Mtwara-Dar es Salaam Gas Pipeline

=Background= In July 2012, the Tanzanian Government officially launched the construction of a 532 km long Mnazi Bay to Dar es Salaam natural gas pipeline project. The project involves the construction of a 24-36 inch diameter pipeline from Mnazi Bay in Mtwara, connected to Somanga Funga with an existing spur line from SongoSongo gas field in Lindi region, and then onto Kinyerezi in Dar es Salaam. A 24-inch pipeline is being constructed from Mnazi Bay to Somanga whereas the existing 16-inch pipeline between Somanga and Dar es Salaam is being expanded to 36 inches. It will have a capacity to convey 210 million cubic feet of gas a day (MMCFD), up from the current 105 MMCFD. The existing 16-inch natural gas pipeline from SongoSongo to Dar es Salaam, which is owned by a private investor— SONGAS Limited—has been facing capacity constraints amidst a soaring demand for gas and energy in Dar es Salaam. The pipeline project also includes the construction of natural gas processing plants at Madimba in Mtwara and SongoSongo Island in Lindi. Two power plants at Kinyerezi I and Kinyerezi II with power generation capacities of 150MW and 240MW, respectively, weill be fired by natural gas.

=Energy Demand in Tanzania= On completion, the Mtwara-Dar es Salaam pipeline will have a capacity to transport 784 MMCFD of gas to be used in the production of 3,920 MW of electricity. The current installed power capacity produced at the two power plants is 1,509.85MW. Tanzania’s current electricity demand is 720 MW per day. Gas production at the SongoSongo field is about 100 MMCFD which is transported via pipeline to Dar es Salaam to generate 320 MW of power and to supply to 37 industrial entities. Mnazi Bay, on its part, produces only 2 MMCFD of gas that is used to generate 10 MW of electricity which is consumed in Mtwara. The project will also allow the supply of natural gas to large-scale and industrial electricity users in addition to major population centres in Tanzania. The natural gas project is expected to help the country meet all its power needs. Currently, the country has unconstrained peak demands of up to 1,000MW with a growth demand of 10-15% per annum.

=Madimba and SongoSongo Gas plants= One of the natural gas processing plants is being constructed at Madimba in Mtwara by China Petroleum Engineers, the China Chemical Engineering Secondary Construction Corporation and Worley Parson. The other gas plant was constructed on SongoSongo Island and is owned by SONGAS Ltd; a local joint venture company formed by CDC Globeleq, TANESCO, TPDC and TDFL.

=Construction Agreement between China and Tanzania= In September 2012, the Ministry of Finance on behalf of Government of Tanzania and Exim Bank of China signed a US$ 1.225 billion concessional loan agreement with a 33 year maturity at 2% interest rate to finance the construction of a natural gas pipeline linking Msimbati and Mnazi Bay gas fields to Dar es Salaam. The implementing organisations are China Petroleum Technology and Development Corporation (CPTDC) and China Petroleum Pipeline Engineering Corporation (CPPEC).

=Mtwara gas protests of 2012= Towards the end of 2012 and in the first half of 2013, Mtwara witnessed violent clashes between protesting residents and security forces as a result of plans by the government to construct the gas pipeline from the Southern Tanzania gas fields of Mnazi Bay and Msimbati to Dar es Salaam. Demonstrators demanded to see local benefits from the natural resource found in the region as earlier plans were to pipe only 16 percent of the natural gas to Dar es Salaam. Security forces have so far regained control and the construction of the pipeline is in its final stages.

=Economic impacts associated with the gas pipeline= The construction of the gas pipeline is an important driver of economic activities in the region and beyond. The industry’s activities generate and sustain jobs, income and output as well as contribute to state and local government revenues. Natural gas is used to heat water with the resultant steam used to generate thermal power. It is estimated that costs per unit of thermal power generated from gas powered plants is Tsh 65 (5.5 US cents) in comparison with Tsh 96 (12 US cents) the country incurs to generate power from other sources. This lower cost will reduce power costs and the country’s over-reliance on unreliable and expensive hydro and oil power generating sources. Consequently, the government will save close to US$1 billion annually in heavy oil for electricity generation. From January 2013, the Tanzanian Government reduced the cost and issued new charges for service line within 30 metres and with one pole: For rural areas, the electricity connection fee dropped by about 60 percent and 75 percent whereas for urban areas the connection fee dropped by about 29 percent and 60 percent. Special attention given to dwellers in Southern regions of Lindi and Mtwara will see them pay USD 62 for both single-phase and three-phases which is likely to spur growth of small businesses within the regions. The project will help Tanzania fulfil some of the goals that are stipulated in the Tanzania Development Vision 2025. These include the availability of a reliable electric power supply, expansion and increase of the industrial spectrum, cleaner environment, employment creation, extended natural gas usage, availability of clean water and the use of petrochemicals in Tanzania’s industries. According to the TPDC, the project is in the final stages of construction and what is left is the testing stage that would be carried out between January and June 2015. On completion, the project will enhance the sustainability of electricity generation and, hence, improve the national economy. The outcome of the work will provide a basis for concluding an immediate Gas Sales Agreement to supply to consumers and for future development of the Mnazi Bay and Msimbati gas fields.

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