Compromise will be key to Tanzania’s gas ambitions

Significance There is fresh enthusiasm for the project from President Samia Suluhu Hassan’s new administration, but project economics mean a deal will remain difficult to finalise. Impacts The government has accorded high priority to this project, suggesting it may be willing to offer the necessary compromises to make it work. Lower-than-projected domestic supply of gas could hasten power sector reform and create more opportunities in renewables. Regulatory authorities, which were weakened under the previous administration, will be strained by the demands of energy sector reform.

Significance There is broad consensus that security sector reform is necessary, but lingering concern that the government lacks a coherent plan, and will end up being distracted by other issues. Impacts The economic crisis resulting from the debt crisis will continue to put the government under severe fiscal pressure. Small amounts of gas should begin to be exported in 2022, but uncertainty over the timelines for larger projects will persist. Mozambique’s relations with neighbours should continue to improve over the immediate term.


2006 ◽  
Vol 17 (4) ◽  
pp. 39-56 ◽  
Author(s):  
K Gratwick ◽  
R Ghanadan ◽  
A Eberhard

Initially conceived of within the broader context of power sector reform in the late 1980s and early 1990s, Independent Power Projects (IPPs) were intended to relieve state utilities of the burden of financing new plants, bring quick, quality power and reduce costs for end-users. Although IPPs have indeed contributed to generation capacity in Tanzania, much of the power that resulted from investments has been supplied neither quickly nor cheaply. Embarking on power sector reform in the early 1990s, Tanzania made IPPs a pillar of its reform strategy. Presently, Songas and IPTL, the country’s two IPPs are helping to reduce load shedding. However, these projects have not been without controversy. One of Tanzania’s IPPs was taken to international arbitration over a dispute related to construction costs. The state electric utility, Tanzania Electric Supply Company Limited (TANESCO), currently pays more than 50% of its current revenue towards combined fuel and capacity charges for the IPPs. Capacity charges for the country’s two IPPs are equivalent to approximately one percent of GDP. The Government of Tanzania (GoT) is intervening to assist TANESCO with its monthly IPP payments at present. With twenty-year Power Purchase Agreements (PPAs) between IPPs and TANESCO, these costs are expected to continue, albeit with some modifications due to refinancing, fuel conversion and further development of the natural gas market. This paper provides a detailed summary of how and why IPPs developed in Tanzania as well as their impact to date. Development outcomes, namely the extent to which the host country is benefiting from reliable, affordable power and investment outcomes, the degree to which investors have made favourable returns and been able to expand market share, are analysed in turn. IPPs offer more than a decade of experiences in private sector investment in developing countries and a detailed understanding of them may be the key to unlocking and sustaining future power investment.


Subject Outlook for the Central African Republic's peace process. Significance Three months after signing a peace agreement with the country’s main armed groups, President Faustin-Archange Touadera continues to emphasise his commitment to the deal. However, some rebel groups have denounced the government’s concessions as insufficient. For their part, rebels seem more interested in further negotiations than implementing peace. This raises the risks that the flaws in the agreement could become increasingly exposed. Impacts Armed violence will likely continue until the new government is respected by all parties, which may prove challenging to achieve. A sustainable transition to peace will require credible measures for restorative justice, security-sector reform and economic recovery. The government will look to secure more financial and technical assistance from its regional and international partners.


Significance This is the first time that an opposition party has won a multi-party election in Nigeria. Popular support has never before trumped the advantages of incumbency which have historically been used to rig or win elections. The impartiality of the Independent National Electoral Commission (INEC) and the clear margin of victory give a strong and legitimate mandate to the incoming government. Impacts After pulling off a credible election in difficult circumstances, Nigeria may seek to re-assume its moral regional leadership role. The government and armed forces will be given renewed confidence to tackle Boko Haram, possibly with more international support. Policy focus will have similarities (eg electricity and agriculture) but also differences (eg youth employment and security sector reform). Without being hampered by corruption and low public support, the APC should be better placed to deliver.


Significance Spain has been harder hit by rising prices than other EU states. The governing Socialist Party (PSOE) and Unidas Podemos (UP) have clashed over the appropriate response, with the latter favouring partial nationalisation of the energy sector. The governing parties also are at odds over pension reform, the environment and labour policy. Impacts With Spain responding first to the international energy price crisis, its measures will face close EU scrutiny. High household electricity bills are particularly affecting working-class consumers, many of whom vote for the governing parties. The government is unlikely to repeal 2012 labour reforms that have had the effect of liberalising the labour market.


Significance This chokes off an unexpectedly strong economic recovery in the first half of 2021. Meanwhile, unemployment has hit a record high at 35%, or 47% according to the expanded definition which includes people who have given up looking for work. Impacts Without higher economic growth, the unemployment rate will not substantially improve. The combination of low growth and high unemployment heightens the chance of further violent unrest. The government will have difficulty sticking with debt reduction plans without further dampening growth. Planned reforms in the energy sector could ease some of the country’s electricity woes in the medium term.


Significance The government is trying to transfer the benefits of low international crude prices to customers without jeopardising the finances of Pakistan's oil marketing firm. It hopes that its moves will restore its public image after a debilitating petrol crisis in January. However, this may prove optimistic: the January crisis exposed the government's continued failure to reform the energy sector, despite power and fuel shortages holding back overall GDP growth. Impacts The IMF will transfer the next tranche of around 560 million dollars to Islamabad, despite insufficient reform. Inflation will decline with the fall in fuel prices, although the sales tax rise will be a partial offset. The cash-strapped government will not invest in upgrading energy infrastructure; private enthusiasm is likely to be limited.


Subject Ghana oil and gas update. Significance Ghana has started acquiring geological data ahead of an oil and gas licensing round planned for year-end. Authorities wish to make the licensing process and the overall industry more transparent, although the most promising acreage may already have been handed out. Industry interest has been boosted by the recent arrival of ExxonMobil and last year’s ruling on the maritime border with Ivory Coast, while gas is playing a growing role as the government assesses future domestic energy needs. Impacts A licensing round will focus attention on Ghana’s deep-water exploration potential after recent successes offshore Senegal and Mauritania. Further exploration and development work on existing licensed acreage is also expected following the Ivory Coast border ruling. Harnessing domestic gas for the power sector will benefit the overall economy by making electricity supply cheaper and more reliable.


Subject Renewable and coal energy in China. Significance Late last month, China upgraded its target for renewable energy and issued a draft plan for green energy certificates. This follows a new three-year anti-pollution plan issued in July. These strategies to clean up the energy sector are being pursued at the same time as the government is introducing competition in the power sector, planning a nationwide carbon trading market starting with the power sector and reinforcing its clean energy policy. Impacts Central government will press hard on local governments across northern China to fight air pollution. Natural gas imports will rises, especially once new LNG gasification and import pipeline capacity comes onstream over the coming year. A new 'green certificate' scheme should boost the share of renewable energy in China’s electricity supply. The continued growth of coal-fired generating capacity may blunt the influence of the green certificate scheme.


Significance The government is pressing ahead with key developments in the energy sector. These include attempts to boost electricity supply and reduce dependence on Iranian gas and power. Impacts Washington will continue supplying sanctions waivers, fearing the effects of instability. Compliance with OPEC cuts will be weak. Cooperation on exports of Kirkuk oil to Turkey via the Kurdistan pipeline may expand. New oil field development and infrastructure projects will not have a significant impact this year.


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