Tanzania: New Prices for Natural Gas to be Set

Posted on :Thursday , 29th December 2016

Tanzania will next week start setting indicative prices for natural gas to guide potential investors.

Currently the prices of natural gas are negotiated between the buyer and the government-owned Tanzania Petroleum Development Corporation (TPDC), which is the seller.

The Energy and Water Utilities Regulatory Authority (Ewura) is expected to announce the first list of the prices for 2017 by December 30.

Ewura's director for natural gas Charles Omujuni said that before setting the prices, the authority invited input from major and potential users of natural gas, as required by the law. However, no investor submitted data.

"In the absence of the required data, Ewura consulted the general public and service providers to help it arrive at appropriate indicative prices," he said.

Mr Omujuni added that the stakeholders needed more time to submit their inputs "but, given the prevailing situation we are going ahead with finding or coming up with appropriate indicative prices for strategic investors including fertiliser manufacturers and people like the Dangote factory in Mtwara."

The development comes two weeks after a dispute arose over the price of natural gas, between Dangote Cement Ltd and TPDC. Analysts say the controversy may have contributed to expediting the process.

Initially, the move will target strategic investors to make them aware of the indicative prices so that they can make informed decisions.

Other customers, including households, hotels, power generation and compressed natural gas producers, would continue using the current formula until March next year, when Ewura will come up with an indicative price for them.

Ewura has powers under Section 29(2) of the Petroleum Act, 2015 to determine and enforce tariffs, rates, charges and fees payable by a licensee in respect of regulated activities. Section 164 of the law provides stakeholders inputs as a precondition: It states "Ewura shall, before determining tariffs, rates or charges for natural gas, conduct an inquiry."

Prices published

Ewura is bound to issue, at least once a year, and two months before the end of the year, indicative natural gas prices, and to publish the approved natural gas prices or cause them to be published in widely circulated newspapers in both Kiswahili and English.

Once Ewura comes up with the indicative price of natural gas that genuinely considers stakeholders inputs, the issue of investors with heavy energy needs trying to generate energy from coal or diesel may be resolved.

Earlier this month, Forbes reported that Aliko Dangote shut down his cement plant in Tanzania due to high energy costs and a technical glitch.

The $500 million factory in Mtwara region South Tanzania had a conflict of price of natural gas with TPDC, which stuck to a price of $5.12 per 1,000 cubic feet. The cement manufacturer was ready to buy natural gas at $4 instead.

The factory that employs 1,000 workers suspended production citing technical grounds.

The situation was resolved after Mr Dangote visited President John Magufuli.

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