ENERGY & MINERALS

by Ben Taylor
Significant deal signed on LNG processing facility
Tanzania has signed a framework agreement with the Norwegian firm Equinor and UK-based Shell that brings the parties closer to starting construction on a $30bn project to process and export liquefied natural gas (LNG). The deal announced in June foresees a final investment decision by 2025, and a start of operations by 2029-2030 at a liquefied natural gas plant to be built in Tanzania’s southern coastal town of Lindi.

“We have never reached this stage of natural gas development in the history of our country,” said Energy Minister January Makamba during the signing ceremony. “This project will significantly change our economy,” he added.

President Samia Suluhu Hassan, also present at the ceremony, welcomed the preliminary agreement. “We have reached a good stage of discussions about the LNG project, but much work is still waiting for us to talk and make it competitive,” she said.

Plans for the LNG plant had stalled for several years under President John Magufuli, and President Hassan re-launched efforts after taking office in 2021.

“We had many stops but through [the] resolve of the government, we kept engaging, discussions and we believe Tanzanian gas presents a huge opportunity,” said Equinor country manager for Tanzania, Unni Fjaer.

Both Equinor and Shell have existing interests in natural gas in Tanzania. Along with US firm ExxonMobil, Equinor is exploiting an offshore block where it says it has found 20 trillion cubic feet of natural gas. Shell, together with Ophir Energy and Pavilion Energy, says it has discovered 16 trillion cubic feet of gas in two other offshore blocks in the same area.

Low-carbon energy potential, and projects
While Tanzania continues to seek to exploit her natural gas resources, the country is also powering ahead on low-carbon energy projects.

President Samia Suluhu Hassan stated while on a visit to the US in April that the country has a goal of producing 6,000MW from renewable energy by 2025. She said the electricity will be produced through a combination of hydropower, solar and wind projects.

The President was speaking at a discussion themed “A New Day for US-Tanzania Relations,” hosted by President and Chief Executive Officer of the Wilson Centre (and former US Ambassador to Tanzania), Mark Green.

Chief among Tanzania’s portfolio of renewable energy projects is the controversial 2,100MW Julius Nyerere Hydropower Project (JNHPP) at Stiegler’s Gorge, where construction is well under way (see previous issues of TA). Two smaller hydropower projects – the Ruhudji and Rumakali projects, both in Njombe region – are also lined up to begin producing 358MW and 222MW respectively. In combination, these three projects will nearly triple the country’s electricity supplies from the 2021 level of just over 1,605 MW.

Tanzania is also pressing ahead with both wind and solar power projects. In July, Energy Minister, January Makamba visited the site of a proposed 150MW solar farm in Kishapu District, Shinyanga Region. He explained how the project, financed by the French development agency AFD, will eventually feed power into the national grid, providing energy particularly to Simiyu and Mwanza regions, as well as to communities surrounding the plant.

Tanzania is recognised as having an abundance of the solar radiation necessary for generating large-scale power year round. It is estimated that 83% of the country’s land area has a high level of annual average radiation, and 14% has very high levels. This means the solar resource for power generation is viable in most, if not all, the country.

The President told the audience in the US that Tanzania has a target to produce between 600MW and 700MW of electricity from solar.

Similarly, the country has high potential for wind-power projects, with several parts of the country having strong and predictable wind patterns. Projects already underway include a 100MW plant near the town of Singida and a 300MW project near Makambako.

Geothermal energy potential is also being developed, with an initial focus on providing direct heat for agricultural and industrial purposes including greenhouse heating, grain drying, etc.

Currently, with per capita annual energy consumption of just 103KWh, Tanzania ranks in the bottom ten nations in the world, below even the norm across sub-Saharan Africa. In the past ten years, while the population has increased by 32% and electricity demand by an estimated 400%, total installed power generation capacity has increased much more slowly, from 1,521MW to 1,700MW: a pace equivalent to roughly one percent per year.

Fuel subsidies introduced to cushion citizens from price increases
In May, the government announced moves to protect consumers in Tanzania from the rapid global rise in fuel prices by introducing a TSh 100bn (USD $43m) monthly subsidy. The subsidy took effect on June 1st and resulted in a reduction in prices at the pump of around TSh 300 per litre.
Petrol, diesel and kerosene prices had risen to record highs of above TSh 3,000 per litre earlier in May after global oil prices shot up following Russia’s invasion of Ukraine.

Nevertheless, as global prices remain high, pump prices in Tanzania have continued to rise despite the government subsidy. In early August, the Energy and Water Utilities Regulatory Authority (EWURA) announced new price caps for fuel that saw prices for petrol and diesel rise to levels never recorded before in the local market. A litre of petrol in Dar es Salaam will cost TSh 3,410, while in Mtwara the same will cost TSh 3,762.
“Fuel is a strategic and very important product,” said the executive director of the Tanzania Association of Oil Marketing Companies (Taomac), Raphael Mgaya. “If the government continues with its efforts to ensure the commodity is available at affordable prices by the end user, then it will help strengthen the economy and reduce the risk of inflation,” he added.