The Tanzania Petroleum Development Corporation (TPDC) will on July 29 start trial tests on a new 542-kilometre long pipeline from Mtwara to Dar es Salaam for between 40 and 60 days.
The pipeline is expected to deliver higher volumes of natural gas for power generation and other applications.
Exploration firms have discovered about 55.1 trillion cubic feet of natural gas in offshore and onshore southern Tanzania.
“The gas processing plants and the natural gas pipeline will be ready for trial operation on July 29,” said TPDC managing director James Mataragio.
He said the Mtwara to Dar es Salaam pipeline will transport 80 million standard cubic feet of natural gas per day in September and the capacity is expected to rise to 1,002 million standard cubic feet per day.
Building of the facility was financed by a $1.2 billion loan from Export-Import Bank of China.
The construction of two processing plants at Madimba in Mtwara region and Songo Songo Island in Lindi region with a 36- inch natural gas pipeline from Mtwara through Somanga Fungu to Dar es Salaam started in June 2013.
The Madimba village plant has two trains (processing units) and Songo Songo Island two trains to handle 350 million standard cubic feet of gas per day. The Songo Songo-Somanga Fungu pipeline is 24 inches.
Initial production will be from the Mnazi Bay field wells in Mtwara. Total output of natural gas will increase to 130 million standard cubic feet per day in future. The Songo Songo field wells are expected to start producing 120 million standard cubic feet per day in October.
Mr Mataragio said the government wants natural gas to be used as a source of energy for generation of electricity, industrial applications, cooking in households and in vehicles as condensed natural gas.
The Tanzania Petroleum Development Corporation last year submitted to the Energy Water Regulatory Authority (Ewura) a proposal to charge $4.178 as the tariff for a million metric British thermal units of gas.
TPDC wanted Ewura to grant regulatory approval for the fee applicable to consumers in the category of power generation, industrial use, vehicles, households and institutions from January 1 to December 31, 2017.
The China Petroleum and Technology Development Company which was awarded the contract to build the pipeline with requisite facilities and was expected to complete construction work last year, faced technical challenges.
TPDC requires an appropriate tariff to service loans and recovery capital and operational costs of the project. The $1.2 billion loan from Exim Bank met 95 per cent of construction cost and the balance of $61.27 million is TPDC’s equity.
The project capital structure is 81 per cent debt and 19 per cent equity. TPDC has to get a reasonable return on investment as it incurred capital costs of $213.223 million resulting in equity of $274.492 million.
The pipeline tariff will be reviewed every three years and the Gas Supply Company (Gasco), a subsidiary of TPDC, will be the link between gas producers and users, responsible for processing, transport and distribution.
Gasco is expected to implement Dar es Salaam gas distribution in three years . There will be a penalty for a buyer who fails take agreed amounts of gas to meet off-take or pay obligations. Payment will be on 15th working day from due date.
The new pipeline will enable gas from Mnazi Bay and Msimbati fields in southern Tanzania — owned by Wentworth Resources Ltd with Maurel Prom — to be delivered to Dar es Salaam under an agreement signed with TPDC.