AMBITIOUS Government plans to convert the 100-megawatt diesel-fired turbines under the Independent Power Tanzania Limited (IPTL) project to natural gas consumption in a bid to cut down on costly fuel imports and subsequently lower the country’s current power tariffs have hit a stumbling block.
According to official figures, IPTL-generated electricity currently costs 170/- per kilowatt hour (kWh). This could be drastically reduced to just 26/- per kWh with the introduction of natural gas instead of diesel as the fuel to run the plant’s power generation machinery.
It is understood that under President Jakaya Kikwete’s instructions, both the Ministry of Energy and Minerals and the state-run Tanzania Electric Supply Company (TANESCO) have been engaged in efforts to implement the plan to convert the IPTL turbines from diesel to natural gas obtainable from Songosongo Island.
But it has now emerged that the plan to deliver enough natural gas to feed IPTL’s thermal power plant using existing infrastructure may not be logistically possible
The plant based in Tegeta, on the outskirts of Dar es Salaam, consists of 10 units of Wartsila diesel-fired engines.
TANESCO Managing Director Dr Idris Rashidi told THISDAY that in order to deliver enough natural gas to IPTL, the existing gas transmission pipe from Songosongo in Kilwa District, Lindi Region to Dar es Salaam has to be expanded.
Alternatively, new investment is needed to build a gas processing plant and transmission pipe from another source of natural gas at Mkuranga in Coast Region.
While Tanzania is known to have vast reserves of natural gas buried in the ground, the country still lacks the logistical capacity to extract the gas and transport it to Dar es Salaam and various other regions.
At a seminar for members of parliament jointly organised in Dodoma last week by TANESCO and the Energy and Water Utilities Regulatory Authority (EWURA), various experts noted how the lack of efficient gas delivery infrastructure is hindering the gas conversion plan.
Presenting an ambitious 22-year power generation plan to legislators at the seminar, Dr Rashidi said the gas output currently produced by Songas cannot meet the nation’s growing demand for power.
The TANESCO boss explained that even if the conversion of the IPTL turbines from diesel to gas were to be concluded as expected next year, a major headache would still remain on availability of gas.
The capacity of the pipeline currently connecting Songosongo Island gas deposits to mainland Tanzania is about 70 million cubic feet (two million cubic metres) per day, Rashidi said.
’’Out of the 70 million cubic feet of gas processed by Songas, some 62 million cubic feet is already being used for power generation. The remaining eight million cubic feet is for industrial use. This means that there is not enough gas to run the IPTL turbines once the conversion from diesel is done,’’ he told THISDAY.
Confirming that the Government is aware of the problem, the Minister for Energy and Minerals, William Ngeleja, said talks are ongoing between the Government and potential private investors to boost the volume of gas processed from Songosongo.
It would take 18 months for the planned capacity expansion, he said.
TANESCO currently pays more than 50 per cent of its current total revenues towards combined fuel and capacity charges for various independent power producers (IPPs), with IPTL and Songas claiming the lion’s share.
Experts say apart from the actual power tariffs, capacity charges for these two IPPs alone are equivalent to approximately one per cent of the country’s entire gross domestic product (GDP) or economic output.
Although the Government is understood to be currently assisting the financially crippled TANESCO in making the monthly payments in capacity charges, the terms of the long-term power purchase agreements between TANESCO and the IPPs mean that these costs are likely to continue for a long time to come - albeit with possible modifications due to refinancing, fuel conversion, and further development of the natural gas market.
Government officials say the country could save up to $6bn by 2024 through use of domestically-produced natural gas rather than increased oil imports for electricity generation.
According to Songas - a consortium that includes the state-run Tanzania Petroleum Development Corporation (TPDC) and Bermuda-based Globeleq - natural gas extracted locally has already saved the national economy some $1.2bn todate, which would otherwise have been spent on oil for power production.
Songas, which has been selling electricity to TANESCO since 2004, gets its gas from Songosongo Island off the Indian Ocean coast near Dar es Salaam, and generates about 190MW of power at its own plant.
The Government says Songosongo’s recoverable gas deposits stand at 850 billion cubic feet, while proven deposits - gas in place - are about 1.3 trillion cubic feet.
Estimated actual demand for natural gas in the country currently stands at between 100 million and 105 million cubic feet per day. Songas plans to expand its processing capacity from 70 to 140 million cubit feet per day by mid-next year.
Tanzania suffered serious power cuts nationwide in 2006 after drought slashed hydro-power production, and like many oil-importing countries it has also been battered by high global crude prices.
But the country’s vast natural gas deposits are yet to bring any significant relief.
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