Shell moves to help enable exploration off Zanzibar

(Reuters) – Royal Dutch Shell is stepping up efforts to help clear the way to explore for oil and gas in east Africa after a decade-long delay due to a standoff between Zanzibar and Tanzania on the sharing of potential revenue, company officials said.

The dispute between semi-autonomous Zanzibar and its mainland rulers has prevented Shell from starting work on four blocks off Zanzibar’s coast or selling interests in its exploration rights in the region, which has become a hot spot for oil and gas exploration after new finds.

Shell said it could not discuss details of its negotiations with the governments but was hopeful of a resolution.

The oil major will be able to move forward when a production-sharing agreement it started negotiations on in 2003 is finalised.

“We have recently been engaging with both the Tanzanian and Zanzibar governments with a view to achieving this, which would allow exploration activities to begin,” a spokesman for Shell who declined to be named, said in an email to Reuters.

“We understand the complex issues involved, and we are playing a constructive and full part in seeking to resolve them as soon as possible.”

Zanzibar has said since Shell won rights to the blocks in 2002 that the revenue from any discovery should be for its sole benefit.

State-owned Tanzania Petroleum Development Corp (TPDC) fears that making a politically unpopular decision could stoke separatist sentiments in Zanzibar.

Government officials in Tanzania and Zanzibar said meetings to discuss the standoff have all but ceased, while an escalation of tensions as separatist Islamist groups clashed with police on May 27 has worsened the impasse.

“There have been a number of meetings, and a committee has been set (to resolve the issue). But they are not meeting anymore … all have grown tired,” said Elias Kilembe, a senior geologist with the TPDC told Reuters in Dar es Salaam.

But Mohamed Mohamed, director of Zanzibar’s department of minerals and energy, told Reuters that he was still hopeful of a quick resolution to the dispute.

“I’m optimistic this will work out soon.”

HANDLE WITH CARE

The Indian Ocean archipelago of about 1 million people merged with mainland Tanganyika in 1964 to form the modern Tanzania, but Zanzibar retains its own president and parliament.

Tanzania, which has enjoyed relative stability in a volatile region, has pledged to have a new constitution in place by 2014, with the union expected to be one of the major issues of debate.

“It has been more politicised than what we thought,” Kelvin Komba, principal petroleum geophysicist at TPDC, said. “One has to handle (discussions) with care.”

The last major push to end the stalemate was in 2005, when the TPDC hired a consultant to show how a discovery could benefit both the archipelago and the mainland.

Both sides appeared to agree on the consultant’s initial findings, but at the last minute the Zanzibaris did an about-face, said the TPDC. They said the terms were unfair and would not sanction exploration progress of its idyllic beaches.

Shell appears keen to establish a foothold in the region, escalating a bidding war this month for independent explorer Cove Energy, which has a minor stake in several gas blocks offshore Tanzania and Mozambique.

Canadian explorer Antrim Energy, a smaller, independent firm has also found itself entangled in the dispute since 1997 and has been blocked by the Zanzibari house of representatives from resuming exploration activities.

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