Why regional energy hub tag beckons for Tanzania

TANZANIA is making major headway towards implementation of the flagship energy projects, so as to sustain energy security, with 42 billion US dollars (about 92tri/-) Liquefied Natural Gas (LNG) plant in Lindi Region inching closer to reality.

Significantly yet, prospect of oil discoveries at Wembere-Eyasi basin in the country also beckons with the state-owned Tanzania Petroleum Development Corporation (TPDC) Executive Director Mussa Makame yesterday saying that they have stepped up exploration exercise.

Although no oil has yet been discovered, one of the wells drilled in 1984 encountered an oil source rock, and surface oil seeps have been observed both in the coastal basin and in the western rift valley.

“Exploration is ongoing but signs of oil presence are there,” affirmed Mr Makame in a meeting with editors in Dar es Salaam on Thursday.

The meeting among others was meant to point out success attained by the corporation, which is under the auspice of Treasury Registrar (TR) Office. TPDC also used the platform to highlight its strategic plans in the next five years, aimed at maximising the potential of the rich energy natural resources the country is endowed with.

“In gas sector, we are marching towards the right direction of signing the final Host Government Agreement (HGA) with investors of a long awaited LNG plant in Lindi Region,” said Mr Makame.

The government, he said, has already concluded talks with investors and agreements, adding that pertaining to the massive project, it will be presented to the cabinet for approval as required by law before the documents are signed.

It is anticipated that the Final Investment Decision (FID) would be signed in 2025 and once the FID is inked, the construction work for the project is expected to kick off in the same year after which, production and exports of natural gas to global markets will start by 2030.

The initial HGA was signed last year between the government of Tanzania on one hand and investors of the project on the other. They included Shell and Equinor ASA companies, which are the main partners in implementation of the project.

Other investors who are partners of the multi-million project which is one of its kind in Tanzania include ExxonMobil, and Pavilion Energy.

The project was delayed by years of prolonged negotiations but gained urgency as European countries look for LNG projects that can be long-term replacements for energy supplies from Russia.

Tanzania’s natural gas reserves are estimated at 57 trillion cubic feet (tcf) with a total annual production of 110 billion cubic feet from three fields in Songo Songo Island, Mnazi Bay, and Kiliwani North.

Africa’s natural gas reserves stand at over 620 tcf as of 2021. Tanzania, with 57.54 trillion cubic feet, stands at the sixth position in the top ten countries with abundant natural gas reserves in the continent.

According to the experts, this volume of discovered gas would take 500 years for Tanzania to consume at current rates of consumption.

This means there is more than enough gas for own consumption in country for current and future power generation, expansion of current industrial use of gas in industries such as cement, breweries, plastics, ceramics, glass, steel and other energy intensive industries as well as selling gas potentially to neighbouring countries, developing Tanzania as a regional energy hub.

Mr Makame said Tanzania will reap massive economic and social benefits from the LNG project, which included creation of employment as well as transforming the country into a regional energy hub.

He said the international gas market will act as an “anchor customer” to unlock further domestic gas market growth, while generating a large amount of tax revenues which can be used to boost Tanzania’s economy.

Speaking about the 5billion US dollars East African Crude Oil Pipeline Project (EACOP), from Hoima in Uganda to Chongoleani in Tanga, Mr Makame said everything was going according to the script.  TPDC has 15per cent stake in the project and the corporation has already offset 53 per cent of the shareholding dues.

He insisted that TPDC will continue to seek partnership with the private sector to exploit the potential of several projects in the sector.

Mr Makame said TPDC managed to strengthen its financial capacity, whereby for the financial year 2021/2022, they registered a profit of 97.78bn/-, up from 22.92bn/- recorded in 2020/2021 fiscal year.

He said the corporation’s balance sheet continued to improve from 3.17tri/- for the year 2018/2019 to 4.21tri/- in 2021/2022 financial year equal to an increase of 1.042tri/- for a period of four years.

He said that the success registered in in 2021/2022 financial year, enabled the corporation to pay to the government about 62.84bn/- in the oil and gas revenue management fund, dividends of 2.7bn/- as well as various taxes worth 57.85bn/-, making it one of the largest taxpayers in the country.

“We have significantly reduced the dependence on money from the government where currently the dependence is about one per cent and we want to get rid of the dependence in the future,” said Makame.

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