Got seeks new arrangement as Songas project pact ends 2024

19May 2022
Francis Kajubi
The Guardian
Got seeks new arrangement as Songas project pact ends 2024

​​​​​​​A GAS-driven electricity generation accord with Songas ending in June 2024 will not be renewed, the Ministry of Energy has declared.

Stephen Byabato.

Stephen Byabato, the deputy minister, made this affirmation in response to a question from Jesca Kishoa (Special Seats-contested) who demanded affirmation that such agreements are not entered again.

The contract came up as the Songosongo gas offshore unit was coming up, and was used to diminish reliance on hydropower production as it was insufficient, or heavy fuels imported from outside.

With the completion of the Julius Nyerere hydropower project and a few others on waterfalls, contractual electricity supply is no longer a vital option, precluding any extension of contract from July, 2024.

There is a possibility that the government and the power producer reach an accord on how the facility will be utilized, he stated, intimating that the terms thereof will have to be a lot more favorable to the government.

Experts believe that a new contract would at most involve an energy charge without a capacity charge, as the purchasing and operational cost risk for which the capacity charge was intended has been overly compensated in the 20 years in which the plant is used, via the 2004 contract.

At the same time a review team has been formed involving the power utility - TANESCO, the ministry and the Attorney General’s Office to look into the matter, as passing the facility outright to TANESCO is among relevant options.

In her remarks, Kishoa argued that the current agreement is exploitative upon the country’s natural resources in the gas sub-sector, lacking transparency as to its investment costs, shareholding structure and capacity charges.

That is why was it so difficult for the ministry to execute the Tanzania Extractive Industries Act of 2015 that stipulates among other inputs that all agreements entered in the energy sector should be transparent, which ordinarily implies being scrutinized by the relevant parliamentary committee.

“Why is the law not being executed in this regard?” the MP demanded, while her (contested) colleague Esther Bulaya suggested that the ministry should review all major contracts it signed with foreign companies.

It seems they were all signed under the influence of unspoken intentions, she asserted, adding the Nyerere hydropower project under the same suspicions, demanding that the review should start with the contract the government has entered in construction of the Stiegler’s Gorge project.

Songas was conceived as a least-cost thermal power supply project under the 1991 power system master plan, implemented after a thorough international competitive tender.

Online sources affirm that Songas ownership fields Global, a South African firm based in Cape Town, which owns 54.1 percent, while a number of public agencies, namely TANESCO, TPDC and TDFL hold around 40 percent of Songas.

Of the various power generation contractual projects of two to three decades ago, Songas had the best PR and was fully supported by the World Bank, raising few queries in the legislature for that matter.

As of 2021, the government had received 166bn/- ($71.5m) in dividends, 147bn/- ($64m) in corporate taxes, as well as 251bn/- $109m) in value added tax (VAT).

TPDC reports affirm that by using domestic gas instead of imported heavy furnace oil for electricity generation, Songas has enabled more than 11trn/- ($4.7bn) cut on potential fuel import costs since it began operations in 2004.

By last year Songas was selling power to TANESCO at less than six US cents per kilowatt hour, from 11 cents at the start, while capacity utilization has attained 96 percent for most of the period, underlining the lack of contentions in its operational framework.

Over the past few years, the government has observed its commitment to the project with steady payments to Songas as the leading provider of thermal electricity, the deputy minister affirmed.

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