NEWS By ADAM IHUCHA Posted Saturday, May 26 2012 at 12:56 The discovery of abundant natural gas in Tanzania will help the country reduce its oil import bill as well as deforestation. The Bank of Tanzania says the country spends over $2.84 billion annually importing about 3.4 million tonnes of fuel - more than a third of all imports. In addition, money used to import oil never returns to the country, hence creating an imbalance in trade. Oil importation also raises the cost of electricity, making it expensive for common people. The majority use charcoal and firewood as a primary source of energy for cooking and heating, thereby accelerating deforestation in the country. According to the World Bank's latest report from the Environmental and Natural Resources Unit of the African Region, Tanzania's annual charcoal trade is worth $650 million, with Dar es Salaam alone consuming the equivalent of $350 million. This has resulted in extensive deforestation. Forest area per person has declined from 6.3 ha in 1961 to well below 0.8 ha presently. Currently, Tanzania urgently needs more electricity and the state-run-power supply firm, Tanesco has commissioned two power firms - Aggreko and Symbion Power Ltd, to generate 500MW emergency power combined. But the recent discovery of enormous gas fields in Tanzania's offshore waters by Britain's BG and Sweden's Statoil could reverse the trend. Both firms have found huge quantities of natural gas, equivalent in energy terms to roughly two billion barrels of oil. Major reserves According to a US-based consultant in African Affairs, Mobhare Matinyi, if the recent discovery is proven accurate, Tanzania will move to 34th place from the current 84th in the global ranking of countries with significant natural gas reserves. In Africa, the country will rank fifth behind Nigeria, Algeria, Egypt and Libya, up from 16th place. The managing director of the Tanzania Petroleum Development Corporation, Yona Killaghane, said the recent gas discovery will boost the ongoing laying of a natural gas pipeline in Dar es Salaam's Mikocheni area, where 57 houses will be connected to natural gas for domestic purposes. "This started as a pilot project but now more than 50 houses will be added," the TPDC boss noted. The World Bank's lead economist in Madagascar, Dr Jacques Morisset, said these proven natural gas reserves can be a game changer for Tanzania, though extracting and producing is not a simple affair. Massive up-front investments - larger than the country's current GDP of $22 billion - and new technologies are necessary, while benefits will typically spread over 25 to 30 years. "Short of cash and expertise, Tanzania will have to partner with global companies. Potential candidates - British Gas, Statoil - are already knocking on the door" Dr Morisset said. The high cost of electricity also has a negative impact on other key sectors of the economy like mining, manufacturing and agriculture. Erratic electricity supply has so far caused a 17 per cent fall in gold production in the first quarter. African Barrick Gold's vice-president of corporate affairs, Deo Mwanyika, said that escalating operational costs arising from unreliable power supply are the major reason for the fall in gold production. South Africa, with a whopping 240 tonnes of gold production in 2011, is the largest gold producer on the continent, followed by Ghana, with a gold production of 80 tonnes. Third position is held by Mali with a production capacity of 60 tonnes, while Tanzania comes in fourth at 50 tonnes of gold. The country's earning from gold alone soared to $2.1 billion in 2011, up from $1.5 billion in 2010 and generated 2.6 per cent to GDP. The World Bank says that poor governance and high energy costs are the biggest drag on East Africa's second largest economy.