Gas to bring many economic benefits

With the construction of the 532-km natural gas pipeline from Mtwara to Dar es Salaam, savings  from low cost gas power generation would be passed on to industrial and other users, raising Tanzania's competitiveness and growth prospects, a new IMF Country report says.

The report released  shows that the construction of the 1.92tri/- pipeline shall have broader economic benefits as a shift to low cost gas power generation will reduce electricity tariffs

"The authorities have shared with the IMF two feasibility studies for the project and both indicate commercial viability. The broader economic benefits would exceed the commercial benefits, as a shift to low cost gas power generation will reduce electricity tariffs," notes the report.

It adds that the savings would be passed on to industrial and other users, raising Tanzania's competitiveness and growth prospects. "The consultant studies indicate that existing gas reserves will be adequate to meet projected electricity needs for the coming decade. Access to additional new gas discoveries will be needed to make the pipeline viable over a 20-year period," says IMF.

IMF says that the volatile and declining contribution of hydroelectric power and the high cost of imported liquid petroleum fuels, Tanzania intends to draw increasingly on its natural gas reserves for power generation. Full utilisation of gas reserves in Southern Tanzania (Songo Songo and Mnazi Bay) is currently hampered by pipeline capacity constraints.

Accordingly, it says that the new 36-inch diameter gas pipeline would allow for expanded delivery of gas to Dar es Salaam and nearby areas for power and industrial use. The project would be implemented over 18 months, starting in 2012/13.

It says the external loans will be contracted by the government of Tanzania, which will extend a counterpart credit to TPDC. It adds that for debt service payments, a portion of the revenue from TPDC's.Pipeline operations would be transferred to the central government as a source of non-tax revenues, which will be used for interest payments to the foreign creditors.

IMF says that principal repayments such as TPDC's repayments to the government and counterpart repayments by the government to the foreign creditors will be recorded as a reversal of financial assets and liabilities.

"These repayments are expected to begin around 2018/19. The project's medium-to long-term fiscal implication will depend, in part, on the profitability of the pipeline," notes IMF.

Source: The Daily News,http://www.dailynews.co.tz, reported by Orton Kiishweko

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