with PAET is set to expire in 2026 and did not provide
further details due to ongoing negotiations. She emphasized the importance of
maintaining confidentiality during this period.
According
to Orca, the conflict arose after TPDC rejected PAET’s requests for an
extension of their license in April 2023. Despite repeated appeals by PAET, TPDC
failed to act due to legal disputes regarding the continuation of the PSA. The
delay and alleged unfounded accusations against PAET led to a breakdown in
negotiations.
On
April 15, 2024, Tanzania’s Energy Ministry intervened, instructing TPDC to
continue producing gas beyond the PPA's deadline, contrary to existing
agreements. PAET has challenged this directive, fearing it signifies an
imminent threat to its rights over the gas block.
A
letter from the Energy Ministry, dated August 5, 2024, requested PAET to
propose suitable terms for an interim arrangement to extend gas production.
This letter was interpreted by PAET as a threat to seize their assets,
prompting them to file a dispute notice on August 7, 2024. PAET believes this
letter indicates a risk of asset appropriation if their rights are not
respected.
PAET,
a significant player in Tanzania's energy sector for over two decades, claims
to have invested more than $311 million in the country. It asserts that its
contributions include over $725 million to the national revenue and $900
million in cash flow to the Tanzanian government.
The
core issue revolves around the Songo Songo development license granted to TPDC
in 2001. This agreement, which includes the PSA and GA, was intended for gas
production until July 31, 2024, primarily for power generation at Ubungo in Dar
es Salaam.
In
recent developments, Tanzania resolved a long-standing dispute with Indiana
Resources Limited over the Ntaka Hills Nickel Project. The government agreed to
pay $90 million to settle the issue, concluding nearly seven years of
arbitration at the International Centre for Settlement of Investment Disputes
(ICSID). Payments are being made in three phases, with the first $35 million
already received.
Similarly,
in October 2023, Tanzania settled a dispute with Canada's Winshear Gold Corp by
paying $30 million over a contested gold project in southwestern Tanzania,
addressing a claim for over Sh250 billion.
As
the Tanzanian government faces these financial burdens, it is imperative to
reflect on the broader implications of costly legal disputes over flawed
contracts. Prof. Anna Tibaijuka has criticized the government’s secretive
dealings with external investors, arguing that such contracts often bypass
parliamentary scrutiny, leading to long-term financial repercussions.
Firebrand
Kisesa MP Luhanga Mpina once declared that with Tanzanian students facing
inadequate loans, poor infrastructure, and rising external debts, the
government must rethink its investment agreements.
In
2016, Tundu Lissu, then Vice Chairman of Chadema for mainland Tanzania, urged
Parliament to tackle future disputes by ramping up transparency in contract
negotiations, enforcing rigorous parliamentary oversight, and prioritizing
sustainable agreements aligned with national interests. “Proactively addressing
these issues can help Tanzania alleviate financial pressures and shift
resources to urgent social needs,” Lissu emphasized, advocating for a fairer
and more stable economic landscape.