30 July 2013

Tanzania: How Ready Is Dar es Salaam to Reap From the Gas Boom

THE country's preparedness for the imminent gas economy was the main subject that dominated discussions during the breakfast meeting in Dar es Salaam over the weekend on the best use of natural gas discoveries in the southern regions of Lindi and Mtwara.

The Bank of Tanzania (BoT) and Rex Attorneys, a city based law firm, co-hosted the meeting as part of a series of such discussions to strategise on maximisation of benefits from the newly discovered resources that are likely to fast track the country into a middle economy by 2025.

"We were not ready for the mining boom and it seems we're still not yet ready for the gas economy... and that explains why there are concerns over the country being shortchanged in the mining sector," observed one participant to the meeting that involved members of the media as well.

Tanzania is estimated to have 42 trillion cubic feet (tcf) of recoverable natural gas reserves in the southern regions. Discoveries offshore of Tanzania and Mozambique's waters have led to predictions that the region could become the world's third-largest exporter of natural gas. And as expected, investments are already soaring.

According to the World Investment Report 2013, Tanzania registered 869 investment projects worth 1.4 billion US dollars (over 2trn/-) in 2012, ranked second after Uganda which led in attracting Foreign Direct Investments in the East African Region.

How is the government prepared to manage the new found wealth in terms of formulating the right policies, instituting regulatory mechanisms and helping in inculcating the right mentality to the people as far as the impending gas economy is concerned?

There are new developments from the government, which has revised the energy policy to cash in from the gas boom. It has come up with the 2013 draft of the natural gas policy that seeks to channel the benefits of the boom to the people.

The draft policy paper proposes for gas companies to list on the Dar es Salaam Stock Exchange (DSE) as well as creation of Gas Revenue Fund; National Oil and Gas Company and locating plants onshore to liquefy the gas from the offshore fields.

The draft policy also envisages using gas sector growth to support investments in other sectors of the economy including supporting private sector participation for rapid development of strategic industries such as petrochemicals, steel and other energy intensive industries.

With the draft policy in the final stages, construction of a 532 kilometre pipeline that links Mtwara gas fields to Dar es Salaam is underway, with the government having secured a 1.2 billion US dollar loan from the Chinese government-owned Export-Import Bank.

China Petroleum and Technology Development Company, a unit of China National Petroleum Corp and the state-owned Tanzania Petroleum Development Corporation (TPDC) are jointly executing the project.

As the draft policy stipulates the gas industry to stimulate more investments in the region, a 500 million US dollar (over 800bn/-) cement plant from Nigerian investor Dangote is under construction in Mtwara.

The cement factory, described as the largest in Sub Saharan Africa, will have the capacity to produce about three million metric tonnes of cement annually.

Speaking at the ground breaking ceremony to launch the plant construction, Prime Minister Mizengo Pinda said over 50 factories were expected to be constructed in the gas endowed region of Mtwara.

The premier cited some of the industries lined up for construction as three radio and television stations as well as two agricultural industries. Others are a fertilizer factory, seven cashew nut processing plants, two building equipment manufacturers, two water plants, three cement industries, one plastic industry, one industry for manufacturing of blade, two oil producing industries, one plant for manufacturing fishing boats, fourteen tourism industries and eight transport equipment production industries.

The industries that are on pipeline have so far started stimulating social and economic development in the regions amid one pertinent question: How do Tanzanians position themselves to cash in from the gas boom?

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