HomeRegional NewsEast AfricaTanzania switch to gas in effort to reduce tariffs and generation costs

Tanzania switch to gas in effort to reduce tariffs and generation costs

Mtwara to Dar es Salaam gas pipeline
Prime Minister Mizengo Pinda tours construction of the gas pipeline from Mtwara to Dar es Salaam

Energy experts are hopeful that Tanzania will drastically reduce generation costs when it shifts to natural gas after completion of the 542-km gas pipeline from Mtwara to Dar es Salaam.

Further to this, plans to convert the heavy furnace oil (HFO) fired-power plants at the Independent Power Tanzania Limited (IPTL), is being closing monitored by government. This is in line with the order by the High Court last year.

In a ruling in September 2013 by High Court Judge John Utamwa it was ordered that the HFO plants be converted to natural gas. The conversion will increase its capacity from 100MW to 500MW in an effort to reducing tariffs the IPTL charges the Tanzania Electric Supply Company (Tanesco).

‘We expect the project to be implemented by next year; the government is now monitoring the situation on the ground. At present, we are told they have already acquired additional plot for the expansion,’ Deputy Minister for Energy and Minerals Charles Kitwanga told the Tanzanian Daily News.

Kitwanga explained further that the government would sign new power purchase agreements with independent power producers (IPPs) once the 532 km gas pipeline from Mtwara to Dar es Salaam is completed.

‘The new agreements will come with lower tariffs since the country will be producing electricity from natural gas which is cheaper compared to fuel,’ the deputy minister said in a telephone interview.

Pan Africa Power Solutions Tanzania PAP, IPTL’s secretary and counsel, Joseph Makandege, said the company expects to start implementing the project by the end of this year.

‘Initially, we had planned to accomplish the plan by February next year but we were let down by protracted legal battles. We expect to start the scheme by the end of this year, it is projected that its implementation will take between 12 to 18 months,’ Makandege explained.

According to the counsel, the expansion will be conducted in phases with the first stage of implementation expected to spend between US $600 million and US$1 billion dollars.

‘There are a number of considerations in place and one includes retaining the current 100MW plant to use HFO and set up additional 500MW exclusively for natural gas to boost capacity to 600MW. Discussions with various stakeholders have made us contemplate retaining the existing plant so that it can be used as a contingency in case there are interruptions in supply of gas,’ he explained.

Currently selling a unit of electricity at 0.23 US cents, the conversion and expansion of the plant is expected to significantly reduce the tariffs to potentially between 0.07 and 0.08 US cents.

Previously, limited gas supply has hindered adequate generation of power at power plants operated by Tanesco and IPPs. However, the ongoing construction of the 532-kilometre pipeline to transport gas from gas fields in Mtwara and Lindi regions is expected to meet the demand to produce electricity for industrial use in Dar es Salaam.

IPTL and gas-fired Songas Power Tanzania’s plants at Ubungo are the only independent power producers currently generating electricity for the national grid while the remaining Aggreko and Symbion Power Tanzania are on stand-by.

At present, Tanzania generates electricity from hydropower, diesel powered generators and gas-fired plants. Even so, hydropower remains unreliable while diesel plants are costly to operate.

Photo source: Tanzania Post [Prime Minister Mizengo Pinda tours construction of the gas pipeline from Mtwara to Dar es Salaam]

Nicolette Pombo-van Zyl
As the Editor of ESI Africa, my passion is on sustainability and placing African countries on the international stage. I take a keen interest in the trends shaping the power & water utility market along with the projects and local innovations making headline news. Watch my short weekly video on our YouTube channel ESIAfricaTV and speak with me on what has your attention.