Bright Future for Natural Gas in Tanzania Amid Growing Demand

By Alfred Zacharia

Tanzania's appetite for natural gas is surging, as the nation seeks to capitalize on its economic benefits and lower carbon footprint compared to other fossil fuels. In 2023, the country's revenue from locally sourced natural gas soared by 20 percent, reaching TSh 961 billion, up from TSh 801 billion in the previous fiscal year, according to the Energy and Water Utilities Regulatory Authority (Ewura).

The Natural Gas Sub-Sector Performance Report for 2023 released by Ewura show that the growth is largely driven by the new gas-fired power plant, Ubungo III, and an increased reliance on natural gas for power generation, compensating for shortfalls from hydropower due to inadequate rainfall.

"More industries, institutions, and households are expected to connect to natural gas infrastructure, underscoring its role as a crucial energy source," the report highlights.

Natural gas consumption in Tanzania spans various sectors, with significant usage in power plants, industries, vehicles, and households. For instance, natural gas sold to the Tanzania Electric Supply Company (Tanesco) averaged $5.36 per MMBtu at the Mtwara power plant, while the average price for the Tanzania Petroleum Development Corporation (TPDC) was $4.08 per MMBtu. The energy source now accounts for over 70 percent of the power supplied to the national grid, with 51,609.78 MMscf used in power generation last year alone.

Industrial usage also remains robust, with 54 industries consuming 11,540.83 MMscf of natural gas, paying $8.24 per MMBtu. 

The use of compressed natural gas (CNG) for vehicles is on the rise, with three CNG filling stations reporting a 146 percent increase in refueling activities, totaling 178,773 in 2022/23 compared to 73,659 the previous year.

Ewura has issued approvals for three new CNG filling stations, with two already operational in Tazara and near the airport. Additionally, TPDC is constructing an integrated CNG filling station and conversion center on Sam Nujoma Road, expected to be operational by February 2025.

Household and institutional consumption of natural gas has also seen an uptick, with 1,514 households and eight institutions using the resource. The ongoing Mwenge-Mbezi trunkline project and gas supply connections to the Saphire Floating Glass Industries in Mkuranga are expected to further boost demand.

However, the sector faces challenges. The report notes that demand for natural gas exceeds current supply due to limited gas well production and declining well pressure, particularly at the Songo Songo gas field. This situation calls for new and existing gas block developments. Additionally, the reliance on natural gas for power generation highlights the need for a more balanced energy mix, incorporating renewable sources such as geothermal, wind, and solar power.

The report also underscores the shortage of CNG stations amidst a growing number of natural gas vehicles, leading to long queues and congestion. Ewura and other stakeholders are working to promote CNG investments and attract more private investors through incentives.

As Tanzania continues to expand its natural gas infrastructure, the future looks bright for this burgeoning sector, promising economic growth and a cleaner energy landscape.