AfDB’s support facility will make Tanzania better equipped to negotiate favourable contracts despite global low gas prices, says Nyirahuku

The African Natural Resources Center of the African Development Bank (AfDB) recently secured US $200,000 from the Korea-Africa Economic Cooperation (KOAFEC) fund to support Tanzania’s gas sector.

The Center’s gas expert, Charles Nyirahuku, provides an insight into the expected key deliverables from the facility.

 Why has the African Natural Resources Center focused on Tanzania’s oil sector- and what makes the country stand out?

Tanzania is an emerging gas producer, which, with Egypt and Mozambique, will drive the continent’s gas growth for the next few decades. As the country is poised to become a large player in the gas market, it is looking to promote domestic consumption of gas and has requested support to build its capacity in this regard.  

South Korea is not a gas producer. Why is it partnering with the Bank in improving Tanzania’s gas sector?

With almost no indigenous gas resources, South Korea relies heavily on imports. It is the world’s largest Liquefied Natural Gas (LNG) importer. In the early 1980s, its economy was comparable to some of the African economies we see today.

As it experienced phenomenal economic growth over the past three decades, South Korea made policy choices aimed at promoting the consumption of natural gas for energy and industrial needs. These efforts are part of what led the country to its current ranking among the top global economies.

As an emerging gas producer, Tanzania has prioritized domestic use of gas as a way to maximize the monetization of its resources and increase revenues from exports. This means putting in place the right policies and strategies to support the growth of its gas market, promoting improved downstream infrastructure and boosting consumption through suitable gas pricing mechanisms.

In this regard, Tanzania has many lessons to learn from the Korean experience – not only from a policy perspective, but also in the areas of technology development and know-how accumulation.

The AfDB Board of Directors recently approved a US $29.8-million project to develop Tanzania’s gas sector. How will the KOAFEC grant support the project?

An important component of the AfDB project includes supporting the gas domestication strategy in Tanzania. We intend to utilize the knowledge gained under the KOAFEC funding to inform and guide the project. It will also provide a platform for knowledge building and sharing of the  South Korean experience.

There is currently a global market slump in commodity prices, including oil and gas. Why is the Bank still investing in Tanzania’s gas sector?

The current unfavourable market conditions have made it even more critical for Africa countries to understand the industry trends and make informed choices when negotiating natural resources contracts.

The Bank’s support to Tanzania includes a large capacity-building component and support to its negotiations team. The objective is to provide the country with skills and tools to understand the natural gas market including LNG economic modeling and pricing mechanisms, among others. In this way, we believe that the country will be better equipped to negotiate favourable contracts despite the current low gas prices.

The initiative mostly revolves around knowledge and capacity-building. Will other African countries considering gas domestication benefit?

We will initially target the emerging gas producing countries in Eastern and Southern Africa, specifically Tanzania and Mozambique using the Korean funding. Afterwards, we e will consider other gas-producing countries in North and West Africa.

 Source: AfDB

 

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