ENERGY supply is one of the greatest challenges facing the planet as traditional fuel sources such as coal and oil run out. This is on top of the mounting condemnation from communities determined to tackle climate change and pollution.
Coupled with the unrelenting upsurge in demand for energy, it is obvious that effective solutions are urgently needed. As we face this massive challenge, the question then is how can we provide reliable, affordable and sustainable energy for a growing population? This question does not have a simple answer, but it is constantly at the forefront of the energy industry’s mind.
Fortunately, practical alternatives are available. Liquid Natural Gas (LNG), for example, has established itself not only as a viable substitute, but also as a superior energy option. In the series of articles to be published on Tuesdays, we will try to explore why the future of Tanzania could belong to LNG. We will also explore the long-term potential of LNG as a fuel and analyse why Tanzania can have a major role in its development as well as explaining why investment in energy projects will positively impact the country both economically and socially and why our country cannot afford to ignore LNG.
What exactly is LNG? In writing on technical matters such as this, the obvious starting point would be to provide important definitions to key terms such as Liquefied Natural Gas (LNG). Though it has been a significant part of the energy mix for over half a century, liquefied natural gas – more commonly referred to as LNG - is not as well-known as oil, gas or coal.
It is, however, becoming progressively more vital to the world’s energy supply. LNG is natural gas that has been converted into liquid form for ease and safety of non-pressurised storage or transport. It is a clear, colourless and non-toxic liquid. It is far cleaner than other fossil fuels and because of recent advancements in terms of storage and shipping, LNG has grown to be an increasingly viable fuel source globally, even for countries without access to gas fields.
The evolution of LNG technology means huge opportunities not only for economies looking to embrace sustainability by reducing reliance on harmful fossil fuels, but also for countries with the capacity to export LNG around the world. For gas-rich nations like Tanzania, the longterm business potential is immense. Efficient, abundant and safe In the past, natural gas, which is found deep underground, could only be really used in close proximity to where it was found.
In its unprocessed state, gas can only be transported via pipelines meaning difficult terrain such as mountain ranges and oceans, for example, can be major obstacle. Because of this, exporting natural gas in its natural state is tricky and is a primary reason why, when compared to oil and coal, demand for gas has traditionally been comparatively low.
Without direct access to natural gas, most countries simply had no purpose to develop the necessary infrastructure. In 1964, however, scientists made a breakthrough. They discovered that by liquefying the gas via cooling, it would be possible to ship gas to anywhere in the world. When natural gas is cooled down to a temperature of -162ºC (-260ºF), it becomes a non-toxic and non-flammable liquid, which is far more suited to long distance travel.
It is easier to store and far less dangerous. As well as being safe to transport, the cooling process shrinks the volume of the gas by around 600 times, meaning that not only can it be shipped safely, but it can be done so in a way that is cost efficient. When LNG reaches its destination, it is then turned back into gas. It was a substantial innovation, turning gas from a localised fuel to one with global potential almost overnight.
Half a century of development Africa has been at the heart of LNG’s progression from the very beginning. The first ever commercial LNG liquefaction plant was opened in Arzew, Algeria, in 1964. In the subsequent 50 years, there have been significant developments in relation to LNG and steady growth. In 2009 for example, Shell started up the Sakhalin LNG project in Far Eastern Russia.
Gas had already been discovered off shore Sakhalin Island during the Soviet era, but it was modern technology that enabled the development ultimately. Since start-up, the Sakhalin project has supplied all gas needed for the local market and exported cargoes of LNG safely and reliably. Room for expansion The LNG market is growing, and this trend is only set to continue as more countries turn their attentions to fuel sources that are environmentally beneficial and sustainable as well as being abundantly available.
According to the International Energy Agency, global demand for natural gas could rise by more than half by 2040. To supply the level of natural gas required, new fields will need to be developed, and countries like Tanzania face the prospect of being at the forefront of this rapidly expanding market. With the development of LNG, Tanzania then will have plentiful, affordable gas to fuel its power generation and industry.
For economies that embrace the LNG revolution, the future could be incredibly bright. To put this and the subsequent articles in perspective, exploration of oil and gas started in the then Tanganyika in 1952 with the first discoveries of natural gas made in 1974 in the Songo Songo area of Kilwa District in Lindi Region.
The second discovery was in 1982 at Mnazi Bay in neighbouring Mtwara Region. However, discovered quantities were nothing compared to the massive discoveries of the recent years.
But the commercialisation of the dual discoveries trigged huge on-shore and off-shore exploration efforts in the two southern regions culminating into recent massive discoveries of natural gas. It is these discoveries that have prompted the current process, still at a foundation stage, led by the Government of Tanzania, through the Tanzania Petroleum Development Corporation (TPDC), to find the most cost effective and efficient way to develop what could be East African first multi-billion dollar LNG plant in Lindi Region.
The writer, Beatus Rwechungura, an Economist with Shell Tanzania has over seven years experience as a financial analyst. He has been working as an economist for Shell Tanzania (BG Tanzania) for over 5 years. Prior to that, he spent two years working as an investment banking analyst in New York. In 2010, he graduated with honours (Cum Laude) from Princeton University with a Financial Engineering Degree and in 2014 he obtained a postgraduate certificate in Mathematical Finance from University of York.
The writer welcomes comments, opinions and questions which he will attempt to address in subsequent articles.