Sabahi (Washington, DC)

30 August 2013

Kenya: Geothermal Deal to Benefit Kenya and Tanzania

Nairobi — The recent landmark deal between Kenya and Tanzania to collaborate on geothermal exploitation is stirring optimism among entrepreneurs over the possibility of increased business opportunities in alternative power across the region.

"It is a huge investment opportunity for mechanical and civil engineers, electricians and geologists, just to mention a few," said Isaac Kiva, director of renewable energy at Kenya's Ministry of Energy.

The two countries signed the bilateral agreement in Nairobi on August 9th. Under the deal, Kenya's state-owned Geothermal Development Company (GDC) will provide Tanzania with technical expertise and training in geothermal power production to help to develop this alternative energy sector.

Geothermal energy comes from natural heat stored within the Earth that can manifest on the surface in the form of hot springs that can be tapped for electricity production, according to the Kenya Electricity Generating Company (KenGen).

The bilateral partnership is to begin in October, Kiva told Sabahi.

"Before geothermal fields are opened up for drilling, civil infrastructural works such as roads, electricity and water connectivity must be put in place," he said. "This, therefore, presents a golden opportunity for Kenyan firms to bid for business in an environment with little competition because of the bilateral trade nature of the agreement."

Kenyan companies to profit from the deal:

Kenyan firms stand to profit from supplying geothermal plant components, while an established company like the GDC could bid for a licence to develop exploration sites as well as bid to build geothermal power plants in Tanzania, Kiva said.

Tanzania boasts East Africa's longest volcanic rift, but it has not yet exploited sources of geothermal energy that lie there. The country has at least 50 sites with the potential to produce 650 megawatts of power, according to a November 2012 Status Report by the Geological Survey of Tanzania.

"Like the rest of East African Community member countries, Tanzania is desperately looking for alternative sources of power to fuel its growing commercial and domestic energy demands," said Jamleck Kamau, a Kenyan lawmaker who chairs the National Energy, Communication and Information committee. "We agreed to help Tanzania set up the right regulatory framework for geothermal exploration and development."

Kenya also agreed to analyse Tanzania's geothermal samples in its geological laboratories until Tanzania builds its own geological labs, Kamau told Sabahi. In addition, Kenya will help Tanzania conduct micro-seismic studies, drilling and environmental studies, among other activities.

"In return, Kenya's private companies will enjoy preferential treatment in bidding for the supply of technical geothermal expertise either as data analysts, geologists, environmental impact mitigation experts or general consultants," Kamau said.

Tanzania chose Kenya as a partner for geothermal development because of its 50 years of experience in the sector, he said.

Kenya's Olkaria I Power Station was the first geothermal power plant in Africa and generates 45 megawatts of power, while the Olkaria II Power Station currently is Africa's largest geothermal power station generating 70 megawatts, according to KenGen.

Last year, Kenya started construction on Olkaria IV, which is expected to surpass Olkaria II as the largest geothermal plant in Africa, producing 280 megawatts when it is completed in 2014.

Geothermal a 'win-win' deal for East Africa:

Kenyans who own geothermal companies are excited by the bilateral deal.

"This agreement presents a win-win situation for both Kenyans and Tanzanians," said Ajay Shah, managing director of Geothermal Explorations Limited. "As an owner of a geothermal exploration company, this Kenya-Tanzania geothermal pact opens a new business frontier for me and many others."

"We hope to go beyond geothermal partnerships and collaborate on bilateral areas such as higher education, infrastructure development, and information and telecommunication," he told Sabahi.

Shah expressed hope that the agreement would speed up harmonisation of trade policies and tariffs between the two countries.

"For sure, Tanzania is sitting on a priceless natural asset. A site like Ngozi Crater Lake is an example of untapped geothermal resource, which I approximate has temperatures in excess of 220 degrees Celsius, which is adequate for supporting [a] 100-megawatt [plant]," Shah said. "Other parts in Tanzania that have huge potential include Lake Ngozi, the Mbaka River and Songwe around the Mbeya region."

Geothermal energy is more reliable, cost effective and friendly to the environment, he said.

"Should Tanzania fully exploit its geothermal capacity, the surplus geothermal power will be sold to Kenya at friendly tariff rates, which will benefit Kenya and the East African region in general, thus helping alleviate the perennial power shortages," lawmaker Kamau said.

"Helping Tanzania exploit its full geothermal potential is a power strategy for Kenya's ever-expanding industries viewed against the backdrop of Vision 2030," he said, referring to Kenya's long-term development plan.

The bilateral partnership will start with Tanzania sending four top geologists for extensive training at the Geothermal Development Company, GDC Corporate Communication and Marketing Manager Ruth W. Musembi said. The number of Tanzanian scientists receiving training at GDC will increase as their country's geothermal projects expand, she said.

"Since Kenya has more than 50 years of experience in geothermal sector, the two countries will collaborate on other issues like drafting geothermal legal policies and a regulatory framework, which is the priority area before issuance of geothermal exploration permits," she said.

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