Africa Oil & Gas: Tanzania’s $344M Natural Gas Plant Is A Game Changer

Natural Gas Power plant.jpgThis week Tanzania opened a brand new $344 million, 167.82-megawatt natural gas power plant outside of the nation’s commercial capital, Dar es Salaam, marking a turning point in the nations push toward industrialization.

The plant, already running at full capacity, is just one part of Tanzanian President John Magufuli’s initiative to transform the Sub-Saharan country’s economy–the third biggest in Africa–into an industrial powerhouse by 2025.

Up until this point, Tanzania has been the furthest thing from an energy frontrunner, with a population of 54 million, skyrocketing demand for power, and just 1,400 MW of installed grid capacity. In the past, the majority of Tanzania’s energy has come from hydropower, leading to frequent shortages in a region with persistent droughts. The inauguration of the new Kinyerezi II natural gas plant will be an undeniable game-changer for the East African nation.

The new natural gas infrastructure will be complemented with a massive hydropower generation project slated for July. The 2,100 MW hydropower project, to be built at the Stiegler’s Gorge in the Selous Game Reserve, will be the largest dam in Tanzania by the time it’s finished in 2021. Combined with the new natural gas plant, Tanzania is expecting to solve the nation’s previous power woes with this massive development in the nation’s power generation capabilities. Soon they may even be able to sell off surplus energy to other countries.

So how has a historically impoverished, developing nation made such a turnaround in such a short time? In a word: Japan. Japanese company Sumitomo Corp. constructed Tanzania’s revolutionary new natural gas plant, and a Japanese bank loan covered 85 percent of the $353.72 million price tag. However, Tanzania has also been making major strides in their own economic strategies with majorly successful money-saving initiatives, particularly when it comes to energy.Related: Does Conoco Know Something That Its Competition Doesn’t?

As part of the country’s push for sustainable energy independence, Tanzania has moved away from importing fossil fuels to focus on using their own domestic natural gas reserves, allowing them to save $4 billion between 2015 and 2017, and therefore massively accelerate domestic economic output and capabilities. The adoption of natural gas and the shift away from HFO and diesel has also saved nearly $6.7 billion just in 2015.

Now, the challenge will be keeping up with demand for natural gas. As the nation achieves its own industrial goals, the next step is to ensure sustainability. Currently Tanzania sources 50 percent of its electricity from natural gas, but the current regime is hoping to push that number a lot higher thanks to the new Kinyerezi II plant. Domestic demand for natural gas has already more-than doubled from 145 million standard cubic feet (scf) a day in 2016 to 300 million scf in 2017, according to figures from the Tanzania Petroleum Development Corporation (TPDC).

The gas is there–it just needs to be extracted. Tanzania has 57 trillion cubic feet of proven natural gas reserves, but they are mostly undeveloped. Furthermore, for the gas that is readily available, there is very little infrastructure to deliver it to potential consumers. President Magufuli said last year that Tanzania will need to invest $46.2 billion over the next 20 years to overhaul its outdated energy infrastructure and increase output capacity to meet with the developing nation’s fast-growing demand for electricity.

Tanzania is still in the beginning stages of industrialization, but its recent developments are extremely promising for the nation’s own economic independence. With growing infrastructure and more readily available electricity, the country will be able to attract much more investment from more wealthy countries (like Japan) but will hopefully also allow the long-impoverished nation to come into its own as an economic player on the global stage. By Haley Zaremba for Oilprice.com

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