Opportunities within Growth: Tanzania’s Future Energy Mix

Tanzania, home of Kilimanjaro, the Serengeti and the source of the Nile River, is increasingly becoming best known for the multiplicity and depths of its energy potential. With such world-renowned environments and a high growth potential at stake, Tanzania is an especially significant emerging producer whose successful or unsuccessful balance of its internal priorities will be a test case for the region at large.

In late February 2016, the most recent in a string of possible natural gas deposits was discovered offshore in Tanzania. That single discovery added an additional 2.17 trillion cubic feet onto existing estimates of over 57 trillion cubic feet of potential deposits.1 These are only projections, but last year the country ranked only 88th in the world for proven natural gas reserves at 6.513 billion cubic meters,2 a tiny fraction of its projected reserves. These discoveries have greatly excited the international energy community.

As thrilling as these projected deposits are for energy companies, they mean far more to the Tanzanian government and the people it will negotiate on behalf of. Currently, many Tanzanians live below the World Bank’s poverty line.3 In Tanzania in 2014, the 2014 gross national income per capita was $920 and the life expectancy was 64.9. In 2015, they had a population of 53.47 million people and a GDP of 45.628 billion US dollars.4 There is a tremendous amount that can be done for the people of this country to improve their length and quality of their life, from raising the standard of living and further investment in education to connecting rural communities.

Tanzania’s potential revenues for exporting its energy reserves or renewables output are high, but strategically tapping this density of domestic energy could make significant positive changes to its population beyond raising them out of poverty. The majority of Tanzanians are either underserved in energy or not served at all, with only 36% of households having access to electricity.5 In 2013, Tanzania emitted .214 metric tons of CO2 per capita (WB), and produced 889 Petajoules of primary energy. The actual energy supply per capita however was only 20 Gigajoules.6 Energy efficiency can make a big difference here as well. Increasing wealth in the country through energy investment and also increasing energy access would mean that Tanzanians would be able to get the internet and also mobile phones, changing the efficacy and depth of their educational resources, the level of globalization, and the role Tanzania as a state can play in the world. As of 2014, 62.8% of people in Tanzania had mobile phone subscriptions, and only 4.9% used the internet.6 These figures may have improved in the past three years, but as Tanzania’s energy investment escalates, so will these numbers, along with the quality of life for its people.

As coal declines and the demand for natural gas rises around the world,7 the price of natural gas continues to climb. Between 2016 and 2017, the EIA projects there to be a 41.4% increase in price.8 Russia currently has a loosening stranglehold on much of the European Union as its principal (sometimes only) supplier9 which is good news for potential competitors, and the massive energy demands of highly developed countries with few natural resources like Japan are urgent and well-funded. Tanzania’s massive reserves would find a welcome home in this market. It is not the only country in Africa with big energy finds, but Tanzania’s comparatively stable history and high poverty rate3 mean that there is motivation to develop quickly, and that investors can proceed without the level of risk associated with many of its neighbors. Proper management of its energy resources could utterly transform the country into a stable and prosperous exporter. Though it would be difficult to get extracted or liquified natural gas (LNG) to major markets like Asia or the the EU the journey is not as far as from the United States, and pipelines are not out of the question. China has already constructed one in Tanzania that transports natural gas from Mtwara, the southern part of the country, to Dar es Salaam, its commercial capital.10

As deep as its natural gas reserves seem to go, Tanzania also represents an extremely exciting source for renewable energy. More than 10% of the country’s surface offers the potential for high wind power, and some of these areas overlap with high solar irradiation zones, where solar panels could be placed. This is relatively rare, and could mean round the clock power generation for the people of Tanzania or the surrounding nations. According to energy studies cited by the world bank, Tanzania surpasses Spain for solar resources and California for wind. There is a lot of potential here which the government seems interested in aggressively exploring.11 The recent studies which found this information come at a time when renewable energy technology is cheaper than ever before. China, already a partner in several Tanzanian ventures, is largely responsible for this drop in prices and has become the major power behind solar power,12 as well as the country responsible for implementing Tanzania’s existing solar power technology;13 this infrastructure could and should be expanded further. While perhaps most of the companies rushing to do business with Tanzania are interested in its natural gas, renewable energy is a robust, expanding market, and this country needs to take further advantage of that.

Many shared energy concerns and tradeoffs play out in Tanzania, but there are also unique circumstances within this country that will dictate the energy development course it can pursue. Environmental protection is an especially significant concern for Tanzania, for several interrelated reasons. While the legendary beauty, health and significance of their environment may be a source of pride to the people and vital to their well-being, environmental tourism is a huge business here. Tourism represented 17% of Tanzania’s GDP in 2014, around 25% of the country’s foreign exchange earnings, and is expected to continue to make healthy annual growth. Tanzania’s tourism industry employs between 600,000 and 2 million people. The tallest mountain in Africa, the world’s largest intact volcanic crater (Ngorongoro), and the Serengeti plains, which witness the largest terrestrial migration in the world, are all in this country14 and are central to its identity. These natural wonders are why film crews and tourists alike flock to Tanzania. However, all of them are jeopardized by the potential mishandling of Tanzania’s energy development. As an example, putting massive wind turbines in the Serengeti would disrupt its unique and endangered wildlife.

A final complicating environmental factor is that Tanzania forms the southern base of Lake Victoria, the primary source of the Nile River. This river flows from south to north, so if there were an accident here, whether from a future pipeline or from gas extraction, it could have grave implications not only for Tanzanians, but also downriver for a not inconsiderable percentage of the 160 million people15 that depend on the Nile for their livelihood, along with the many others in the 10 countries it passes through that depend on it for their lives.

As with most resource-rich developing countries, there is a controversial trade-off between badly needed development for an impoverished population and the environmental impact of that fast-paced and often haphazard development. For a developing country, Tanzania has a relatively high (26.1) percentage of protected areas,6 but as development continues, these efforts will be increasingly urgent. The urgency of Tanzania’s poverty means that it cannot afford to wait to be able to pay for an entirely renewable energy infrastructure. It must take some of the natural gas contracts, but it should do so with the goal of using as large a part of the revenues from these as it can spare from alleviating poverty to focus its own domestic energy production on renewable energy. Renewables will have a less detrimental effect on its environment,16 and this will bring domestic employment and a more self-sufficient future.

Whether Tanzania focuses on renewables or natural gas, it must plan strategically so as to balance its responsibilities to the well-being of its assets and its people. This can be best met through the strategic short term diversification of its energy resources, so that Tanzania can empower itself in the long-run to take an environmentally-conscious place in the sun.

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