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IFC loan boost for gas-to-power projects in Tanzania


The World Bank’s International Finance Corporation (IFC) is to provide a $60 million loan to PanAfrican Energy Tanzania to help further the development of Tanzania’s offshore natural gas reserves and boost electricity supplies through gas-to-power projects.

The IFC said the funding to PanAfrican, a subsidiary of the Orca Exploration Group, will be used to fund work in the Songo Songo gas field, about 15 kilometres from the mainland and around 200 km south of Tanzania’s commercial capital of Dar es Salaam.

Head of natural resources for the IFC, Lance Crist said: "The Songo Songo field is Tanzania’s most important source of proven natural gas production, and is the largest supplier of energy to the Dar es Salaam region."

"Through this investment, IFC is working to help to alleviate electricity shortages in Tanzania, which are an impediment to the country’s continued economic growth and development," Crist said.

According to the IFC, only 38% of Tanzania is electrified, "with demand for electricity growing nearly 15% per year". Developing natural gas reserves for gas-to-power projects "will help the country diversify its power supply which is currently heavily reliant on hydropower facilities, which can be unreliable during droughts", the IFC said.

Orca’s chairman and chief executive officer W David Lyons said: "This investment enables Orca to undertake urgently needed development of the Songo Songo field and safeguards Songo Songo’s future as an important part of Tanzania’s energy security."

The Songo Songo gas-to-power project was originally established in 2001 as a public-private partnership with the support of the World Bank. The IFC said the project "covers the gamut of exploration, development and production of gas, followed by transportation and distribution of gas for power generation, and includes sales of gas to industrial and compressed natural gas users".

An African Development Bank report published this year (72-page / 3.56 MB PDF) said Tanzania’s electricity consumption per capita based on 2014 figures is 104.79 kilowatt hours, but "demand is increasing rapidly owing to accelerating productive investments", driven mainly by industry and mining, and an increase in consumption by connected users and newly-connected households.

The report said Tanzania’s national electricity access rate in 2014 was 36% (11% in rural areas) and a 'power system master plan' updated in 2012 expected the country to reach 75% by 2035. However, "changing rainfall patterns and recent droughts have dramatically reduced large hydropower output", the report said. This has resulted in extensive load shedding and "the running of expensive emergency fossil fuel-based power plants as base load".

Tanzania’s high commissioner to Zambia Grace Mujuma was reported as saying earlier this year that, because of unexpectedly low levels of water in the country’s reservoirs, several hydropower plants had been taken out of service. She said "natural gas will help in cushioning the unprecedented electricity shortage" in the country.

An African Development Fund loan of nearly $150m was granted last February to enable the construction of a 508-kilometre electricity transmission line between Tanzania and Kenya aimed at boosting regional integration through the power trade market.

Last month, Tanzania’s president Jakaya Kikwete commissioned a 535-kilometre pipeline connecting offshore natural gas fields to Dar es Salaam. The pipeline was built with a $1.25 billion concessional loan from the Export-Import Bank of China.

The director-general of the Tanzania Petroleum Development Corporation James Mataragio told Chinese state media that the pipeline had the capacity to transport 210 cubic feet of natural gas a day from Msimbati, in Tanzania's southern region of Mtwara, to Kinyerezi in Dar es Salaam.

According to the government-supported Tanzania Investment Centre, the country has more than 41 trillion cubic feet of gas reserves based on latest estimates (54-page / 5 MB PDF).

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