Fahamu matumizi ya Gesi asilia Tanzania

Stephano Mgendanyi

JF-Expert Member
May 16, 2020

Natural Gas (Pure Methane, CH4) can be used for;
- Domestic Natural Gas Utilization Options.
  • Industrial Application as an Alternative Fuel
  • Households, Institutions and Transport
  • Fertilizer (Ammonia & Urea)
  • Methanol
  • Di-Methyl Ether (DME)
  • Gas to Liquid (GTL) Project
  • Methanol to Gasoline (MTG)
  • Iron and Steel Complex
  • Export Options (Liquefied Natural Gas & Pipeline Export Option)

1. Domestic Natural Gas Utilization Options.

Natural gas may be processed into many useful products that have vast market value. The initial process involves drying and cleaning of the gas to remove unwanted impurities. The most common use of natural gas is fuel. Natural gas is also used as feedstock in petrochemical industries where it is transformed into various derivatives including ammonia, methanol and liquid fuels. Some of these derivatives become feedstock and additives for numerous valuable industrial products.

In Tanzania, natural gas has been used as alternative fuel by power plants, industries, institutions and households. The use of natural gas for power generation and Industries started in 2004 while households and institutions started in 2009. In magnitude of consumption, power generation is the leading consumer followed by industrial utilization and very minor usage in institutions, households and vehicles.

Ninety percent of Tanzania’s energy requirement is supplied from traditional fuels, mostly biomass involving firewood and charcoal. Most of households, institutions and industries use firewood and charcoal for cooking and running their boilers. Application of natural gas as an alternative fuel for cooking and heating will reduce deforestation which is currently at an average of 350,000 hectares annually according to ‘Calls to Legalize Tanzania’s Charcoal trade to serve forest (TFS 2015)’. Natural gas uses will also reduce environmental pollution and save foreign currency used to import liquid fuels.

2. Industrial Application as an Alternative Fuel

Natural gas is used as fuel to fire boilers and furnaces in the glass, textile, food processing, beverage (cold drinks and spirits/beer) and other facilities which require energy in their manufacturing processes. There are 37 industries which are currently connected to the gas distribution network in Dar es Salaam that started in 2004. Potentially, an addition of about 100 industries can be connected to the natural gas distribution network to use natural gas as an alternative fuel in Dar es Salaam. The current industrial average natural gas consumption is 10 MMSCFD, equivalent to 3.65 BCF per annum.

3. Households, Institutions and Transport.

The use of natural gas for households, institutions and transport is projected to expand gradually. Tanzania being a tropical country with relatively high temperature throughout the year, will presumably use natural gas for cooking and cooling (central cooling systems) rather than space heating which consumes high amount of natural gas during the cold winter seasons in some countries.

Demand of gas at household level for cooking may tend to be small due to related investment and operational costs compared to traditional cook stoves. However, the importance of supply of gas as an alternative energy to biomass (mainly charcoal and firewood) makes it necessary for the Government to strategically intervene and promote its implementation through appropriate policies in order to save the fast depleting natural forests.

(A). Gas Demand for Households;
In forecasting households demand for natural gas, based on TPDC pilot project in Mikocheni area, a typical household consumes 35.5 scfd for cooking. According to the 2012 population census report, Tanzania has about 9,000,000 households with a household size of 5 persons. It is assumed that from 2016 – 2045 the population will, on average, be growing at 1.95% per annum. It is further assumed that 10% of households in the country will be supplied with natural gas for cooking by 2045. This makes a total demand of 0.5 TCF for 30 years.

(B). Gas Demand for Institutions;
Gas demand forecast for institutions is projected basing on the average regional demand as per the market study undertaken in 2011 by MEM in 11 regions of Tanzania. Institutions considered under this study include prisons, hotels, academic institutions, hospitals and health centres. The study projected that, in 2016, the natural gas annual demand for institutions will be 3.6 BCF. For the purpose of this plan, it is assumed that the natural gas demand will grow at 2% annually, hence making a total demand of 0.1 TCF between 2016 and 2045.

(C). Compressed Natural Gas for Transport;
Available data shows that out of about 700,000 vehicles registered from 2004 to 2014, sixty percent (60%) use petrol as fuel. These vehicles are potential candidates for conversion to Compressed Natural Gas Vehicles (CNGV). It is assumed that 20% of all petrol vehicles will be converted to use natural gas. To forecast the CNGV demand, it is assumed that a typical vehicle will on average demand 7 liters of petrol per day, which is equivalent to 225 scfd of natural gas. The number of vehicles will grow at the GDP growth rate, which on average is assumed 6.1%, thus making a total demand of 0.6 TCF for 30 years. Further studies should be undertaken to determine the approximate demand and growth patterns.

Therefore, based on the above information, the forecasted demand of natural gas for households, institutions and transport is about 1.2 TCF for the period thirty years.

(D). Viability
The Government intends to supply natural gas to its citizens to alleviate impacts associated with use of traditional biomass and conventional oil. However, due to inadequate infrastructure this exercise may be costly and can be realized in the long term. It is therefore necessary to carry out appropriate studies to determine cost effective mechanism of supplying gas to the public.

4. Fertilizer (Ammonia & Urea).

Tanzania imports 90% of its field grade fertilizers, the remaining 10% is domestically produced. However, the domestically produced fertilizer is only suitable for acidic soils, although the products’ demand is constrained by the slow agronomic response to crops which is observed in the season following application. Consumption of fertilizer from 2010/2011 to 2014/2015 has averaged 306,450 tons per annum, where urea is by far the most used fertilizer accounting for above 33% of the total field grade usage in Tanzania. However, the Ministry responsible for Agriculture estimates the fertilizer use will grow to 485,000 tons per year in 2016.

The Ministry responsible for Agriculture estimated that the demand for fertilizer in Tanzania will increase to 485,000 tonnes in 2015/16, up from an average of 245,900 tons per annum during the period 2009/10 to 2012/13. Urea accounts for one third of the total fertilizer application in Tanzania. Due to sensitivity of fertilizer company’s revenues to natural gas feed stock cost and the global ammonia/urea prices, fertilizer profitability tends to rely on economies of scale in order to remain competitive.

The current world scale Urea plant that can benefit from economies of scale is capable of producing ammonia 2300 t/d and urea 4000 t/d (equivalent to 1.3 million t/y of urea). The plant output will satisfy the local market demand and export the surplus to regional and international markets. Based on the current investment cost estimates, the total CAPEX required will be USD 1200 million (total EPC cost – for Ammonia and Urea Complex and other Utility/Offsite Facilities). This plant will require natural gas supply for feedstock and captive power plant amounting to 0.7 TCF over 25 years (approximately 80 mmscfd). The project is estimated to offer up to 1400 jobs during construction with a potential of sixty (60) direct employment and 400 indirect jobs during operation. Ammonia/Urea plant is proposed to attain commercial operation date in year 2020.

5. Methanol

Methanol is a light, volatile, colorless, flammable, and toxic liquid. It is produced by reactions of steam and methane in the presence of catalysts. It is used directly as a chemical and a raw materials for producing various conventional chemical products, as well as an intermediate materials in producing synthetic fuel products such as gasoline. Currently, there is no production of oil in the country, instead Tanzania can produce gasoline or DME by using methanol as raw materials. Methanol is easily transported using trucks, ships or trains. A flow diagram showing production of methanol from Natural Gas (Methane).

There are a lot of possibilities for utilizing and further processing methanol. It may be processed into polypropylene, polyethylene, fomaldehyde, olefins, Dimethyl ether (DME), acetic acid, methyl amines, methyl methacrylate, and gasoline fuels. As an example, acetic acid can be further processed into vinyl acetate, polyvinyl acetate, acetic anhydride, acetate esters that are applied in pharmaceuticals, plastics, paints, inks, coatings, adhesives, polyester fibres, films, and plastic containers.

The establishment of the methanol plant therefore, opens up possibility for setting up of secondary plants to produce the mentioned products. Basically each of the major products mentioned above translates into a major industry. The process has a significant multiplier effect in the industrial development.

Methanol is distributed from gas producing regions such as The Middle East, CIS, South America, and Southeast Asia to consuming regions such as Europe, North America, Far East, and China. According to Methanol Market Services Asia (MMSA Pte Ltd. Feb 2015), the global methanol market was about 72 million tonnes in 2014, of which approximately half being traded internationally, and is predicted to reach approximately 107 million tonnes in 2019. China is known to be the leader in production of methanol (producing over 50%), but it is also the leading consumer and therefore a major potential market for methanol from Tanzania.

Currently, Tanzania has no methanol plants and imports only about 50 tonnes of methanol annually. In Africa, reliable projections show that demand for methanol is increasing and hence, there is potential for developing methanol value chain in Tanzania. In case that methanol is produced at a low cost from natural gas in Tanzania, it could be exported to neighboring countries and further to the global market, and could potentially develop chemical industries starting from methanol as a feedstock. This may involve DME, MTO, MTG, and Methanol to other chemical products (e.g. plastics, paints, pharmaceutical and adhesives).

The scale of methanol plants has been increasing significantly, and their capacity has reached 3,000 to 5,000 tonnes/day (1.0 to 1.7 million tonnes/year) per single train. The consumption of natural gas in producing 3,000 tonnes/day of methanol is approximately 100 MMSCFD (about 0.7 Tcf over 20 years), which is comparable to that of ammonia - urea plants. A two trains (1 MTPA) plant is proposed, whereby the first train will be on stream by 2023 and the second train will come after 10 years. The CAPEX for initial investment of one train is projected at US$ 900 million and a total of 1.1 TCF of natural gas will be required for production of methanol for two trains a period of 23 years.

Methanol business exhibits relatively stable profitability with respect to changes in construction costs. On the other hand, the profitability of methanol business heavily depend on the product prices. Further, production of methanol is likely to offer direct jobs between 1000 to 1400 jobs. Additional employment opportunities are offered by the downstream plants that use methanol as feedstock. The methanol plant should preferably be located in the areas where supply of gas can be ensured.

The local methanol market is seen to be growing as demand for petrochemical products into the economy grows. A further study is required to establish viability of the project with latest details on price and other parameters.

6. Di-Methyl Ether (DME).

DME is a relatively new secondary product whose major feedstock is methanol, produced either through dehydration of methanol or direct synthesis from syngas. It is gaining its popularity as fuel for power generation, transport fuels, domestic fuel similar to liquefied petroleum gas (LPG), aerosol properants, industrial fuel and chemical feedstock. DME burns more cleanly and is also more efficient than diesel. It can also be formed from organic sources (biomass) and is therefore carbon neutral. It is considered virtually nontoxic, and although flammable, is no more dangerous to handle than gasoline. However, unlike methanol, DME has a high enough cetane number to perform well as a compressionignition fuel. Also unlike methanol, DME is a gas at ambient temperature and pressure, so it must be stored under pressure as a liquid similar to LPG. When used as a diesel fuel, DME provides reduced particulate matter (PM) and NOx emissions, it helps to significant reduce CO2 emissions but increased CO and hydrocarbons (HC).

DME is reformed with steam at relatively lower temperature than natural gas and LPG, etc., and has some advantage on heat balance. Therefore, DME is a promising fuel for the fuel cell. Moreover, a compact reforming device has been developed for use by a fuel-cell car.

Tanzania anticipates producing sufficient and commercializing DME for blending it with LPG, so as to reduce its reliance on LPG imports and hence, minimizes hard cash expenditure on such imports, and also to capture potential export market. For the purpose of supplying to both domestic and export markets, a world scale DME plant with a nameplate capacity of 0.25 MTPA is proposed, with a natural gas demand of 0.3 TCF over a period of 23 years.

The estimated CAPEX for such plant is US$ 65 million. A DME plant would best be located close to methanol plant. DME plant will be built after or in concurrence with the methanol plant, as methanol will be the main feedstock.

The major use of DME in Tanzania may be by blending with LPG for fuel purposes, and export market as demand dictates.

7. Gas to Liquid (GTL) Project.

Gas-to-liquids (GTL) is a process that converts natural gas to high value liquid fuels such as gasoline, jet fuel, and diesel. GTL can also make waxes. The most common technology used at GTL facilities is Fischer-Tropsch (F-T) synthesis. Although F-T synthesis has been around for nearly a century, it has gained recent interest because of the growing spread between the value of petroleum products and the cost of natural gas.

Potential demand for GTL products is massive in Tanzania as the country depends on 100% imports of these products. According to EWURA Annual Report 2014, the country consumed a total of 50,000 bpd equivalent to 2.9 billion litres per annum, where diesel accounted for 64%, petrol 25.7%, kerosene 0.7%, and other petroleum products in small quantities. These products can easily be produced in Tanzania using natural gas through GTL process.

A typical GTL plant (one train) has a capacity of producing 15,000 bpd comprising of Diesel Oil (55% = 8,250 bpd = 1.3 million liters per day), Naphtha (25% = 3,750 bpd) and Kerosene (20% = 3,000 bpd). Therefore, if investment in GTL plant was to happen based on the current demand, an ideal capacity to replace 100% of the reported quantities, particularly diesel and kerosene would require four trains producing up to 60,000bpd. This implies that by 2027, when GTL project is expected to be on stream, more capacity would be required to cater for the increasing demand.

However, due to high CAPEX of a GTL project, its viability including determination of plant capacity would normally be evaluated carefully based on the opportunity cost of importing versus producing locally the targeted white petroleum products. A quick analysis on possible minimum natural gas price in Tanzania, reveals that a GTL project can only be attractive when the oil price is not less than $65/Bbl. Currently the oil price stands at about $35/Bbl. However, assuming the oil price will rebound back to favourable thresholds before development of the offshore gas, a three train GTL plant to produce 45,000bpd has been proposed to limit CAPEX requirement. Each train will come on stream in the interval of 5 years from 2027 (ie. 2027, 2032 and 2037), to replace approximately 16% of imported diesel and kerosene between 2028 and 2036 and 12% of the same in 2037, basing on the demand forecast GTL project will require 1.8 TCF of natural gas between 2027 and 2045.

A proposed three trains GTL plant (15,000bpd each) will have overall CAPEX of US$ 6,220 million. Further expansion may be preferred depending on the economics which will largely be driven by the prevailing global oil prices.

For a country like Tanzania that imports all white petroleum products but has abundant natural gas, GTL project is proposed as one of monetization options. GTL plant involves a greater amount of capital and operation expenditure, making it not highly profitable. Moreover, in order to be profitable GTL project depends on high oil prices as well as low gas prices.

8. Methanol to Gasoline (MTG).

Methanol to Gasoline (MTG) refers to processes which convert methanol into gasoline. MTG is an efficient route which uses methanol as an intermediate product from natural gas to produce high value gasoline that can be directly utilized to power vehicles in place of petroleum refinery gasoline. Under optimal conditions a high octane clean gasoline that meets industry standards is produced from Methanol.

MTG is the logical choice for Tanzania natural gas monetization since we already have a plan to have a methanol plant which will supply methanol to the MTG plant. MTG process will offer an important alternative route for fuel supply to the existing transportation market in Tanzania.

Potential demand for MTG products is high in Tanzania as the country depends on 100% import of white petroleum products. According to EWURA Annual Report, 2014, the country consumed a total of 50,000 bpd equivalent to 2.9 billion litres per annum, where gasoline accounted for 25.7%, diesel 64%, kerosene 0.7% and other petroleum products in small quantities. Gasoline which accounted for 25.7% translates into 12,842 bpd.

A typical MTG plant with nameplate capacity of 0.23 MTPA can produce 6,350 bpd of gasoline and 29,000 tons per year of LPG. This implies that if investment on MTG was to be undertaken based on this demand, it would require at least two trains to replace all import of gasoline. Since the MTG plant is proposed to be on-stream in 2023, more trains would likely be required to cater for the increasing demand. However, due to high CAPEX of MTG project, its viability including determination of plant capacity would normally be evaluated carefully based on opportunity cost of importing versus producing locally the targeted white petroleum products. Assuming that conditions will be favourable, single train MTG plant (0.23 MTPA) is proposed to be undertaken in 2023. It is estimated that MTG will consume 0.4 TCF of natural gas over a period of 23 years. Gasoline produced from MTG plant will replace a significant amount of imported gasoline, approximated to be 27% of Tanzania domestic demand for gasoline in 2023. It is also expected to replace the import of LPG by 36% in 2023

The overall CAPEX of the proposed plant is estimated to be US$ 330 million if feed methanol is purchased, and US$ 869 million if feed gas is purchased to produce methanol.

For Tanzania which imports all white petroleum products but has abundant natural gas, MTG would be one of monetization options. However, since MTG project depends on high oil prices as well as very low gas prices to be profitable.

9. Iron and Steel Complex.
Tanzania has abundant Iron Ore with currently proven reserve of 300 million tons. The ore is mainly found in Liganga, Ludewa District over 800 Km from Mtwara and Lindi where natural gas has been discovered. Direct-Reduced Iron (DRI) and Hot-Briquette Iron (HBI) can be produced using natural gas as a reducer of iron oxide resulting into high quality output which is ideal for conversion to steel.

This creates a potential for Tanzania to implement an iron and steel complex comprising a pelletizing plant, HBI plant and a steel slabs and rolling mill. HBI will be sold to the domestic market for steel manufacturing or for export. However, iron-ore deposit is located very close to coal deposit and therefore coal can be utilized instead of natural gas.




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