THE UNITED REPUBLIC OF TANZANIA

MINISTRY OF ENERGY AND MINERALS

ENERGY SECTOR
QUARTERLY DIGEST

DAR ES SALAAM ED. NO. 01

September, 2015 ISSUE

1
 THE ENERGY DEPARTMENT
MANDATE MISSION VISION

To ensure secure and To provide reliable, A vibrant Energy

sustainable provision of affordable, safe, Sector that
energy for socio-economic efficient and contributes
transformation. environment friendly significantly to
modern energy services economic growth and
to all while ensuring improved quality of
effective participation of life of Tanzanians.
Tanzanians in the
sector.

2
 ABBREVIATIONS AND ACRONYMS
AU African Union
BRN Big Results Now

CAG Controller and Auditor General

DPs Development Partners

ESMAP Energy Sector Management Assistance Program

EPPs Emergency Power Producers

ESQD Energy Sector Quarterly Digest

EWURA Energy and Water Utilities Regulatory Authority

GIIP Gas Initially in Place

GoT Government of Tanzania

GW Gigawatt

JBIC Japan Bank for International Corporation

IPPs Independent Power Producers

IOCs International Oil Companies

MEM Ministry of Energy and Minerals

MoF Ministry of Finance

OMCs Oil Marketing Companies

MW Megawatt

MWe Megawatt Electrical

PICL Petroleum Importation Coordinator Limited

REA Rural Energy Agency

REF Rural Energy Fund

TANESCO Tanzania Electric Supply Company

TCF Trillion Standard Cubic feet

TGDC Tanzania Geothermal Development Company

3
TPDC Tanzania Petroleum Development Corporation

URT United Republic of Tanzania

ZECO Zanzibar Electricity Company

4
 FOREWORD
The Energy Sector Quarterly Digest (ESQD) has been established as a platform for
sharing with stakeholders’ information relating to developments in the Energy
Sector. It provides information that reflects most recent changes in the Sector. Data
are primarily drawn from the Ministry of Energy and Minerals (MEM) Energy,
Tanzania Electric Supply Company (TANESCO), Tanzania Petroleum Development
Corporation (TPDC), Rural Energy Agency (REA), Energy and Water Utilities
Regulatory Authority (EWURA), Petroleum Importation Coordinator Limited (PICL)
and other Government Departments.

The Ministry of Energy and Minerals is planning to issue on quarterly basis the ESQD
to reduce information asymmetry among stakeholders on Energy Sector related
issues. In addition, the ESQD intends to foster the use of reliable and credible
energy data and statistics in day to day decision making and to inform the general
public on progress made on various undertakings in the Energy Sector.

It is my sincerely hope that the information provided herein will be of value to

stakeholders in making informed decision.

Eng. O. A. Chambo
PERMANENT SECRETARY

5
 TABLE OF CONTENTS

THE ENERGY DEPARTMENT .................................................................................................. 2

ABBREVIATIONS AND ACRONYMS .................................................................................... 3
FOREWORD ................................................................................................................................. 5
TABLE OF CONTENTS ............................................................................................................... 6
INTRODUCTION ........................................................................................................................ 7
THE ENERGY SECTOR GOVERNANCE ................................................................................. 8
ENERGY POLICIES AND LEGISLATION ........................................................................... 10
ENERGY SECTOR PROFILING ............................................................................................. 11
ENERGY DEMAND ................................................................................................................... 13
KEY ENERGY SECTOR STATISTICS ................................................................................... 14
KEY DEVELOPMENTS IN THE ENERGY SECTOR ........................................................... 16
THE ENERGY SECTOR GOVERNANCE ............................................................................................... 16
IMPLEMENTATION STATUS OF STRATEGIC PROJECTS................................................................. 20
INVESTMENT OPPORTUNITIES ......................................................................................... 22
CHALLENGES IN THE ENERGY SECTOR .......................................................................... 23
FUTURE OUTLOOK .................................................................................................................. 24
KEY PLAYERS IN ENERGY SECTOR .................................................................................. 25
APPENDICES ............................................................................................................................. 26
Appendix 1: Wind Potential Sites (MEM, 2015) ............................................................................... 26
Appendix 3: Tanzanian Solar Map ..................................................................................................... 28
Appendix 4: The National Grid System (TANESCO, 2015) ............................................................. 29
Appendix 5: ESI Reform Immediate Term Actions implementation Status (July, 2014 –
June, 2015) ........................................................................................................................................... 30
Appendix 6. Summary of BRN Projects Implementation Status................................................... 31

6
 INTRODUCTION
The purpose of this ESQD is to provide a summary of recent Energy Sector
developments and statistics in a compact format. Also, it aims at reducing
information asymmetry among players by providing updated key energy data and
statistics. The ESQD contains the following:-

The Energy Sector Governance;

The Energy Sector Situation Analysis;

Key Developments in the Energy Sector;

Energy Sector Statistics Update;

Opportunities and Challenges in the Energy Sector; and

Future Outlook.

Figures are used to highlight the main features of each topic at a quick glance. This
report is for the period ended 31st September, 2015.

7
 THE ENERGY SECTOR GOVERNANCE
The key stakeholders in the Tanzanian Energy Sector include: Ministry of Energy and
Minerals (MEM), Ministry of Finance (MoF), Tanzania Electric Supply Company
(TANESCO), Rural Energy Agency (REA), Tanzania Petroleum Development
Corporation (TPDC), Energy and Water Utilities Regulatory Authority (EWURA),
Financiers, Development Partners (DPs,) Tanzania Geothermal Development
Company (TGDC), International Oil Companies (IOCs), Oil Marketing Companies
(OMCs), Private Sector and Petroleum Importation Coordinator Limited (PICL), as
summarized in Figure 11.

MEM provides overall guidance on the development of the Energy Sector

through policies, laws, and strategies.

MoF is responsible for mobilization of financial resource for implementing

projects in the Energy Sector.

TANESCO is responsible for electricity generation, transmission, distribution,

sales in Tanzania mainland and bulk supply of electricity to Tanzania Zanzibar
through ZECO.

REA promotes and facilitates access to modern energy services in rural areas
of Mainland Tanzania.

TPDC is responsible for the development of petroleum industry in Tanzania

including exploration, development, production and distribution of oil and gas
in the country.

EWURA is a regulatory authority responsible for electricity, water and mid-

downstream petroleum and natural gas sectors.

PICL is responsible for coordination of importation of the petroleum products

in the country.

TGDC is responsible for geothermal exploration and development in the

country.

1
The presentation is convenience and does not show functional relationship

8
 Figure 1: List of Key Stakeholders

MEM

MoF

FINANCIERS/DPs
TANESCO TPDC EWURA
REA

TGDC IOCs OMCs PICL

The Department of Energy

The Department of Energy was established in 1985 to spearhead attainment of

energy supply security in the country through prudent management of the Energy
Sector and the resource. The Department therefore, seeks to:

Ensure access to affordable and reliable energy supply by Tanzanians and

promote environmentally friendly energy use;

Ensure energy supply security by creating and maintaining a proper balance

between demand and supply of energy in the country;

Regulate the Energy Sector by developing effective policies, legislation and

guidelines; encourage investment in the Energy Sector and ensure
compliance with legislation;

Promote effective and efficient energy service delivery by understanding

stakeholder needs and improving strategies to meet such needs;

Promote optimal use of the energy resources by developing sound policies,

plans, technologies and legislation;

Ensure that the use of energy resources is prudently done for the benefit of
the present and future generations;

Promotes access to modern energies by improving connectivity levels and

providing affordable energy services and

Promote local participation in the Energy Sector.

9
 ENERGY POLICIES AND LEGISLATION
Policy Framework:

The National Energy Policy, 2015;

The Public Private Partnership Policy, 2009;

The Standardized Power Purchase Agreement and Tariffs (<10MW) (2008);

The Model Production Sharing Agreement, 2013; and

The Model Power Purchase Agreement, 2015.

Legal and Regulatory Framework:

The EWURA Act, 2001;

The Public Private Partnership Act, 2010;

The Petroleum Act, 2015;

The Electricity Act, 2008;

The Rural Energy Act, 2005;

The Value Added tax, 1997 (As amended);

The Income Tax Act, 2004

The Occupational Safety and Health Act, 2003 and

The Environmental Management Act, 2004.

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 ENERGY SECTOR PROFILING
Energy Supply

Tanzania has abundant energy

resource such as hydro, natural gas,
coal, uranium, wind, geothermal,
biomass, solar, tidal and waves.
However, much of these resources
are largely untapped. The total
primary energy supply in Tanzania is
dominated by biomass mainly from
firewood and charcoal for about 85
percent. As shown in Figure 2,
other sources of energy include petroleum (9 percent); electricity (4.5 percent) and
other renewable energies (1.2 percent). The resource potentials are summarised
hereunder:

Natural gas resource (GIIP) is about 55.08 TCF as of September, 2015 as

shown in the Figure 3 hereunder

Coal resource is estimated at 1.9 billion tons of which 25% is proven;

Hydro potential stands at 4.7GW of which only 12 percent has been

developed;

Biomass resources potential for power generation is estimated at above 500

MW;

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 Uranium deposits of about 200 million pounds have been discovered in
various sites capable of producing power;

Wind sites with speed ranging from 5 to 10 m/s have been identified
(Appendix 1).

Geothermal potential is estimated to generate about 650MWe (Appendix 2)

Solar insolation is prevalent and averages at 200Wp/m²; (Appendix 3)

As of September, 2015 and as shown in Table 1: Power System Installed Capacity

Station No. of Units
Available
Installed Capacity 17/9/2015
Figure 4, total on-grid generation installed Kidatu 4 204.00 99

capacity is 1,226.24MW2 composed of hydro Kihansi

Mtera
3
2
180.00
80.00
78
40

561.84 MW (or 45.1 percent), natural gas

N/P Falls 2 68.00 53.04
Hale 2 21.00 7.95

441MW (or 35.44 percent) and liquid fuel of

Nyumba ya Mungu 2 8.00 3.75
Uwemba 3 0.84 -

243.40MW (19.5 percent). As shown in

TOTAL HYDRO 561.84 281.74
Songas UGT1_UGT6 189.00 142.6
UGP1 12 102.00 77.7
Table 1 of the total installed capacity, 24 TGP 5 45.00 42
UGP2 3 105.00 0
percent is owned by Independent Power TOTAL GAS PLANTS 441 262.3
IPTL 10 103.00 92.3
Producers (IPPs), 5.6 percent by Emergency DIESELS (TANESCO) 3 7.40 1.91
AGR (UB) 63 50.00 51.3
Power Producers (EPPs) and the rest by AGR (TG)
Nyakato Plant
26
10
20.00
63.00
20.1
31.75
TANESCO. TANESCO also imports power TOTAL LIQUID FUEL PLANTS
SYSTEM TOTAL
243.4
1,246.24
197.36
741.4

from Uganda (8MW), Zambia (5MW) and Kenya (1

MW). TANESCO is planning to commission a
150MW gas fired power Plant called Kinyerezi –I in
October 2015. TANESCO also owns and operates
the interconnected main grid transmission line of
the level of voltage 220kV, 132kV and 66kV
connecting the major load centers.

Tanzania is a net importer of the petroleum

products. Through Petroleum Bulk Procurement
System, Tanzania imports for both local market
and neighboring landlocked Figure 5: Petrolum Products Trends

countries. In 2014, the total 1993 1964

consumption of petroleum products 1770

per annum was about 2.9 billion 2042 2026

1832 Kerosene
liters growing. The annual demand Diesel

for petroleum products averages 7

Petrol
2198 2290 2153

percent. During the period under

review, 1,190,440/MT of petroleum July August Sept

products was imported.

During the period under review and as shown in Figure 5 the petroleum products
prices remained relatively stable. Such trend is attributable to stability of TZS against
USD and declining price trends of petroleum products in the world market.

2
Exclude Isolated grids such as Somanga Fungu (7.5MW), Mtwara (18MW) and Others. It also exclude TPC (9MW), Tanwat (1.5MW) and Mwenga Hydro (4MW)

12
ENERGY DEMAND

Tanzania has a population of about 50 million Figura 6: Energy Consumption Patterns

people with an average growth rate of 2.9
percent per annum. About 75 percent of the 4.2% 3.1%
Tanzanian population lives in the rural areas. 5.8% Residential
Its GDP is around US$ 48 billion (December, Industry
14.4%
2014) and is growing at an average of 7
Transport
percent per annum. Tanzania envisions
72.5%
becoming a middle income country by 2025. Agriculture

This will require raising the average income Others

per capita from the present US$ 1,038 to
about US$3,000 per annum. To achieve this
goal availability of adequate, reliable, and
affordable energy supply to propel the
needed socio-economic transformation
cannot be overemphasized.

The average electricity daily demand is in the range of 950MW and 1,000MW. The
highest peak demand recorded in December, 2014 is 934.62 MW. In 2010, the
energy consumption in different sectors and as shown in Figure 6 was as follows:
residential (72.5 percent); industry (14.4 percent); transport (5.8 percent);
agriculture (4.2 percent) and others (3.1 percent). Demand side management has
become complex as residential account for large share of energy consumption.

By September 20153, the electricity consumption per capita on average is

108kWh/year. This is small compared to world average consumption of
2500kWh/year and 550kWh per year for Sub-Saharan Africa. The Government is
planning to increase electricity consumption per capita to at least 236kWh/year by
2015/164. The demand for electricity is estimated to be growing at 10 percent and
15 percent per year. To meet this demand, the government is planning to increase
generation capacity to almost 10,000 MW by 20255.

Electrification Programme

As of August, 2015 about 30 percent of the Mainland Tanzania population was

connected with electricity services. However and as shown Appendix 3, the large
portion of the country is not connected to National Grid. To stimulate socio-
economic transformation and achieve Tanzania Development Vision 2025 agenda
the government is planning to increase the connection levels to 50 percent by 2025
and more than 75 percent by 2033. To achieve this end, TANESCO targets to
connect on average 250,000 customers per year. TANESCO connected 143,113
customers in 2013; 233,000 in 2014 and 26,698 from January – March, 2015.

3
PDB Report, 2015.
4
MEM, Strategic Plan 2011/12 - 2015/16, November 2012.
5
MEM, Electricity Supply Industry (ESI) Reform Strategy and Roadmap 2014-2025, June 2014.

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 KEY ENERGY SECTOR STATISTICS
S/No. INDICATOR VALUE
GENERAL STATISTICS
1. Total Population (million - EST) 50
2. Rural Population ( % Total Population) 75%
3. Population Growth 2.7%
4. GDP (US$ Billion) 48
5. GDP Growth Rate 7%
6. GDP Per Capita (US$) 1,038
7. Headline inflation 6.4%
ELECTRICITY INDUSTRY
1. Total On-grid Installed Capacity 1,246.24 MW
2. Total Off- grid Installed Capacity 76.43 MW
3. Generation mix (% Hydro/thermal/Liquid fuel) 45/33/22
4. Imported Electricity 14MW
5. Total IPPs Installed Capacity 517 MW
6. Total EPPs Installed Capacity 70MW
7. TANESCO Total Capacity 929.24MW
8. Maximum Power Demand 934.62MW
9. Electricity Connection level 30%
10. Electricity Access level 40%
11. Total Customers Connected with electricity services 1,409,966
12. Ration of No. of customers per employee 229
13. No. of Customers Connected in Q1 of 2015 26,698
14. Electricity Consumption per Capita per annum 108kWh
15. No. of Districts Electrified 120
16. % of Districts not Electrified 10%
17. No. of Villages in the Country 15,209
18. No. of Villages Electrified 4,718
19. %. of Villages not Electrified 68.98%
20. Max. Transmission Voltage 220kV
21. Total losses – Technical and None - Technical 18%
22. Total Commercial losses - % 8%
23. Average Electricty Tariff per Kwh (US$ Cents) 16
24. TANESCO Revenue Collection Efficiency 96%
25. Renewable Energy installed Capacity (on/off grid) 78MW
26. Solar Installed Capacity 5.3 MWp
27. Co-Generation Installed Capacity 37MW

14
 PETROLEUM INDUSTRY
UPSTREAM
1. Number of PSAs signed 25
2. Number of Active PSAs 21
3. Explorable Potential Area 534,000Km2
4. Explored Area 159,000Km2
5. % Explored Area Total Potential 30%
6. Number of active Exploration Companies 16
7. Number of Drilled wells 90
8. No. of wells Discovered 61
9. % of wells discovered and appraised with gas 68%
10. Total Natural Gas Discovered (GIIP) 55.08 TCF
11. Number of dry wells 29
12. Number of producing gas wells 12
13. Total Recoverable Natural Gas (est.70% of GIIP) 38.56TCF
DOWNSTREAM
1. Daily Natural Gas Production - Songo Songo (MCFT)
86 to 92

2. Daily Natural Gas Production - Mnazi Bay (MCFT)

60

3. No. of Industrial Customers using Natural Gas 40

4. No. of Power Plants run on Natural Gas 5
5. No. of Institutions using Natural Gas 3
6. No. of Motor vehicles using Natural Gas 35
7. No. of Households using Natural Gas 70
8. Total Volume of Petroleum Imported per Annum - Litres6 4,714,866,825

9. Total Petroleum Imports during the quarter in Q1 of 2015 - MT 1,190,440

10. % of Petroleum Import For Local Market - MT 52%

11. % of Petroleum Import For Transit - MT 48%
12. No. of Licensed Oil Wholesalers 88
13. No. of Licensed Oil Retailers 990
14. No. of Licensed LPG importers 6
15. No. of Licensed Consumer Installation 2
16. No. of Licensed of Lubricant 8
17. No. of Licensed Bunkering 2
18. No. of Licensed Storage 1
19. Total Annual of LPG imported (MT) based on 2014 imports 65,611
20. Total Annual LPG imported (MT) in Q1 2015 18,275

6
Based on 2014 imports

15
 KEY DEVELOPMENTS IN THE ENERGY SECTOR
Key developments in the Energy Sector include assessment of Energy Sector
Governance and Implementation Status of Strategic Projects.

THE ENERGY SECTOR GOVERNANCE

The governance in the Energy Sector entails Institutional set Up, Legal and
Regulatory Frameworks.

Institutional Set Up

1. TPDC Re-organization

In April 2014, the Government re-organized TPDC by approving a new

organizational structure. The re-organization came into culmination in August 2015
when persons to fill in TPDC vacant management positions were recruited. The re-
organization aimed at increasing Government participation in the Petroleum
Industry, establishing an Independent Petroleum Upstream Regulator, and
developing infrastructure in the petroleum industry. As part of re-organization, TPDC
subsidiary companies were revived as follows:

Gas Supply Company Limited is responsible for the midstream and

downstream operations in the gas value chain including management of new
natural gas infrastructure; and

Commercial Petroleum Company is responsible for midstream and

downstream operations in the petroleum sub-sector including management of
Strategic Petroleum Reserve, Oil Refinery and Oil Commercial Trading and
Distribution.

2. TANESCO Re-organization

In June 2014, the government approved and published the Electricity Supply
Industry Reform Strategy and Roadmap 2014-2025. The instrument aimed at
increasing efficiency, quality of services, and availability of affordable and reliable
power supply, satisfaction of stakeholders, enhancing transparency and competition
and reducing government subsidies to the electricity sub-sector. The Roadmap
envisages unbundling TANESCO over a period of 11 years.

In the immediate term (July 2014-June 2015), the reform efforts concentrates on
TANESCO financial position turn around, creating business units along functional
lines, establishing an Electricity Infrastructure Procurement Coordinator, a Task
Force and a Change Management Team. The reforms in the short-term (July 2015 -
June 2018) focuses on unbundling of generation function from transmission and
distribution segments by December 2017. In the medium term, July 2018 - June

16
2021, the key market changes will involve unbundling of the distribution from the
transmission segment, based on social, economic and financial factors. Major
achievements so far include review of section 41(6) of the Electricity Act 2008 to
allow private generators to sell power directly to bulk off-takers and the
development and operationalization of Model Power Purchase Agreements for
specific technologies. Appendix 4 summarizes the status implementation of the
Immediate Term activities.

Legal and Regulatory Framework

Key legislation enacted during the period under review include: the Petroleum Act,
2015, the Oil and Gas Revenues Management Act, 2015 and the Tanzania Extractive
Industries (Transparency and Accountability) Act, 2015.

1. The Petroleum Act, 2015 - The Act was assented in August, 2015 by His
Excellency, President of the United Republic of Tanzania, Dr. Jakaya M. Kikwete
covering Upstream, Midstream and Downstream segments. The salient features of
the Act are:-

Repeals the Petroleum (Exploration and Productions) Act, 1980 and the
Petroleum Act, 2008;

Establishes system for joint exploration with Tanzania Mainland and Tanzania
Zanzibar for overlapping exploration blocks;

Establishes the Oil and Gas Advisory Bureau (OGAB) to advise the Cabinet
over Oil and Gas Industry;

Establishes the Petroleum Upstream Regulatory Authority (PURA) to regulate

upstream and LNG activities;

Designates TPDC as a National Oil Company (NOC);

Grants NOC exclusive rights to exploration and development licenses and

collection of natural gas from producers for distribution to customers;

Confers upon NOC rights to manage Government interests in oil and gas
value chain;

Promotes Local Content in petroleum value chain through

purchasing/procurement of and using local goods and services; and

Empowers Local Government Authorities (LGAs) to coordinate programmes

agreed with Companies on corporate social responsibilities.

17
2. The Oil and Gas Revenues Management Act, 2015 - The Act ensures
optimal collection and prudent spending of revenue to be accrued from oil and gas
industry. The key highlights of the Act are:

Establishes Oil and Gas Fund and Fiscal Rules to govern disbursement from
the fund;

Restricts the use of the Funds for credit, guarantee or to collateral;

Empowers LGAs to collect a service levy as approved by the National

Assembly;

Requires Fiscal Rules to be changed by not less than two thirds of the total
number of members of parliament;

Empowers PURA to audit exploration, development, production and sale of oil

and gas recoverable cost; and

Empowers the Bank of Tanzania to manage the Fund and subject it to audit
by Controller and Auditor General (CAG) quarterly.

3. Tanzania Extractive Industries (Transparency and Accountability) Act,

2015 - The Act promotes transparency and accountability in the Extractive
Industries namely Energy and Minerals. The key features of the Act are:

Imposes obligation to the Minister to disclose all Mining Development

Agreements (MDAs) and Production Sharing Agreements (PSAs) except for
information that is confidential as the Committee may determine. All other
information contained in agreements shall be subjected to disclosure;

Establishes the Extractive Industries (Transparency and Accountability)

Committee;

Creates obligations for Government to disclose revenues received from

extractive companies;

Empowers CAG to investigate discrepancies arising from payments and

receipts from extractive industries at TEIT request;

Imposes obligation to extractive industries companies to disclose payments,

sales, capital expenditures, and Local Content, Corporate and Social
Responsibilities (CSR) payments;

Imposes obligation to Government agencies to disclose revenue collected

from mining, oil and gas operations;

18
 Provides powers to the Minister to publish in the Gazette specifying other
natural resources to be subjected to the disclosure requirement of the Act;
and

Imposes of offences and penalties to persons and companies who fail to

provide document and information required under the Act; and in the case of
false information.

4. The National Energy Policy, 2015 - The Policy is a result of merging various
policies including: the Petroleum Policy, the Local Content Policy, the Subsidy Policy,
the Natural Gas Policy, the Renewable Energy Policy, the Bio-energy Policy and the
Revised 2003 National Energy Policy to simplify administration. The salient features
of the Policy are:

Enhances investment climate to attract private capital in the Energy Sector;

Promotes community groups and financial institutions in the provision of

modern energy services;

Ensures energy charges are based on prudently incurred costs of efficient

operations;

Improves Energy Sector planning through integrated plans;

Promotes effective and transparent subsidy regime by ensuring targeted,

objective based and transparent subsidy regime;

Introduces Feed-in-Tariffs to promote renewable energy technologies and

integrates renewable energy technologies in buildings and industrial designs;

Promotes energy efficiency and conservation in all sectors of the economy by

promoting use of efficient technologies;

Enhances switching from wood fuel usage to biogas, bio-fuels, compressed

natural gas, liquefied petroleum gas and electricity;

Promotes Tanzanians participation in the petroleum industry; and

Supports cross border projects and investments within EAC, SADC and AU
Partner States in the Energy Sector.

5. The Model Power Purchase Agreement - In August 2015, the Government

issued Model Power Purchase Agreements for seven energy technologies; namely:-

Hydro Model Power Purchase Agreement;

Natural Gas Model Power Purchase Agreement;

19
 Oil Model Power Purchase Agreement;

Coal Model Power Purchase Agreement;

Geothermal Model Power Purchase Agreement;

Solar Model Power Purchase Agreement; and

Wind Model Power Purchase Agreement.

6. Natural Gas Utilization Master Plan - To ensure sustainable development of

the Energy Sector, natural gas sub-sector in particular, in August, 2015, the
government in collaboration with stakeholders developed Natural Gas Utilization
Master Plan (NGUMP). NGUMP will be subjected to public consultations commencing
September, 2015.

It is a strategic document that promotes inter-sectoral coordination in the

design and implementation of natural gas development activities;

The NGUMP, among other things, aims at ensuring security of supply and
promotes local content in the natural gas value chain; and

7. Finance Bill, 2015 and Budget for 2015/16 - The Bill and the Budget for
the year 2015/16 were based on economic growth, control, inflation, a reduction in
providing tax exemptions as well as increasing revenue. Key highlights relevant to
Energy Sector include:-

Removal of tax exemptions on government projects that are financed using

non – concessional loans, except for those projects that had such exemptions
prior to 1st July, 2015;

Introduced “Special Strategic Investment” projects for tax exemptions

purpose for investment of at least US$ 300M and that directly employ at least
1,500 people; and

Increase in fuel levy from TZS 263 to TZS 313 per litre for both diesel and
petrol to be utilized in rural electrification projects.

IMPLEMENTATION STATUS OF STRATEGIC PROJECTS

In 2013, Tanzania launched Big Results Now (BRN) initiative to spearhead

implementation of strategic projects based on a business unusual concept. Twenty
nine (29) projects were nominated in the Energy Sector. The projects included:
seven power generation projects; seven power transmission projects; fourteen
power distribution projects and one Natural Gas Infrastructure project. The
implementation status of two projects is provided in Appendix 5.

20
1. National Natural Gas Infrastructure Project: In 2012, GoT through TPDC
embarked in implementing a 1.255 billion USD project. The project consisted of
construction of a 547 km natural gas transportation pipeline running from Mtwara,
Lindi, Coastal regions to Dar es Salaam and two processing plants at Madimba –
Mtwara (210 mmscfd) and Songo
Songo Island - Lindi (140 mmscfd).
The pipeline will be able to
transport between 784 mmscfd and
1002 with compression. Figure 7
shows the pipeline network from
Madimba to Kinyerezi, Dar es
Salaam. The transportation pipeline
and the processing plant at
Madimba (Mtwara) is 100 percent
complete and is expected to be
commissioned in October, 2015.
On the other hand, Songo Songo
Island Processing Plant is 99
percent complete.

2. Kinyerezi – I (150 MW): The Government through TANESCO is implementing

Kinyerezi I - 150MW gas fired plant, which reached the following stages:
Procurement of equipment is 100 percent completed; all four turbines with a total of
150 MW their installations are completed; all five 50MVA transformers their
installations are completed; construction of administration block, Control Room,
Workshop, Warehouse completed by 100 percent; erection of fuel Reservoir tanks
completed; erection of Gantries for 132/220kV completed; erection of towers for
132kV and 220kV transmission lines from Kinyerezi to Kipawa and Mbezi respectively
are completed remaining stringing of wire for 132 kV line while 220kV from Kinyerezi
to Kimara is completed by 100 percent. The Government made a payment of USD
151.4 million (83 percent of the total contract price USD183 million). The plant is
expected to be commissioned in October, 2015.

3. Mnazi Bay Gas Development Project: An up to 10mmscfd processing plant

transporting in a 27km, 8” pipeline from Mnazi Bay to Mtwara Municipality is in
place. The MB -1 well is supplying 2mmscfd to 18MW capacity power plant at
Mtwara. In August, 2015, Maurel and Prom drilled MB–4 and completed connecting
the gathering station located at MB-3 to collect gas from MB-2, MB-3, MB-4 and
MSX-1wells. This development makes Mnazi Bay to contain five wells.
Implementation Status of other strategic projects is provided in Appendix 5.

21
 INVESTMENT OPPORTUNITIES
Petroleum Sub-sector: Exploration activities for oil and gas are being
promoted. In addition, infrastructure development such a transportation
pipeline from Dar es Salaam to Central, Southern and Northern Corridor
transportation pipeline; Dar es Salaam – Mwanza – Kigoma Petroleum
Pipeline; Mtwara, Lindi, Pwani and Dar es Salaam regions distribution; and
LNG and Petrochemical facilities.

Renewable Energy Sub-sector: Development of Renewable energies

mainly solar, geothermal, wind and biomass is promoted. Investment in the
manufacturing of renewable energies equipments in Tanzania is also
encouraged.

Electricity Sub-sector: Investment in generation, transmission and

distribution networks is promoted as private investment or through PPP.
Focus is on improving generation mix by increasing renewable energies and
coal fired power plants contributions.

22
 CHALLENGES IN THE ENERGY SECTOR
The Energy Sector faces numerous challenges including the following:

Creating a financially and commercially viable sector – Sector reforms

Financial resource constraints for infrastructure expansion – PPP promoted

Attracting more private sector investments to the sector – Sound Policies

Expansion of access to electricity – Increase Generation

Increasing power supply security and reliability – Diversify Generation

Reducing system losses (technical and non- technical) – Maintenance &

technology

Improving TANESCO financial condition – Sector reforms; and

Inadequate resource to fund Energy Sector reforms.

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 FUTURE OUTLOOK
Tanzania is planning to be a power hub for East and Central Africa regions. As a
result, it is actively participating in regional power interconnections linking North and
South such as the Eastern Africa Power Pool (EAPP) and the Southern Africa Power
Pool (SAPP). This interconnection provides opportunities for power trading in the
region, security of supply and system stability.

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 KEY PLAYERS IN ENERGY SECTOR
Key players in the market include:-

Ministry of Finance (http://www.mof.go.tz/)

The Energy and Water Utilities Regulatory Authority (www.ewura.go.tz),

The Tanzania Electric Supply Company Ltd (www.tanesco.co.tz),

Tanzania Petroleum Development Cooperation (www.tpdc-tz.com),

Petroleum Importation Coordinator Ltd (www.picltz.com)

The Tanzania Investment Centre (www.tic.co.tz), and

The Rural Energy Agency (www.rea.go.tz).

TGDC

The Permanent Secretary,

Ministry of Energy and Minerals,
5 Samora Machel Avenue, P.O. Box 2000,
11474, Dar-es-Salaam, Tanzania.
Tel: +255 22 2117156/9
Fax 255-22-2120799
E-mail: [email protected]
Website: www.mem.go.tz

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 APPENDICES
Appendix 1: Wind Potential Sites (MEM, 2015)

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Appendix 2: Geothermal Potential Sites (MEM, 2015)

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Appendix 3: Tanzanian Solar Map

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Appendix 4: The National Grid System (TANESCO, 2015)

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 Appendix 5: ESI Reform Immediate Term Actions implementation Status (July,
2014 – June, 2015)
MAJOR ACTIVITIES STATUS
Establish a Task Force with mandate to MEM established a task force in August,
monitor the implementation of the Roadmap 2014
EWURA established a task force in
January, 2015
National Steering Committee established
in June, 2015
Establish a Transformation and Change TANESCO formed a TCMT in September,
Management Team (TCMT) at TANESCO to 2014
manage the reform process
Initiate valuation of TANESCO’s generation, Technical and Financial Evaluation
transmission and distribution assets completed for Consultant engagement
Carry out management information system Deloitte & Touche engaged for service
audit
Improve TANESCO financial performance Retired 112MW Symbion-DSM, 50MW
Symbion – Dodoma, 55MW Symbion -
Arusha and 100MW Aggreko EPP by
December 2014
Establish EIPC , Standard PPA and Grid code MPPAs approved in August 2015
EIPC Concept Note in place awaiting
TANESCO’s Board approvals
Designate Grid Control Center as Independent ISO Rules in the make by EWURA and is
System Operator (ISO); to be effective in December, 2015
Reviewing of the Electricity Act, 2008, in Replaced with Section (56) in the
particular, Section 41(6) Tanzania Extractive Industries
(Transparency and Accountability) Act.
2015
Capacity building to MEM, TANESCO, REA and Human needs assessment done for
EWURA EWURA and TANESCO and training is
ongoing
Develop of Grid Codes to guide transmission Draft Grid code in place and Rules are
and distribution operations being developed.
Review tariff structure EWURA is carrying Cost of Service Study
(COSS)
Improving financial management and Each zone envisages submitting
accountability for each zone by June, 2015. provisional statements by the end of third
quarter, 2015
Ring fence the core functions into strategic Subject to completion of TANESCO’s
business units (SBU) by December, 2015. assets evaluation
Establish market information desk at MEM, Not Done
REA and Regulator in March, 2015.
Ring fence Dx into several zones by Seven zones established
December, 2015.

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Appendix 6. Summary of BRN Projects Implementation Status
S/N Project Name Implementation Status Project cost
1 Mwanza (HFO), Completed and Commissioned in 2014 USD 59 million –
60MW GoT financing
2 Kinyerezi I, 150MW. Construction completed and it is on USD 183.3 million
Power generation testing. The project will be -Financier: GoT
using natural gas commissioned in October, 2015
(Simple Cycle)
3 Kinyerezi II, 240MW Government, TANESCO and Financiers USD 334 million
Power generation have concluded negotiations on project Japan Bank for
using natural gas financing and loan agreement signed International
(combined cycle) in March, 2015. Completion expected Cooperation –
in 2017. 85%
Government –
15%
4 Kinyerezi III, JV arrangements with Shanghai USD 369.8 million
300MW Phase 1 to Electric Power Company of China
be followed by signed.
Phase 11-300MW. Feasibility study completed
Power generation approved by TANESCO’s Board of
using natural gas Directors and EWURA and
(Simple Cycle) submitted to MoF for approval
Treasurer Registrar has approved
the project.
Completion expected end of 2017
5 Kinyerezi IV, 300MW JV arrangements with China Power USD 400 million
Power generation Investment Company completed.
using natural gas Project Concept Note to be tabled
(Combined Cycle) to TANESCO’s Board of Directors
for discussion and approval.
Expected commissioning end of
2018.
6 Singida Geo Wind Land acquired, ESIA certificate issued USD 136 million
Phase I, 50MW and Compensation completed
PPA negotiation ongoing
Expected completion in December
2016
7 Kilwa Energy Phase I PPA finalized USD 365 million
(Somanga Fungu), Addendum to Implementation
210MW Agreement – Comments received
from MEM are under review by
Lenders.
Power Purchase Agreement Direct
Agreement – Executed with
TANESCO on 14 August 2015
Gas Supply Agreement Direct
Agreement – Final document
provided to TPDC for their review
and execution
Shareholder Agreement with

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 TANESCO – Under review by
TANESCO
Gazetting of incentives approved
by NISC pending with Tanzania
Investment Centre
Phase I to be commissioned by
end, 2016
8 Iringa - Shinyaga Contractor mobilized to site and USD 441.13 million
(Backbone construction of all 4 lots are on
Transmission), progress
400kV, 690km Overall Status - Forecast: 83%
Actual: 69%
Iringa – Dodoma (Lot 1):Forecast:
93% Actual: 91%
Dodoma-Singida (Lot 2): Forecast:
89% Actual: 67%
Singida – Shinyanga (Lot 3):
Forecast: 91% Actual: 87%
Substations (Lot 4): Forecast: 60%
Actual: 52%
to be commissioned by June, 2016
9 North East Grid Negotiations between the Ministry USD 692.7 million
Kinyerezi-Chalinze- of Finance and EXIM bank of China
Segera -Arusha, is in progress
Transmission 400kV, ESIA study completed.
764km To be commissioned by June,
2018
10 Makambako – 580km site clearance completed, USD 91.43 million
Songea, Contractor for Distribution sub-
Transmission Line project on site and for
220kV Transmission sub-project the
contractor is mobilizing and
the project to be commissioned by
June, 2016
11 North West Grid Phase I (Mbeya- Sumbawanga) USD 664 million
Transmission ESIA study completed, Upgrading of
(Mbeya, 220kV feasibility study to 400kV level
Sumbawanga, ongoing. To be Commissioned by
Kigoma, Nyakanazi), September, 2018
400kV 1,148km
12 Transmission Procurement USD 244.375
Singida - Arusha - • Evaluation of Technical Proposal million
Namanga, 400kV, for consultant services was
414.4km completed on 28th August 2015
and final report submitted for
approval by TANESCO Tender
Board and Lenders.
• Tender for Substation advertised
on 3rd July 2015 and submission
date extended to 20th November
2015.

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 • Tender for Transmission lines was
advertised on 10th July 2015 and
submission date extended to 21st
October 2015.
Financing
• Loan Agreement between GoT
and JICA reached on 29th Sept
2015. For AfDB Loan Agreement
signed on 29th April 2015.
• Rural Electrification: Bid
documents for works under
review for advertisement.
13 Transmission • EIA was obtained in February USD 176 million
Chalinze – Dodoma, 2015
400kV, 350km • The Draft Contract for Consulting
Services for Feasibility Study and
supervision of the project has
been approved by the Attorney
General. PMU is finalizing
Contract signing between
TANESCO and the awarded
Consultant, M/s SMEC.
14 Transmission • TANESCO has approved the Final USD 150 million
Somangafungu– Loan Term sheet from TIB for
Kinyerezi DSM, project financing. TANESCO is
400kV, 198km finalizing the process of opening
Account at TIB for transactions of
the credit facility which amount to
an aggregate of TZS 79.5 bil. For
compensation of PAPs and MUSD
98.1 for other contract cost
inclusive of EPC cost
• TANESCO has instructed PAPs to
submit their relevant documents to
their local governments based on
instruction given and the same will
be submitted to TANESCO for
compensation purposes.
The Tender Board has approved M/s
Byuksan Power Co., Ltd of South Korea
for provision of consultancy services of
the Project
15 Bulyanhulu – Geita • EIA certificate for the 220 kV USD 30 million
220kV, 55km Bulyanhulu - Geita Transmission
Transmission line Line route has been issued
with rural • Valuation of properties along the
electrification Transmission line corridor (55km)
components is completed. Report preparation is
ongoing.
• Collection of social economic data
for preparation of Resettlement

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 Action Plan (RAP) is completed.
Report preparation is on going
• The Contract for the Consultancy
Services with M/s Shaker
Consultancy Group of Egypt has
been signed since 15th June 2015
16 Ngara, Biharamulo Implementation awaits for counterpart TShs. 71.5billion
and Mpanda (ORIO) funds - Completion time is expected to
March, 2016
17 Electricity V Project Distribution Works USD 43.16 million
(Sub-station and Construction of MV, LV lines,
distribution lines) installation of distribution
transformers and street lights
completed by 100%
3,580 customers out of 8,400
customers connected
Overall completion of Distribution
works: 94%
Substation Works
Ilala ss- energized on 19th August,
2015
Njiro ss - energized on 11th
September, 2015
Sokoine ss – works completed by
53%
18 Village Electrification Tender Document has been prepared, TShs 20 billion
Scheme along awaiting for availability of funds to
Mtwara-Somanga start procurement process for the
contractors
19 Sustainable Solar Installation of 300 solar PV systems TZS 4.544 billion
Market Packages to public facilities is completed.
(SSMP I)-8,300 Installation of PV systems to 8000
customers. private facilities is in progress.
To be completed December 2015
20 Sustainable Solar The evaluation of bids was completed TZS 24 billion
Market Packages in February, 2014. Installation of
(SSMP II). blueprints for all 8 Lots has been
completed and verification is underway
and is to be completed June 2016
21 Small Hydropower A total of 1,396 out of 2,600 USD 2.5 million
Projects (SHP) connections have been made for (TZS 4 billion)
Provided With Mwenga SHPP. A total of 100 out of
Performance Grant 922 connections have been made for
(Mawengi, Mwenga Andoya SHPP. Connection to other
and Mbagamao). customers is in progress.
22 Underline Tender Document has been prepared, TZS 124 billion
Distribution waiting for availability of funds to start
Transformers to procurement process for the
Electrify Villages contractors. To be completed June
along Transmission 2016

34
 Lines.
23 Attend all Pending Project implementation is in progress. TZS 145 billion
and new A total of 2,679 customers were
Applications for connected from 15th to 21st October
Customer 2015..Total number of pending
Connections customers is19,585
(180,000
customers).
24 Electrification of 51 Consultant to supervise design and TZS 54.18 billion
Villages under construction has been engaged.
Backbone Evaluation report for works contract
Transmission under Lot 1,2 & 3 submitted to
(BTIP)-24,300 Lenders for approval. Tender awards
customers. scheduled for October 2015 and the
project is to be completed in June
2016
25 Rural Electrification Project implementation is in progress TZS 881 billion
Project under To be completed in December 2015
Turnkey Phase II
(250,000 initial
customers).

35