Saturday, 26 January 2013

The Natural Gas debate: An initial critical look at Tanzania's options

I will be the first to admit that I lack a qualified background to make recommendations on the strategy that Tanzania should pursue with regards to development of its natural gas reserves. This together with a lack of details of proposed deals from the government make it exceptionally difficult to compare the two main strategies being considered by the Tanzanian government. But a critical examination of the two main strategies needs to be conducted to determine which is the best one to pursue.

The two main strategies are:

1. Build a 300 MW natural gas electricity generation plant in Mtwara and transport the electricity by 1,100 km of high voltage power lines to connect to national grid in Singida. (Source: Press release, President's office, October 2011)

2. Build 990 MW electricity generation capacity and 530 km natural gas pipeline to transport natural gas under high pressure from source in Mtwara to Dar es salaam. (Source: Daily News)

The two strategies are compared in the table below:

(For the physicists in the house; correct me if I am wrong: Power losses = I^2 X R where I = current R = Resistance. 300MW at 300kV gives us operating current of 1000A. Lets assume (a very low figure) of 0.1ohms per km of wire. With 1100km this gives us 110 ohms resistance. Power loss= 1000^2 X 110= 110MW or 30% of total capacity. Natural gas pipelines leakage rate about 5%, US reported figures about 2% Source: SourceWatch)

Uhuru Blogs recommendations are as follows:

The proposal to build the natural gas pipeline to Dar es salaam appears to be more economically viable because of increased power generation capacity, lower capital costs per MW generated, generation of power in close proximity to where demand is highest.

Additionally, with stronger regional ties within the EAC, transport and sale of excess natural gas capacity will benefit Tanzania with increased revenue. On the other hand, transporting of excess natural gas capacity from Mtwara will require additional capital expenditure in improved roads, storage facilities etc to send the natural gas to the major markets in the North.

The major concern is that Mtwara will lose out on the benefits of natural gas, which can be solved in the following ways:

1. Set aside a percentage of natural gas receipts to be used solely for development in the Mnazi Bay and Mtwara region to increase employment and economic activity in the region.

2. Build smaller generator plants (e.g 50MW plant) in the South which will be more than enough to provide electricity for that region and stimulate growth of industry.

Ultimately, we have to understand that natural gas capacity in the South of Tanzania is far greater than local demand and current electricity generation required  We need to think of what is the most cost-effective and useful means to utilize natural gas for electricity generation and exporting additional capacity. And that way is to transport excess natural gas for electricity generation and sale in the Dar es salaam region.

Comments and criticisms welcome.


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