Tanzania’s National Environmental Management Council has approved the $1.2 billion Mtwara gas pipeline and processing plant, putting the project on course for commissioning next year.

According to the Tanzania Petroleum Development Corporation (TPDC), a right of way for the project has also been acquired and the geotechnical survey and testing for the sites is 95 per cent complete.

The project will involve construction of a gas pipeline that will connect almost all natural gas reserves discovered in Tanzania.

It entails building of three expandable gas plants each with a capacity of 70 million standard cubic feet a day at Madimba, Mtwara and two expandable plants of similar capacity at Songo Songo Islands.

Owing to a mix-up last week, The EastAfrican reported that the government had backed down on the construction of the pipeline following the signing of a memorandum of understanding between the Tanzania Electric Supply Company (Tanesco) and a US-based energy firm, Symbion Power, to build build a 400MW plant in Mtwara.

The government is undertaking the two separate projects in a bid to diversify its energy sources from the unreliable and expensive hydro and oil sources.

Construction work on the 400MW plant, to be built under a private-public partnership, is scheduled to start next year, with the project slated to take three years. The project is a joint venture between Tanesco and Symbion Power.

“Our first initial rough estimate of the cost of this entire scope will be $900, but further studies will determine the actual costs,” said Paul Hinks, chief executive officer at Symbion Power adding that the actual figures will only be known sometime in April after completion of engineering and financial studies.

The power plant under the Tanesco and Symbion deal will be 100 per cent owned by a Special Purpose Company to be formed by the two firms. The two companies hope to secure funding by the end of the year.

“Symbion and Tanesco will be working with a number of international funding agencies, banks and private equity firms this year in order to put projects financial package together,” said General (Rtd) Robert Mboma, a board director at Tanesco told The EastAfrican.

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Already, added Mr Mboma, the US Exim bank and the US Overseas Private Investment Corporation had indicated interest in financing the project. TPDC is already building a similar project which will cost in excess of $1.2 billion dollars.

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Faced with an energy demand that is growing at between 11 per cent and 13 per cent per year, Tanzania has embarked on plans rack up its power output with the country keen on tapping some of the estimated 40 trillion cubic feet of natural gas discovered on its territory.

TPDC is currently building gas pipelines that will connect almost all the country’s natural gas reserves –both on shore and offshore-as well as building four gas processing plants with a capacity for 280 cubic feet of gas.

The natural gas is used to heat water with the resultant steam used to generate thermal power. It is estimated that thermal power generated from the gas powered plants costs Tsh65 (5.5 US cents) per unit compared with Tsh96 (12 US cents) the country incurs to generated power from other thermal sources.

Power from the new project is expected to cost even less considering that the transmission lines will be owned exclusively by Tanesco and thus the costs that a private investor would normally pass on to consumers will be borne by the government owned utility firm.

The Mtwara project comes amid increased demand for power in the region occasioned by commercial gas exploration and the growing investments in the country’s mining industry.

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Statoil last week indicated it will start works on a $15 billion liquefied petroleum gas plant in the region within the next five years, a development that will demand huge power supply.

“With a natural gas reserve of 9 tcf and the potential to increase that figure with future discoveries, I’m confident come 2020 we will commence a $15 billion LNG onshore plant in Tanzania,” said Rasmussen Bjorn, Statoil’s Tanzania country manager. 

Additional reporting by Adam Ihucha and Peterson Thiong’o