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Government investors discuss Songosongo...
2007-02-22 10:06:27
By Judica Tarimo
The government and strategic investors on Tuesday started official negotiations in Dar es Salaam on the expansion of the Songosongo gas project, as experts predicted a sharp increase in the demand for gas-for-electricity production in the country.
Investors-Songas, PanAfrican Energy and the state-owned Tanzania Petroleum Development Company have long made public their expansion plans that seek to double gas production from the present 70 million standard cubic feet a day.
The installation of some equipment has started alongside various other preparatory works at the project site, Songosongo Island in Lindi Region, although investors have made a number of demands that could delay the project implementation.
The demands the investors want the government and other stakeholders to meet include getting liquidity funds to the tune of 5 million US dollars, having the Tanzania Electric Supply Company (Tanesco) commit itself to a long-term gas supply agreement of sufficient duration, and there being a reasonable price for the gas by the end of next month to justify the envisaged expansion.
Yet other demands are a commitment by all stakeholders by the end of next month to expand the capacity of the Songosongo system in accordance with the memorandum of understanding signed in December 2006, and approval by the Energy and Water Utility Regulatory Authority of aspects of the gas pricing under its jurisdiction.
Prime Minister Edward Lowassa visited the project site at Songosongo on Tuesday for first-hand information on the expansion strategy from Songosongo project officials and an eyewitness account of the on-going expansion activities.
He could not say whether the government would release the money, and if so how soon, but instructed the investors to meet in Dar es Salaam on Tuesday for an appraisal of the demands and the viability or otherwise of the new investment proposals.
`There are number of demands that might delay the project, including lack of liquidity fund, which is 5million US dollars from the government,` PanAfrican Energy managing director Pierre Raillard said.
For his part, Energy and Minerals ministry permanent secretary Arthur Mwakapugi explained that the expansion proposal was triggered by increased demand of gas-for-power production in the existing plants and the hired generators located in Dar es Salaam.
TPDC engineers interviewed at the site said demand of gas-for-power production could rise from around 60 million to between 125 and 130 million standard cubic feet per day, justifying additional investment to process more gas.
The government`s commitment to release the 5 million US dollars in liquidity funds as well as meet other demands would attract additional investment leading to the installation of more gas processing equipment and other machines.
The project is expected to be completed by end of this year but it remains unclear when negotiations between the government and investors will be finalised, hopefully with agreement on the terms and modalities of the implementation of the project.
`Both sides are keen to see how they will benefit from the project. The government wants to get details on the technicalities of the project, while investors want to be assured of economic gains,` said a Songas source in an interview with The Guardian at Songosongo.
Investors have expressed their readiness to pour money into the project, with PanAfrican Energy alone planning to make additional investment to the tune of 20 million sterling pounds this year, according to Raillard.
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