Mtwara Freeport Zone Set To Stimulate Tanzania Southern Economy

By the Export Processing Zones Authority (EPZA).

The idea of having the Freeport Zone at Mtwara Port came about in 2009 as Tanzania’s oil and gas stakeholders deliberated on the most efficient and effective way to manage and support the operations of the oil and gas exploration firms in the country.

As increasing deep sea seismic acquisition and exploration drilling created demand for specific and specialised services by the gas and oil companies, the need for a centralised distribution centre with better environment for development of the industry becomes inevitable.

And, in their response to massive equipment to move around, extensive materials and consumables to handle, stakeholders discussed the best way to facilitate oil and gas exploration activities in deep see and offshore, settling for the Freeport as the lasting solution.

“There is urgent need for Tanzania to offer the necessary support infrastructure and enabling environment for trouble free operations to boost and support the oil and gas industry,” says Export Processing Zones Authority (EPZA) Director General Dr Adelhelm Meru.

He argues that the need for cost effective solutions in procurement logistics and supply chain management necessitates the set up of the Oil and Gas Free Zone within Mtwara port as a distribution centre for Tanzania as well as the eastern and southern Africa.

The tremendous growth of exploration activities in shallow to deep waters of the Indian Ocean, including seismic acquisition and drilling operations in the deep sea, has amplified demand for materials and equipment sourced from multiple places around the globe.

The industry sources argue that experience gained elsewhere shows that potential oil and gas areas attract service companies that manufacture drilling equipment, supplies and consumables.

The same companies are expected to locate their bases near the port because of the guaranteed market for their products.

The presence of an Oil Field Supply Hub (OFSH) at the port therefore enhances the growth of oil and gas exploration and drilling activities.

The supply hubs that render operational efficiency, bring in significant economic gain and salvage time that could have been lost if equipment were to be imported, are even more important in deep sea drilling.

Mtwara Port is the potential candidate for the OFSH, thanks to its proximal position to the oil and gas deep sea fields.

The supply hubs or Freeport zones as they are commonly referred to enjoy the status of tax free zones in respect of customs duties.

The Freeport Zones therefore are customs controlled areas where imported free duty goods are stored for the purpose of trade.

Firms operating in such free zones provide services and supply oil equipment to the drilling companies, which are not allowed to locate in the Free Zones.

Mtwara has recently become a centre of attraction to investors, with EPZA receiving many inquiries from investors with interest to set up businesses in the southern region and experts believe that the establishment of the Mtwara Freeport Zone will greatly enhance, facilitate and support Oil and Gas exploration in the country.

Mtwara region has already earmarked 110 hectres for the Free Port Zone, with the first phase of the EPZA/TPA joint project on the 10 hectres scheduled to operate as the oil and gas supply base, according to EPZA Director of Development Zawadia Nanyaro.

“A number of oil service companies currently providing support to oil exploration companies in the deep sea have shown interest to locate at the envisaged Mtwara Freeport,” says Ms Nanyaro, adding that with the establishment of the envisaged Mtwara Free port, more companies are expected to relocate to Tanzania, creating more demand for space.

EPZA and Tanzania Ports Authority (TPA) had jointly invited potential investors to express interest on leasing plots of between 6,200 and 15,900 m2 on the 10-hectre area earmarked for oil and gas firm’s supply base.

Ms Nanyaro describes the response to the invitation as positive, with over 10 potential investors having responded: “Many companies have shown interest to invest on the (Mtwara Freeport) zone…it’s an indication that investors are eager to operate at the area.”

The Special Economic Zone Act 2006 and EAC Customs Union (Freeport Operations Regulations) stipulate that applying companies to undertake operations that provide services to the oil exploration and gas extraction companies, whose activities should be limited to warehousing and storage; labeling, packaging and repacking; sorting, grading, cleaning and mixing; breaking bulky; simple assembly and grouping of packages.

EPZA and TPA have partnered on the project to support smooth exploitation of natural resources in the southern region, which is endowed with a huge amount of gas and oil.

Investors are already flocking to the southern region to invest in manufacturing plants—cement and fertilisers in particular.

Deep sea exploration is in progress by multinational companies—Petrobras, British Gas and Orphir, making it inevitable to have a logistical centre to supply materials and services to the companies for efficient operations.

The envisaged zone is expected to serve the oil exploration and gas extraction activities in the region endowed with immense natural resources like gas and huge potential for oil.

The presence of oil and gas companies creates opportunity for investors to set up petrochemical processing and allied industries in the region.

According to Ms Nanyaro, the envisaged Freeport zone is specific for foreign companies that supply materials and provide services to the exploration firms, which have to invest over one billion US dollars (about 1.6trn/-) with over 5,000 direct employment to Tanzanians.

The deep water port at Mtwara was built between 1948 and 1954, with the major import commodities being foodstuffs—maize, rice, beans, sugar, beer, cement, other general cargo, wheat and wheat flour—while the principal export commodities were raw cashew nuts and simsim.

The port, with the 400,000 metric ton annual capacity, is presently underutilised due to low economic performance of the hinterland of Mtwara coupled with poor access to that hinterland. The port, mainly designed to handle conventional cargo, has its average annual cargo for the past five years standing at 136,500 metric tons, which is only 34 per cent of the installed capacity.

EPZ programme, established following the enactment of the Export Processing Zones Act, 2002, provides for establishment of export oriented investments within the designated zones.

The programme objectives are to attract and encourage transfer of new technology, attract and promote investment for export led industrialization, create and expand foreign exchange earnings as well as increase employment and development of skilled labour.