Challenges As Tanzania Emerges As East Africa's Gas Economy

2122 Views Mtwara, Tanzania

In short
Tanzania is certain the recently discovered gas reserves will play a huge role in the realisation of the country's socio-economic development agenda as envisaged in the Tanzania Development vision 2025. The Tanzanian economy that has until recently been highly dependent on agriculture and tourism now boasts of over 50 trillion cubic feet (50tcf) of gas reserves and is already undertaking a lot of projects to utilise the resource.

Tanzania is certain the recently discovered gas reserves will play a huge role in the realisation of the country's socio-economic development agenda as envisaged in the Tanzania Development vision 2025.
 
The Tanzanian economy that has until recently been  highly dependent on agriculture and tourism now boasts of over 50 trillion cubic feet (50tcf) of gas reserves and is already undertaking a lot of projects to utilise the resource.
 
The first hindrance that the resource solves right away is inadequate electricity. Tanzania's power generating entity - Tanesco - entered a gas sales agreement with French company Mourel  et Prom (M&P) to supply gas to produce 600Megawatts of electricity.
 
The country is currently generating about 1,000MW of electricity 50% of which is generated from gas.
 
The Regional Commissioner Mtwara region, one of the two regions endowed with gas, Joseph Leon Simbakalia says the electricity project is timely as power was inadequate and expensive.
 
Simbakalia told journalists who were touring the country's gas wells and the projects being undertaken that the tariff has been high as much of the power was from thermal generators whose prices range between 11-15 cents a unit, forcing government to subsidise it. He adds that the country has been struggling with lack of enough power especially in the rural areas adding that the country targets to be producing 15,000MW by 2025.
 
Simbakalia says that this power which translates into 300-400 watts per capita for the expected 50 million people by 2025 will go a long way in creating a semi-industrial economy as envisaged in the Vision 2025.
 
More investments in upstream production as well as linked downstream activities which the commissioner says are to create opportunities to monetize the gas reserves are being undertaken. They include a 1.2 billion-dollar gas processing plant at Msimbati which is two months away from completion. The plant is for flaring and processing gas to exclude other hydro carbons. 
 
A 500 billion-dollar cement factory by Africa's richest entrepreneur, Aliko Dangote, is also under construction. Simbakalia says Dangote cement industries will be the immediate mineral-based major growth driver for Mtwara Region in Southern Tanzania.
 
The factory, Simbakalia says, will have a capacity to produce 3 million Metric Tonnes per annum (MTPA), expandable to 5 MTPA adding that the project will have a significant direct impact to the local economy in Mtwara.
 
The project is expected to create 5,000 permanent jobs in Mtwara and initiate downstream related manufacturing industries such as the production of roofing tiles and gypsum wall-partition boards.
 
The government has also entered a partnership with companies; Exonmobil, British Gas, Ophir and Statoil to build a 20 billion dollars Liquefied Natural Gas (LNG) plant in Mtwara with capacity to produce 5 MTPA for export gas.
 
Simbakalia explains that the domestic demand for natural gas is still very low in relation to the total volumes of gas adding that large volumes have to be sold to recover the risk capital that is being employed for the exploration and development phases. 
 
He says that the project will fetch the economy 2.5 billion dollars in the first year up to 25 billion dollars in the subsequent years
 
But Tanzania recognises that the nationals can't maximally benefit from the opportunities that come with this natural resource without the preparedness needed to accommodate the new gas economy.
 
Simbakalia told journalists that the regions where the world class natural gas discoveries have been made are undeveloped in terms of the basic facilitative physical infrastructure required to accommodate and support the operations and commercial activities of a modern, world class gas industry.
 
He said that Tanzania's biggest challenge remains overcoming what he calls the seven generic cardinal lacks which include lack of technical know-how, lack of finance capital, lack of institutional development, lack of advanced technology and lack of developed domestic markets.
 
Simbakalia said that Tanzania is taking its time to prepare itself so as not to miss on any of the opportunities that the resource presents. He said that the country is learning from the consultants from Qatar who are dealing with negotiation with oil companies and teaching the Tanzanian economy how to manage the huge revenues that are set to come in.
 
The government has also set up a technical institute in Mtwara region to supplement the Universities of Dare Salam and Dodoma which have introduced courses relevant to the gas resource.
 
Tanzania made the first discoveries of natural gas in 1974 when discovery wells at Songosongo in Lindi Region gave resource estimates of 1 - 2.5 tcf. In 1982, more discoveries were made at Mnazi Bay in Mtwara Region and in 2012; more substantial discoveries to a tune of 50tcf were confirmed.

Correction: Correction: The government has also entered a partnership with companies; Exonmobil, British Gas, Ophir and Statoil to build a 20 billion dollars Liquefied Natural Gas (LNG) plant in Mtwara with capacity to produce 5 MTPA for export gas.