New gas finds in lower-income Africa--the case of Tanzania.

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There has been great excitement in recent years about the huge oil and gas finds, offshore and onshore, in a number of lower- and lower-middle-income countries such as Mozambique, Tanzania, Uganda and, more recently, Kenya. The scale of the potential reserves, future production levels and government revenues associated with these finds is substantial relative to the size of these economies.

The prospective levels of new foreign direct investment (FDI) to develop the fields would dwarf almost any previous investment in those same countries. For example, in Tanzania the prospective investment in offshore gas by just one company--BG Group (now part of Royal Dutch Shell)--could be some 5 times higher in future years than even the highest annual FDI flows seen in the past. But, of course, the excitement has been dampened significantly by the sharp decline in world oil and gas prices during the past 2-3 years: this has already caused significant delays and will inevitably cause some investment plans to be mothballed.

Price declines are not all bad news

However, the news in this new environment of softer prices is not entirely bad. The Tanzanian example shows that the smaller volumes of new onshore and near-shore gas are capable of delivering significant macroeconomic and social benefits quite quickly even if offshore projects are not. Many of the huge offshore projects--such as that being considered by the BG Group and Ophir--require huge scale and for this reason require also that a high percentage of total through-put be sold on world export markets after processing into products, such as liquefied natural gas (LNG). They are also likely to be long delays before production can begin. However, new onshore and near-shore finds by the French--Anglo consortium of Maurel et Prom and Wentworth Resources were able to deliver their first gas from Mnazi Bay in August 2015. They will quickly have the capacity to deliver more than100 mmscfs/d; i.e. significantly more than the existing through-put from the older established Tanzanian field at nearby Songo Songo, which itself is expected to increase its throughput. The gas from Mnazi Bay (south of Dar es Salaam) is already having major impact on Tanzania's capacity to generate electric power and on its macroeconomy.

The domestic energy situation in Tanzania is currently very poor. Power supply is not widely available, and even where available it is unreliable. Most of the country is not connected to the...

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