Tanzania: Tanzania's Helium

Last Updated: 11 July 2016
Article by Amne Suedi

While the existence of helium in Tanzania is not novel, not many people know much about element other than it is used in party tricks.

Helium is associated to natural gas. It has been located in several blocks in Tanzania, where there has exploration for oil and gas. Exploration has taken place in Tanzania since the early 50's and continues to date. The Tanzania Petroleum and Development Corporation (TPDC), a government parastatal established in -May 1969, has been an important party to the Production Sharing arrangements signed in Tanzania and continues with oil and gas exploration to date. Helium has been located in few of the blocks where natural gas was discovered, but hardly anything to go to the news about.

The recent discoveries made a few days ago are novel because of the scale of the discovery which amounts to 54 Billion Cubic feet.

Hellium One, a company that not many people knew about until more recently, has been prospecting quietly in the Great Rift Valley in Tanzania. "Project Rukwa" seems to have several parties, the main one being Helium One, registered in Tanzania since September 2015 as an explorer, developer, and producer of high value bulk liquid helium for the international market. To date, this company has applied for and secured 20 Prospecting Licences with a further two applications submitted. All PLs are held solely by the Helium One, which has exclusive rights for another 9 years before they are converted into MLs and mining begins

Since the discoveries, Minister of Energy and Minerals Professor Muhongo made a statement hailing the discoveries of Helium. Netherland Sewell and Associates Incorporated (NSAI), independent experts, have publicly estimated an "Unrisked Prospective Recoverable Helium Resource (P50)" of 54.2 billion standard cubic feet. Helium occurs in 27 leads, defined by 2D seismic and is supported by data from two legacy exploration wells. Further, Oxford University's Department of Earth Sciences had conducted a geochemical analysis of the surface gas emanations and confirmed helium migration within the basin through their recent geochemical analysis of surface gas emanations (cf. company website of Helium One for more information). Helium One has declared that it also planned an extensive work programme to convert this resource into reserves and define additional prospects.

This discovery makes Tanzania a potential global player when it comes to trading Helium in the future.

The main use of helium is in medical appliances and military technology, space technology, light aircraft fuel. It is also used in nuclear reactors, welding and magnet productions for laboratories. Helium doesn't form compounds easily with other elements. It is also very stable and its stability and non-reactive nature makes it the perfect tool for handling unstable materials. It is the only gas that can reduce temperature and be an effective cooler. 

The global market for helium is estimated at USD 6 billion and it is growing. The USA supplies 40 percent of global consumption. Other principal actors are Qatar and Algeria. It is estimated that by the year 2021, the USA will not be supplying the open market and that the remaining reserves will be for strict federal usage only. The USA regulates its helium usage through price regulated auctions and storage in reserves. This translates into an opportunity for Tanzania to become a new market player in the helium gas industry. The current biggest consumers of helium in Tanzania are Industries, the military, hospitals and TPDC.

In order for this discovery to be beneficial to Tanzania, work needs to be done to align all strategies so as to find a "win -win" situation for everyone. Currently, the Government of Tanzania's interests will be safeguarded by the Mineral Policy (2009) and other relevant policies and laws available for regulating the mining industry. Should this materialize into a large scale industrial project, the Land Policy will also be applied as well as land legislations when it comes to acquiring land or evacuating people from the land in order to develop the project. Tanzania has several frameworks already in place through the Mining Act 2010 and its regulations. Additionally, the Environmental Management Act and its regulations will be applied to the mining project.

The Government of Tanzania may enter into a Development Agreement for the mining of Helium and shall be subject to the provisions in the Mining Act and its regulations. If the project will require a capital expenditure of more than USD 100,000,000 and that the holder of the mining rights, Helium One are deemed to have the financial and technical capacity to undertake a large scale investment. The government stands to win revenues in terms of taxes, royalties as well as free carried interest.

Tanzania will have to guarantee fiscal stability to the investor /developer in the Mining Development Agreement. For example, the Finance Act 2016 contains major changes in sectors such as tourism, where the introduction of VAT has already affected the cash flows of companies in this sector. Helium One or any other investor would insist on a stabilization clause so as to avoid this kind of situation and negative impact in their industry. The Government of Tanzania must undertake and guarantee that there will be no major fiscal changes detrimental to the investors through the lifecycle of the project.

There is a big market opportunity for Tanzanians producing goods and services since these discoveries can create employment and businesses to cater for the entire chain of the product. The Mineral Policy as well as the Mining Act guarantees the use of local products and services. Another benefit will be from infrastructure development, which will not only support the production and distribution of helium, but also by extension the communities.

In a country where the mining industry has not had a significant and powerful impact on Tanzania, one hopes that the production of helium will be different. However, the reality is that helium is non-renewable, it is not as abundant as oil and gas, and the market is relatively small compared to gas or other resources.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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