Tanzania’s Worried About How To Spend The Gas Money

The President of Tanzania says “there will be a lot of money coming to the government” when the massive gas deposits discovered in the country’s offshore are developed. “The question will be how to spend such money judiciously and effectively”, he told the weekly newsletter Tanzaniainvest. “And for this good leadership and good plans will be key”.

Some 40Trillion Cubic Feet Of Gas, a third of the reserves of Algeria, have been discovered in the deepwaters off Tanzania since 2011. The Norwegian explorer Statoil and the British firm BG, lead the two ventures that have made the discoveries. They are hoping to deliver the first cargoes of LNG to South east Asia by 2020.

“Today we have so many (development) plans but not enough government resources”, Jakaya Kikwete disclosed to Tanzaniainvest, “so we ask donors and the private sector for support, without actually collecting enough. But during these times in the near future I think this problem will not be there anymore”.

Mr. Kikwete is not unmindful of the so-called resource curse. “To successfully anticipate that, we are learning from other countries that went through the same, such as Norway and Abu Dhabi, where they established sovereign wealth funds with strict modalities on how to spend the resources generated from the gas industry.

“We expect by October 2014 that the Tanzanian parliament will have enacted a law to create such fund so that revenues are used judiciously for the benefit of the current as well as the future generations of Tanzanians”.

By Sully Manope

Kenya progresses along nuclear energy path

The Kenya Nuclear Electricity Board (KNEB) is looking for a consultant to undertake a technical evaluation, which would include an analysis of the electric grid requirements to support proposed nuclear power plants. “The proposed grid system study will build on the studies already carried out but with a specific emphasis on the nuclear power plants and is expected to take 12 months,” KNEB says.

The board also expects the consultant to develop plans to improve the current grid, including having a reserve capacity on the grid to support the use of nuclear power plants. KNEB has also set requirements for the consultant to have a team composed of both local and foreign experts for the study.

KNEB expects nuclear electricity to play a critical part in meeting power demand, which has been projected to hit 15,000 MW over the next 16 years, from the current 1,400 MW.

The board was formed in 2010 and has been exploring possibilities of the country generating electricity using nuclear energy in the long term. It expects to have the first nuclear-fired electricity generation plant by around 2022.

Previous estimates have put the cost of setting up a 1,000 MW nuclear plant at US$3.5 billion. Nuclear energy has been marketed as cleaner and also cheaper, alongside other sources like geothermal, wind and solar.

While it is capital intensive and requires high levels of technical expertise, which is currently scarce in Kenya, it is also cheaper once initial installations are in place. Coal and natural gas are expected to form part of the electricity generation mix in the coming years.

“The growth in annual demand for electricity has reached seven per cent in the past and this will progressively increase to 15 per cent as Vision 2030 projects are implemented. Demand is expected to reach 15 000 MW by 2030,” according to KNEB.

By Kim Jansen 

Testing Distribution Strategies To Reach End Users in the Last Mile Across Uganda

High distribution costs in remote rural markets are a significant barrier for companies trying to reach populations at the base of the pyramid. Gaining access to end-consumers, often living in remote areas with little infrastructure, is costly and challenging. A pilot project is seeking to address this issue by building on existing distribution infrastructures across various channels.

 98% of improved cookstove producers in Uganda are concentrated around the country’s major cities, with less than three businesses running their operations in rural areas. One of the barriers to growth is their inability to reach out to those customers who don’t have access to sales outlets, conventionally located in the urban and periurban areas of the country.

Distribution, as it is currently being undertaken, simply involves loading a truck with stoves and driving through major towns and along highways until all stoves are sold, or nearly so. Being limited to major roads and towns, distributors fail to reach customers in the last mile.

Building a distribution network that covers the last mile to poor and under-served communities is crucial to business development. However, this is a challenge for most companies.

“Few companies are likely to have their own ready-made distribution infrastructure that reaches the BOP market – explains Joel Essien, GVEP’s ESME Advisor. Assuming they don’t, there are three options available to them: a) build their own infrastructure, at a considerable expense; b) harness an existing infrastructure; c) co-create one by setting up a franchisee system. Given the investment that the first and third options require, using existing networks – even if they are not known as ‘distribution’ networks is often the most viable avenue for small businesses.”

GVEP’s ESME programme in Uganda, which aims at supporting the development of Energy SMEs in sub-Saharan Africa, is working with three high preforming companies, engaged in the production of domestic improved cookstoves, to set up a distribution chain. Each entrepreneur – International Lifeline Fund, Africa Energy and Environment Saving Stoves and Solar Ltd and Energy Uganda Foundation – is responsible for a geographic area: respectively, the Northern, Eastern and Western region.

The distribution chain will be one where an entrepreneur linking to a distributor, a transporter serving as an intermediary and a network of five and six retailers serving the last mile distribution.

“We kept the distribution model simple because it is a pilot that needs to be proven before it can be replicated amongst the thirty plus cookstove entrepreneurs we work with in Uganda, most of who will also require production support in order to reach enough scale before distribution support can kick in,” explains Mr. Essien.

Harnessing existing networks that reach the base of the pyramid

The distribution channels were identified as a result of a market assessment study undertaken by GVEP for the Global Alliance for Clean Cookstoves in 2012. The distributors that are being considered are those who stock supermarkets throughout the country with a range of non-perishable goods including toothpaste, cereal, pasteurised milk, soap, sugar etc. Other identified potential transporters are those dealing in dry commodities such as beans, maize, groundnuts. Given the fragile nature of the cookstoves, transporters of fragile materials, such as sheet glass, are also being considered. In terms of retailers, the preferred outlets are the supermarkets and hardware stores dotting the main streets of rural towns.

It is expected that this approach will generate a 50% increase in cookstoves sales within the next six months, resulting in approximately 36,000 improved cookstoves sold. In addition to the financial benefits for the companies involved, there are considerable social and environmental benefits derived from an improved distribution network of energy efficient cookstoves.

“Given an average of four occupants per households, we estimate that the number of beneficiaries will be in the range of 50,000. These are mostly poor families that will be able to halve the cost of cooking fuel from the adoption of an energy efficient stove. As for the environmental benefits, the sales of 36,000 stoves will translate in an average of 36,000 tons of CO2 saved,” points out Mr. Essien.

Posted By Meghan Smith 

KenGen seeks advisor to secure funds for 140MW geothermal plant

Kenya's main electricity producer KenGen is looking for an adviser to help it secure financing for the development of a 140 megawatt (MW) geothermal plant, it said on Tuesday.

The company, 70 percent owned by the government, has installed capacity of 1,252 megawatts (MW) out of Kenya's total 1,664 MW. It aims to add another 844 MW to the grid by 2017 as part of a broader national power expansion programme.

Much of the new power supply will come from geothermal sources, tapping underground steam from the Rift Valley.

The advisors are expected to advise KenGen on the identification, procurement and selection of a private investor for the project including funding, KenGen said in a statement, without disclosing the estimated cost of the project.

Kenya relies heavily on renewable energy such as hydroelectric and geothermal power production.

KenGen's expansion efforts are part of the government's broader ambitions to add 5,000 MW to Kenya's power output by 2017, with the goal of boosting growth.

KenGen in February said it had drilled the largest geothermal steam well in Africa with a capacity to generate 30MW of power.

Although expensive to drill initially, development of cheaper geothermal power means the country will come to rely less on thermal or fuel-driven power, prone to the vagaries of high international prices, and rain-fed hydroelectric dams.

Kenya currently has 1,664 MW of capacity against a maximum recorded demand of about 1,410 MW.

Source: Reuters

African Development Bank gives Angola $1 bln loan to develop energy network

LUANDA (Reuters) - The African Development Bank (AFDB) has approved a US$1 billion loan for Angola to help develop its war-ravaged electricity network and facilitate reforms to government financial management, the bank said.

Angola's power network was devastated by a 27-year civil war that ended in 2002 and the country has grappled with frequent and long outages, forcing households and businesses to rely on expensive diesel-fuelled generators.

Africa's second-biggest oil producer has posted rapid economic expansion since the war, but analysts say its weak energy network is a major obstacle to developing other sectors and reducing reliance on oil revenue.

President Jose Eduardo dos Santos's government plans to spend $23 billion by 2017 to quintuple installed capacity by building large dams and improving the power transport and distribution networks.

"The government has already shown strong ownership and commitment to the power sector and the public financial management reform process," said Alex Rugamba, director of the AFDB's Energy, Environment and Climate Change Department.

"The bank is happy to help the government to implement the ongoing reforms with needed financing and technical expertise, in collaboration with other partners," Rugamba said in a statement seen by Reuters on Thursday.

The AFDB said it would study how Angola managed its public finances and produce a medium-term plan to address weaknesses.

Dos Santos, who has been in power since 1979, has long been accused by local opponents and international lenders of keeping Angola's finances opaque and mismanaging the country's wealth.

The International Monetary Fund in March warned of continued weaknesses in Angola's financial management and urged the government to take steps to promote transparency. 

Transparency International ranks Angola 153 out of 177 countries in its Corruption Perceptions Index.

Source: Reuters

The 3rd East Africa Oil and Gas Summit and Exhibition

Event Title: The 3^rd East Africa Oil and Gas Summit and Exhibition
Date: 15 – 17 October 2013

Event Venue: KICC, Nairobi, Kenya
Website: www.eaogs.com

The 3rd East Africa Oil and Gas Summit (EAOGS) will build on the success of the 2013 Summit which welcomed over 350 delegates from 200 regional and international companies and 30 different countries.

In 2014 this prestigious, government-led summit has been expanded to include a larger exhibition to meet the demand for stands. EAOGS 2014 will once again provide a platform for East African ministries and the National Oil companies to engage with international and local investors to examine the vast opportunities across East Africa.

For more enquiries contact

Rosie Topp rtopp@gep-events.com Direct Line: + 44 20 3488 1193


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Tullow OIl & Africa OIl strike more oil in Turkana, Kenya

Tullow Oil and it's partner Africa OIl have encountered more oil in Blocks 10BB and 13T in Northern Kenya.

According to Angus McCoss, Exploration Director, Tullow Oil plc, “I am pleased to announce that the Twiga-2 exploratory sidetrack has encountered material oil-bearing sandstone reservoirs north of Twiga-1. The combined results from Twiga-2 and its successful sidetrack confirm the resource potential and have given us valuable insights for the locations of future exploration and development wells. The Ekunyuk-1 well encountered the best developed reservoir sands so far on the east flank, although at this location the trap appears to be incompletely formed. Additionally, the presence of a thick extensive oil shale gives us new options to study the basin’s substantial unconventional oil potential.”

Twiga-2 sidetrack encounters 62 metres of net oil pay

“The Sakson PR5 rig is continuing drilling operations on the Twiga-2 up-dip appraisal well.  The initial wellbore was drilled near the basin bounding fault and encountered some 18 metres of net oil pay within alluvial fan facies, with limited reservoir quality. A decision was therefore made to sidetrack the well away from the fault to explore north of Twiga-1 and some 62 metres of vertical net oil pay has been discovered in the Auwerwer formation, similar in quality to the initial Twiga-1 discovery.  The well is currently being deepened to evaluate the Lower Lokhone potential and a testing program for this successful well is planned to be conducted later this year.”

Ekunyuk-1 finds best sands on eastern flank although lacks trap

“The Ekunyuk-1 well is located on the eastern flank, on trend with recent discoveries at Etuko and Ewoi. The well has now reached a final total depth of 1,802 metres and has encountered some 5 metres of net oil pay, within approximately 150 metres of reservoir quality water-bearing sandstone and an equal thickness of a basin-wide rich oil shale. This rig will now be moved to the Agete-2 location.”

This gives confidence to the government and people of Kenya that commercial viability of the oil fields in Turkana county is getting closer. 

US advisory group warns African economies on over-reliance on oil and gas

A US-based risk advisory group has warned that foreign direct investment into energy sectors of marginal African oil producers will decline as the US and China ramp up shale oil production.

DaMina Advisors says acceleration in hydraulic fracturing and horizontal drilling technologies has catalysed domestic shale oil boom in the US, “altering the future landscape of global energy”. The US is poised for energy self-sufficiency in six years.

China is also boosting its domestic shale oil and offshore developments in disputed islands. Further, the world’s second largest economy is seeking to secure “a more proximate stable oil source” through a pipeline from neighbouring Russia.

“… marginal African energy producers, who are also heavily dependent on oil export revenues to fund national budgets and maintain social cohesion, face a growing threat to state stability as both the US and China curb African oil imports,” the firm warns.

Its analysis shows that US oil imports from key African exporter — Nigeria, Angola and Algeria — have declined by a cumulative 180 per cent over 10 years.

“Unless marginal African energy producers such as Chad, Cameroon, Gabon, Ghana, Cote d’Ivoire, Uganda, Kenya, the Congo’s and Equatorial Guinea dramatically alter their energy sector fiscal and regulatory regimes to increase attractiveness to investors, the region will see a drastic shortfall in FDI in coming years,” DaMina warns.

It says the asymmetry of a heavy state reliance on oil and gas exports revenues, plus a declining global export market due to rising US energy self-sufficiency and declining Chinese demand for African oil, will leave many key African economies facing major fiscal imbalances which will ultimately threaten state stability.

It points to other key threats such as high taxes, rising political risk, surging royalties, new foreign exchange controls, harsh local content laws and unstable regulatory regimes.
“Resource-rich countries are also at the mercies of world prices for their products. For every boom there is a burst,” the IMF warned recently.

Source: The Star

3 Firms shortlisted to built Power Plants in Menegai Geothermal Field, Kenya

The Geothermal Development Company of Kenya (GDC) has  picked three firms, New York Stock Exchange-listed power generator Ormat Technologies, Quantum Power and local firm Sosian Energy to build geothermal power plants in Menengai that are expected to form a key plank of the Jubilee government’s promise to raise Kenya’s energy capacity to 5,000 megawatts.

 Each firm is expected to build a 35-megawatt steam power plant under a build–own–operate model.(BOO). Building of the power plants is set to start in December.

GDC has already signed a deal with the three independent power producers (IPPs), which it will supply with steam at a cost of US¢3.5 (Sh3.05) per kilowatt hour.

Each of the power plants will cost about Sh4 billion to set up, and the 100 megawatts of geothermal electricity will be injected into the national grid by the end of 2015.

“The three IPPs have been selected and are now engaging Kenya Power to sign a power purchase agreement,” said a GDC tender committee member who did not want to be named.

GDC said that the three were selected from the 12 bids that were submitted at the close of the tendering process in September last year.

The State-owned agency said that it would complete drilling wells that would feed steam to the power plants by end of the year.

Earnings from the Menengai project is expected to help the State-owned GDC to cut dependence on the Treasury for funding and spur drilling activities in its other geothermal fields in Suswa and Baringo.

Tender documents seen by the Business Daily show that the investors will deliver the power at US¢8.5 (Sh7.40) per kilowatt hour excluding value added tax, in what is likely to help bring down the cost of doing business in Kenya.

“The tariff will be capped at $ 0.085/kWh exclusive of value added tax which includes the cost of steam (US$ 0.035/kWh) and the cost of generation ($ 0.05),” reads the tender document.

Kenya is turning to clean and cheaper sources such as geothermal, wind and liquefied natural gas to halve the cost of electricity to Sh9.10 (US¢10.45) per kilowatt hour from the current average of Sh17.20 (US¢19.78) per unit for domestic households.

Mozambique’s growing energy needs have much to offer financiers

Lending to off-grid power projects and companies helping to maintain the grid are probably the most attractive opportunities for financial institutions in Mozambique at present, Standard Bank’s head of power and infrastructure, Ntlai Mosiah, said on Friday.

He said this was not the same as project financing for transmission projects, which, in agreement with Old Mutual portfolio manager Sean Friend, he believed were not generally appropriate for private financiers because they had a 20- to 50-year horizon. This financing was for subcontractors to Mozambique’s energy utility, Electricidade de Moçambique (EDM).

Mr Mosiah was speaking during a panel discussion on funding options at the Powering Africa — Moçambique conference organised by Energy Net and Mozambique’s Ministry of Energy. The conference has attracted about 200 local and international delegates, reflecting interest in developing Mozambique’s substantial coal and gas resources and meeting it’s energy needs. The country’s demand for energy is growing at about 100MW a year.

SCP Africa LDA partner Colin Waugh said there was a huge need to provide temporary power solutions for both big and small companies affected by power outages.

Another issue Mozambique is trying to tackle is the rolling out of electricity to far-flung rural areas. Mr Mosiah said these projects required some credit enhancement and credit support, which meant government needed to play a role so commercial banks would be willing to take an appropriate level of risk. "We have started engagement with a few parties on this," he said.

Peter Ballinger, the MD of Overseas Private Investment Corporation, a development finance institution, said his company was looking to get involved in off-grid projects but it was important to find a developer with the demonstrated skills and ability to execute them and put together a business plan to bring electricity to 500 villages, for example.

Speakers said that when deciding whether to finance power projects in Mozambique some of the key considerations included what the fuel source was, the quality of the offtake, the returns to the developer, the operation and maintenance of the asset and the social, economic and environmental aspects.

Mr Waugh said the regulatory environment was also important. There was a question mark over the financing of Electricidade de Moçambique, which was in a weak financial position. It was charging six to seven US cents per kilowatt hour (kWh) while sourcing power for up to 20 US cents/kWh, or even 70 US cents/kWh from South Africa.

"EDM is losing money and there is no recapitalisation plan," Mr Waugh said. It was a risk outsiders wanted to know about and know how to address before taking on projects, he said.

BY CHARLOTTE MATHEWS

Off - Grid Lighting Companies Awarded Grants to Benefit Kenya's Poor

Eight off-grid lighting (OGL) distributors have been awarded grants in an effort to increase access to reliable and affordable OGL solutions for the Bottom of the Pyramid.

The grant winners of a competition seeking to deliver financial support to eligible distributors of modern off-grid lighting products in Kenya were announced last month. The eight selected companies are: Hensolex, One Degree Solar, Renewable Energy Ventures, Smart Solar Kenya, Solataa Ltd, Sollatek electronics Ltd, SunnyMoney Kenya and Mibawa Suppliers. 

Launched in June last year, the grant competition is Funded by the Russian Federation through the World Bank, and operated under the ESME Trust Fund. The initiative aims to support Energy SME Development in sub-Saharan Africa to foster local private entrepreneurship and invest in the provision of energy services in remote, un-served or under-served regions. This initiative forms part of GVEP’s support to Energy SME to accelerate the development of commercial OGL markets in Kenya.

Ms Mills added that the OGL grants fill this gap by providing working capital to distributors, who in turn sell products through low-interest credit to clients, whilst still being able to replenish stock.
“Clients immediately benefit from cheaper, cleaner light sources whereas the distributor is assured of short- and medium term cash flow”, Ms Mills explains.

The OGL products mainly use solar energy as a source of lighting and for mobile phone charging, reducing overreliance on electricity and kerosene lamps.

According to Lighting Africa, a joint World Bank/IFC Project, there is a real need for high quality lighting products to be more readily available in the African market.  Annual sales of OGL have grown by 90% to 95% since 2009. The sales are expected to rise due to many phone users and limited connection to electricity. 

Improved quality of available off-grid products and the development of easy payment options such as pay-as-you-go models, are contributing to their increased popularity.
However, off-grid lighting and other clean, renewable energy initiatives, though promising, are threatened by inadequate funding and investment options. Banks’ limited knowledge on the industry’s prospects and perceived high risks coupled with weak balance sheets and credit history among the SMEs, are a stumbling block to fast uptake of the technology. Manufacturers are also grappling with how to increase production to match demand, while importers tie up considerable funds due to bureaucracies in the manufacturing process. 

Against this backdrop, pre-qualified OGL product distributors were called to submit proposals for grants. The proposals were required to have targets for product sales; a viable business plan including sustainability after the grant is completed; key measurable milestones; an environmental sustainability plan; a detailed budget, and procurement plan. GVEP provided business advisory services to the applicants in order to improve the quality of the proposals.
An Independent Evaluation Committee (EC) consisting of eminent professionals drawn from diverse fields with a bias towards renewable energy, rural business and finance provided an objective assessment of the proposals. The committee included the Government of Kenya (represented through the Ministry of Energy & Petroleum and the Rural Electrification Authority), Kenya Renewable Energy Association (KEREA), Consumer Information Network (CIN), Research Institutions and others.

Now that GVEP has completed signing the contacts with the grant recipients it will be responsible for the implementation of the programme.

 "Communities that will benefit most from clean, sustainable energy solutions are those with least access to these products, having to pay high up-front capital costs,” Says Belinda Mills, ESME Programme Manager.

“By achieving business scale and commercial viability, we are confident that this programme will succeed in bringing about strong developmental impact and the reduction of dirty lighting at the Bottom of the Pyramid.” Says Dr. Caesar Mwangi, GVEP Regional Director Africa.

Posted by Deborah Mupusi

China’s Energy & Raw Materials “Going Out” Strategy, the African Perspective

The Chinese Premier Li Keqiang is on a four country African tour this week, which will culminate in his addressing the 2014 World Economic Forum on Africa in Abuja, Nigeria today. He will also meet several African leaders on the fringes of the WEF for Africa. On this tour China is said to have signed agreements totaling US$12 billion in loans and aid to African countries. Here is the context the massive Chinese investment in Africa.

Approximately, Thirsty years ago, with a population of more than 1.1Billion people and a GDP growth rate of 9% annually, China was short of raw material – food, iron ore, aluminium, copper, coal, natural gas and oil. Its export led growth strategy, plus the growth needed for domestic consumption, had fueled massive demand for all sorts of raw material.

The construction of national infrastructure necessitated extraordinary amounts of iron ore, alumina, copper and metallurgical coal. China was also committed to the auto mobile industry setting a target of producing 20 million cars annually, requiring a lot of petroleum despite its limited domestic reserves. In May 2010, China was consuming 9.2 million barrels of petroleum per day, yet it produced only 3.9 million locally and the difference was being imported, The International Energy Association (IEA) projected that by 2030, China would be importing more than 12 million barrels a day, or three fourths of the oil it would require. To a lesser extent the same was true for natural gas, which would be used for gas turbines as a replacement for China’s abundant but more polluting coal.

Sometime after the Asian crisis of 1997-8, about a decade earlier , the Chinese government adopted a “Going Out” strategy. The 3 national oil companies – CNPC, Sinopec and CNOOC began ramping up their upstream investments activities overseas, displacing western firms in places such as Angola and investing in places like Sudan where western companies could not go. In the 15 months prior to to April 2010 alone, these companies spent US$29 billion to acquire oil and gas assets outside of China. CNPC and Sinopec were involved with 8 countries in 11 loan for oil deals worth US$77 billion. Further, these companies entered contracts to invest at least US$18 billion in future exploration and development in Iran, Iraq, Venezuela and Angola. 

The “Going Out” strategy was driven by a sense of geopolitical insecurity. The Chinese government realized it would be a huge net importer of fuels and other minerals for the indefinite future, and it worried about access to those minerals and fuels, not only in a competitive squeeze (where prices went up sharply and supplies were constrained), but also in a security situation.

This resource acquisition strategy seemed to fit well with Chinese foreign policy. For the past several years according to Thomas Lum, “China had bolstered its diplomatic presence and garnered international goodwill through financing infrastructure and natural resources development projects, assistance in the carrying out of such projects, and large investments in many developing countries”. This policy was “driven primarily by Beijing’s desire to secure and transport natural resources…. And secondarily for diplomatic reasons.”

As a result of these investments, China became a top trading partner to Africa and South east Asia, and by late 2010 was only second to the USA as a market for Latin American commodities. Some studies have shown that China’s aid amount was US$25 billion in 2007 and has been growing ever since.

In Africa, for example, nearly 70% of china’s infrastructure financing was concentrated in Angola, Nigeria, Ethiopia and Sudan – 3 of which have significant oil fields. Additionally, China pledged US$16 billion in aid, loans and investment to Latin America, with another US$8.2 billion for Brazil.

Therefore, we see the Chinese “”Going Out” strategy as a means of ensuring a constant supply of natural resource raw materials to power its economy in a bid to secure its way of life and long term survival. Africa has been a beneficiary of this trend that seems not to be abating by growing its trade with China, despite a few issues along the way in terms of higher value end products exports, capital and manpower being skewed towards China. There is also a growing fiscal & monetary indebtness towards China.