Monday 21 October 2013

Re: [wanabidii] Why Natural Gas isn’t Likely to be Tanzania's Economy Liberator

Mtaalamu Mataragio wanastahili kutusaidia namna ya kufaidi hii gasi asilia, lakini si kutukatisha tamaa hivi. kumbe with good investment and marketing gas can be consumed within Tanzania and countries arround. If this can be so and with good promotion of protecting our environment (forests) people can use Gas. We can slowly replace petrol vehicles with LNG using cars etc. Improving domestic use of natural gas first because this has multible benefit.
I think these are langeages we need to hear from our leaned experts. If other countries benefitted from this resources why not Tanzania?

From: Abdalah Hamis <hamisznz@gmail.com>
To: wanabidii@googlegroups.com
Sent: Monday, October 21, 2013 9:05 AM
Subject: [wanabidii] Why Natural Gas isn't Likely to be Tanzania's Economy Liberator

Why Natural Gas isn't Likely to be Tanzania's Economy Liberator
 
In recent years we have been hearing from the media and politicians about the many benefits of newly discovered natural gas and how it will dramatically transform people's lives and significantly contribute to the national economy.
 
As I write people's lives have been lost following a recent uprising from Mtwara and Lindi, protesting for government's decision to build a pipeline which will transport natural gas to the capital Dar es Salaam.
 
Last month alone we have read a more intensified and personal battle between some prominent bussiness men on one side and the government on the other side, and it is all about who gets a share of this national cake. The struggle and high expectations between citizens on one side and the central government on the other hand is a clear indication that stakes are very high all across the board and nobody wants to be left out of what is at least for now is thought to be an alternative economic liberator after we have messed up the mining contracts.
 
Although expectations for changes are so high, however the truth is that many Tanzanians who are counting on natural gas to resolve their economical worries are "counting their chickens before they are hatched".
 
To be able to understand why I personally think natural gas discovery in Tanzania may end up being just a big disappointment, we need to understand how capital expenditure, marekts and competition will play part.  In this article I will briefly discuss these four factors that are key to understanding prior to making any conclusions as to whether or not the natural gas will be our economical savior. These factors are capital expenditure, markets, and competition.
 
Capital Expenditure (Capex) needed to establish Infrastructure for natural gas distribution
In many ways, natural gas consumption is tied up to other things that are happening in the economy. An economy that is industrializing rapidly will easily be able to consume more natural gas than a decline economy.
 
Natural gas is a fuel that requires a lot of infrastructure in order for anything to happen, as a result, it needs a lot of up-front investment. It also needs changes on the consumption side (requiring further investment) that will allow natural gas to be widely used. Excessive initial capital investment requires initial massive production to pay for huge up -front capital expenditure. Tanzania's economy as it stands is not as strong to support such a massive injection of capital investment to support large consumption of natural gas within a relatively short period.
 
Lack of Domestic and Regional Markets
In order for a country to consume a large proportion of natural gas produced, a considerable initial amount of capital investment is needed. A network of new pipelines has to be built to connect regions, districts and neighboring countries where the gas will be sold and consumed in large amounts. If that happen consumption will grow and boost more production. Homeowners and business may need to purchase gas-fired equipment to raise demand. If it is decided to use natural gas vehicles, there is a need for the new vehicles themselves, plus service stations and people trained to fix the new vehicles.
 
Lack of needed infrastructure will create a dismal market and hence low production. To offset this, natural gas will have to be shipped abroad where larger markets exist.
 
External Market (Europe) 
Lack of infrastructure and capacity to consume more natural gas domestically means that the natural gas will have to be shipped abroad where existing infrastructure supports large consumption of natural gas. If that happens, additional facilities such as storage conversion facility that will convert natural gas into liquefied gas before it is shipped in tankers. Liquification of the natural gas into LNG is usually an expensive and a complicated process.
 
Competition 
The total costs that will be involved in building large storage facilities, turning the natural gas into Liquefied Natural Gas (LNG), and shipping costs will significantly add up to the final price of the natural gas produced in the country. This will make our natural gas less competitive compared to other natural gases produced elsewhere.
 
James Mataragio
Senior Geoscientist
Minerals and Energy
 
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