Tanzania’s new $344M natural gas plant holds lessons for Nigeria

With a population of over 54 million and grid connected power capacity of 1,400 MW, frequent power outages were the norm in Tanzania. All these will change soon as the country, one of Africa’s top ten economies, last week, opened a brand new $344 million, 167.82-megawatt natural gas power plant outside of the nation’s commercial capital, Dar es Salaam.

Tanzania had always depended on hydropower but frequent droughts acted as threats to the country’s energy ambition. Along with new Kinyerezi II natural gas plant, the East African nation, in July, is embarking on a massive 2,100 MW hydropower project, to be built at the Stiegler’s Gorge in the Selous Game Reserve which would be completed 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. Analysts say the country may soon be able to sell off surplus energy to other countries.

But what were some of the factors that helped the country on its way of realising its energy ambitions? Unlike many African countries that rely on China, John Magufuli, president of Tanzania turned attention to Japan.

Japanese company Sumitomo Corp. constructed Tanzania’s new natural gas plant, and a Japanese bank loan covered 85 percent of the $353.72 million price tag. This is significant because it does not come with exploitative terms and conditions Chinese loans are perversely reputed for which sometimes demands Chinese citizens involved from project design to clearing bushes, leaving little value for the country’s citizens.

While Nigeria regales its citizens with a dubious claim that it is spending over N1.4 trillion a year on fuel subsidies, 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.

In Nigeria, the government is making arguments on why it needs to maintain a fraudulent subsidy regime that is cost the country billions. With landing cost of petrol put at N171 per litre, the Nigerian National Petroleum Corporation (NNPC) incurred N37 on each litre of fuel at a depot price of N133.80, leading to a daily subsidy of N2.046billion for 55million litres. The landing cost of petrol has been higher than N145, after crude oil prices rose to $45 per barrel in January 2017. This puts total subsidy spends since February 2017 to February this year at N746.79billion. There is no better manual on how to self-destruct an economy.

Tanzania has 57 trillion cubic feet of proven natural gas reserves, but they are mostly undeveloped and infrastructure is still unavailable. 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.

Nigeria has significant proven gas reserves of 187 Trillion Cubic Feet, (TCF) which ranks it the ninth in the world. But the LPG market has witnessed massive growth from less than 70,000 metric tonnes consumed in 2007 to about 500,000MT currently according to the operators. There are opportunities in Nigeria with deeper adoption of natural gas both for CNG vehicles and other uses for domestic gas but the country’s energy policy is grossly deficient.

“There is a strong economic, environmental and security case for use of gas in Nigeria, including even for Compressed Natural Gas (CNG) cars” said Chijioke Mama, energy analyst and founder of EnergyDatar, an energy intelligence firm, in a recent comment for BusinessDay.

Operators say big policy initiatives that will encourage investments in manufacturing plants, storage facilities and jetties, and the promotion of gas-powered vehicles are required in Nigeria.

ISAAC ANYAOGU