Tanzanian Regulator Blocks Billionaire Rostam Aziz's Acquisition of Key Gas Field

Tanzania’s Fair Competition Commission has halted a significant merger that would have allowed billionaire Rostam Aziz to acquire a substantial stake in the Songo Songo gas field, a vital resource that supplies approximately half of the nation’s natural gas. The decision, announced on October 5, has raised questions about the future of the gas field and the broader implications for the country's energy sector.

The proposed deal involved Aziz’s company, Taifa Gas Tanzania Ltd., acquiring a 49% stake in Orca Energy Group Inc., the Canadian-listed operator of the Songo Songo field. Amber Energy Investment L.L.C-FZ was set to take the remaining 51%. Orca Energy had agreed to sell its Tanzanian operations for a nominal fee of $10, citing that its assets were burdened by tax claims, licensing uncertainties, and other liabilities.

Despite the commission’s ruling, Orca Energy has not terminated the deal and is currently seeking clarification from the regulator while exploring its options. The lack of a detailed explanation for the commission's decision has left many stakeholders in the energy sector uncertain about the future.

The timing of the commission's ruling coincides with the expiration of the Songo Songo field's 25-year development license, which was granted in 2001. As of October 10, the license was set to expire, prompting Tanzania’s energy minister to announce intentions to extend it to the state-owned Tanzania Petroleum Development Corporation and PanAfrican Energy Tanzania Ltd., the Orca subsidiary managing the field. However, PanAfrican Energy rejected the proposed terms, describing them as “uneconomic and unacceptable,” and indicated plans to cease operations by November 29 unless a resolution is reached.

Songo Songo, located off Tanzania’s southern coast, was the first natural gas development in the country. It plays a crucial role in the national energy landscape, with its gas transported approximately 207 kilometers via pipeline to Dar es Salaam, where it powers electricity generation and industrial operations. The field is estimated to hold proved and probable reserves of 293 billion cubic feet, making it a cornerstone of Tanzania's energy supply.

Orca Energy's relationship with the Tanzanian government has been strained for some time, leading to arbitration claims filed by the company against the government at the World Bank’s International Centre for Settlement of Investment Disputes. These claims stem from delays related to the license and an order requiring the company to supply gas at subsidized prices.

For Rostam Aziz, the Songo Songo acquisition was poised to be a pivotal move in his expanding business empire. The former lawmaker has been instrumental in shaping one of East Africa’s largest private business groups over the past decade. When the deal was first announced in April, Aziz emphasized the importance of increasing Tanzanian ownership of natural resources, arguing that it could enhance industrial capacity and retain more profits within the country.

Aziz, who was named Tanzania's first dollar billionaire by Forbes in 2013, has built his wealth through various ventures, including a significant stake in Vodacom Tanzania. His company, Taifa Gas, has become a key player in the energy sector, operating liquefied petroleum gas import terminals in Dar es Salaam and Zanzibar, and is also developing a $130 million terminal in Kenya's Dongo Kundu special economic zone.

In addition to his energy interests, Aziz has diversified his portfolio, recently acquiring control of Kenya’s Nation Media Group, which positions him as a major player in the East African media landscape.

As the situation unfolds, stakeholders in Tanzania's energy sector will be closely monitoring the developments surrounding the Songo Songo gas field and the implications of the regulator's decision on future investments and operations in the country. The outcome of this case could significantly influence the trajectory of Tanzania's energy landscape and the role of private ownership in its natural resources.