How private sector can boost Tanzania's natural gas plan

Natural gas has become the main focus as Tanzania looks to mitigate the rising fuel costs

By The Citizen Reporter

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Dar es Salaam. With the government calling for multinational energy companies to partner with local firms, key players in the energy sector have come forth to talk about the potential of alternative energy in the country.

This call comes as natural gas contributes up to 45 percent of the total energy supply in Tanzania, as a result, the government is looking at ways to scale up production and supply amid rising prices of petrol and diesel.

Sharing his views during a media briefing at the Tanzania Energy Congress, managing director of PanAfrican Energy Tanzania (PAET) Andrew Hanna highlighted the major potential of natural gas and the projected demand that might surpass supply, calling for the expansion of exploration. He also said collaboration with the government to ensure Tanzania realizes its full potential in gas exploration is ongoing.

“The major projects we typically undertake are focused on sustaining the supply of gas. At the moment, our daily production is largely at the sustainable level that we can meet up to October 2026 when the project ends. While I know that the government might be looking at our PSA, and what happens after the October 2020 timeline, we have to be as conscientious and good partners to the government, constantly looking and anticipating increased demand and being able to support the nation,” said Andrew.

Natural gas has become the main focus as Tanzania looks to mitigate the rising fuel costs. The latest fuel prices as released by the Energy and Water Utilities Regulatory Authority (Ewura) have seen costs of the precious liquid rise to levels never recorded before; motorists in Dar es Salaam are now paying Sh3.410 for a litre of petrol, while a litre of diesel goes for Sh3,322. This, according to Ewura, is a considerable rise due to the Sh220 and Sh412 on every litre of petrol and diesel respectively that retail buyers save as a result of the Sh100 billion fuel subsidy.

Despite government efforts, experts have stated that subsidy isn’t a long-term strategy and might be less effective. According to analysts, natural gas is a more viable option for alternative energy supply.

The need for more use of natural gas has seen the role of the private sector elevated. Companies such as PAET that operate big gas fields and invest millions of dollars in the sector are strategically placed to be part of the solution.  

“In the last three years we’ve spent over $70 million on installing a largescale compression system on the Songas gas plant on Songo Songo Island that takes the gas that arrives at the plant, and boosts its pressure to ensure we can process it and send it out of that plant into the pipeline to Dar es Salaam at the correct specification,” said Andrew.

Prime Minister Kassim Majaliwa spoke recently that exploitation of the vast resources in Tanzania can be realized only if there’s a conducive business environment. “The government has been putting in place friendly policies and institutional frameworks. The doors for partnerships (joint ventures) are open. We will continue to ensure that sound regulations and mechanisms are in place to attract foreign investors,” the PM said.

As observed by private sector players, demand for natural gas in the downstream market is going up, making it economically viable. This means more investment is needed to meet market demand.

Speaking to The Citizen, Oryx Energies Tanzania managing director Kalpesh Mehta said Tanzania needs to invest more in CNG as the main source of energy. “There needs to be a massive investment in natural gas because the Sh100 billion monthly subsidy cannot be the only sustainable solution,” said Mehta.

There are about 57.5 trillion cubic feet of natural gas discovered in Tanzania, but less than 5 percent of the discovered natural gas has been explored, this is partly due to limited exploration efforts as a result of limited partnerships between the government and private sector.

However, through the Tanzania Petroleum Development Corporation (TPDC) strategies continue to be implemented to ensure CNG is utilized, with figures showing that some 1,000 vehicles are currently using CNG.

“We need to diversify our sources of energy and overreliance on petrol and diesel,” shared Mehta, adding that renewable energy is the way to go.

Over Sh90 billion will be required by PAET to drill exploration wells in acquired 3D surveys, this is on top of the Sh49 billion ($20 million) acquisition of 3 dimension seismic surveys.