Source: Reuters * Zanzibar barred from developing own oil sector under Union * Hunt for oil a big bone of contention on archipelago * Dispute had hindered Shell By Fumbuka Ng'wanakilala ARUSHA, Tanzania, Oct 25 (Reuters) - Tanzania and its semi-autonomous islands of Zanzibar have agreed on the sharing of any future hydrocarbon revenues, ending a standoff which delayed exploration projects, a Zanzibar minister said on Thursday. The dispute prevented Royal Dutch Shell from beginning exploration 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 big finds. "An agreement has been reached in principle between Tanzanian President Jakaya Kikwete and Zanzibar President Ali Mohammed Shein to allow Zanzibar to manage its own oil and gas industry," Mohamed Aboud Mohamed, minister of state in Zanzibar in-charge of union affairs told Reuters by phone. He did not give any details on the revenue sharing terms. The Tanzanian minister responsible for union matters was not available to comment. Zanzibar formed a union with mainland Tanzania in 1964, relinquishing control of its potential offshore oil and gas reserves to the union government. Zanzibar was not allowed to develop a energy sector on its own since it was under the jurisdiction of the union government. However, after Shell won rights to the four blocks in 2002 Zanzibar said that revenue from any discovery should be for its sole benefit. There has been growing pressure in Zanzibar from politicians and an Islamist separatist group for the energy sector to be removed from union affairs to allow the islands to license exploration companies. "We expect the Tanzanian cabinet to give its nod to the decision to allow Zanzibar to manage its own oil and gas industry before the issue is taken to the Tanzanian parliament for final approval," Mohamed said. "In the meantime, Zanzibar has been allowed to start working on its own oil and gas policy and legislation ... and (to) establish the regulatory institutions to manage the sector while we await for the formalities to be concluded." Mainland Tanzania, which has made huge natural gas discoveries offshore, aims to have a new gas policy in place before the end of the year. Zanzibar says the mainland's legislation will not apply to it under the terms of the new deal.