THE UNITED REPUBLIC OF MINISTRY OF ENERGY AND MINERALS

ENERGY SECTOR QUARTERLY DIGEST

DAR ES SALAAM ED. NO. 01

September, 2015 ISSUE

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THE ENERGY DEPARTMENT

MANDATE MISSION VISION

To ensure secure and To provide reliable, A vibrant Energy sustainable provision of affordable, safe, Sector that energy for socio-economic efficient and contributes transformation. environment friendly significantly to modern energy services economic growth and to all while ensuring improved quality of effective participation of life of Tanzanians. Tanzanians in the sector.

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ABBREVIATIONS AND ACRONYMS

AU African Union BRN Big Results Now

CAG Controller and Auditor General

DPs Development Partners

ESMAP Energy Sector Management Assistance Program

EPPs Emergency Power Producers

ESQD Energy Sector Quarterly Digest

EWURA Energy and Water Utilities Regulatory Authority

GIIP Gas Initially in Place

GoT Government of Tanzania

GW Gigawatt

JBIC Japan Bank for International Corporation

IPPs Independent Power Producers

IOCs International Oil Companies MEM Ministry of Energy and Minerals

MoF Ministry of Finance OMCs Oil Marketing Companies

MW Megawatt

MWe Megawatt Electrical

PICL Importation Coordinator Limited

REA Rural Energy Agency

REF Rural Energy Fund

TANESCO Tanzania Electric Supply Company

TCF Trillion Standard Cubic feet

TGDC Tanzania Geothermal Development Company

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TPDC Tanzania Petroleum Development Corporation

URT United Republic of Tanzania

ZECO Electricity Company

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FOREWORD

The Energy Sector Quarterly Digest (ESQD) has been established as a platform for sharing with stakeholders’ information relating to developments in the Energy Sector. It provides information that reflects most recent changes in the Sector. Data are primarily drawn from the Ministry of Energy and Minerals (MEM) Energy, Tanzania Electric Supply Company (TANESCO), Tanzania Petroleum Development Corporation (TPDC), Rural Energy Agency (REA), Energy and Water Utilities Regulatory Authority (EWURA), Petroleum Importation Coordinator Limited (PICL) and other Government Departments.

The Ministry of Energy and Minerals is planning to issue on quarterly basis the ESQD to reduce information asymmetry among stakeholders on Energy Sector related issues. In addition, the ESQD intends to foster the use of reliable and credible energy data and statistics in day to day decision making and to inform the general public on progress made on various undertakings in the Energy Sector.

It is my sincerely hope that the information provided herein will be of value to stakeholders in making informed decision.

Eng. O. A. Chambo PERMANENT SECRETARY

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TABLE OF CONTENTS

THE ENERGY DEPARTMENT ...... 2 ABBREVIATIONS AND ACRONYMS ...... 3 FOREWORD ...... 5 TABLE OF CONTENTS ...... 6 INTRODUCTION ...... 7 THE ENERGY SECTOR GOVERNANCE ...... 8 ENERGY POLICIES AND LEGISLATION ...... 10 ENERGY SECTOR PROFILING ...... 11 ENERGY DEMAND ...... 13 KEY ENERGY SECTOR STATISTICS ...... 14 KEY DEVELOPMENTS IN THE ENERGY SECTOR ...... 16 THE ENERGY SECTOR GOVERNANCE ...... 16 IMPLEMENTATION STATUS OF STRATEGIC PROJECTS ...... 20 INVESTMENT OPPORTUNITIES ...... 22 CHALLENGES IN THE ENERGY SECTOR ...... 23 FUTURE OUTLOOK ...... 24 KEY PLAYERS IN ENERGY SECTOR ...... 25 APPENDICES ...... 26 Appendix 1: Wind Potential Sites (MEM, 2015) ...... 26 Appendix 3: Tanzanian Solar Map ...... 28 Appendix 4: The National Grid System (TANESCO, 2015) ...... 29 Appendix 5: ESI Reform Immediate Term Actions implementation Status (July, 2014 – June, 2015) ...... 30 Appendix 6. Summary of BRN Projects Implementation Status...... 31

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INTRODUCTION

The purpose of this ESQD is to provide a summary of recent Energy Sector developments and statistics in a compact format. Also, it aims at reducing information asymmetry among players by providing updated key energy data and statistics. The ESQD contains the following:-

The Energy Sector Governance;

The Energy Sector Situation Analysis;

Key Developments in the Energy Sector;

Energy Sector Statistics Update;

Opportunities and Challenges in the Energy Sector; and

Future Outlook.

Figures are used to highlight the main features of each topic at a quick glance. This report is for the period ended 31st September, 2015.

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THE ENERGY SECTOR GOVERNANCE

The key stakeholders in the Tanzanian Energy Sector include: Ministry of Energy and Minerals (MEM), Ministry of Finance (MoF), Tanzania Electric Supply Company (TANESCO), Rural Energy Agency (REA), Tanzania Petroleum Development Corporation (TPDC), Energy and Water Utilities Regulatory Authority (EWURA), Financiers, Development Partners (DPs,) Tanzania Geothermal Development Company (TGDC), International Oil Companies (IOCs), Oil Marketing Companies (OMCs), Private Sector and Petroleum Importation Coordinator Limited (PICL), as summarized in Figure 11.

MEM provides overall guidance on the development of the Energy Sector through policies, laws, and strategies.

MoF is responsible for mobilization of financial resource for implementing projects in the Energy Sector.

TANESCO is responsible for , transmission, distribution, sales in Tanzania mainland and bulk supply of electricity to Tanzania Zanzibar through ZECO.

REA promotes and facilitates access to modern energy services in rural areas of Mainland Tanzania.

TPDC is responsible for the development of petroleum industry in Tanzania including exploration, development, production and distribution of oil and gas in the country.

EWURA is a regulatory authority responsible for electricity, water and mid- downstream petroleum and sectors.

PICL is responsible for coordination of importation of the petroleum products in the country.

TGDC is responsible for geothermal exploration and development in the country.

1 The presentation is convenience and does not show functional relationship

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Figure 1: List of Key Stakeholders

MEM

MoF

FINANCIERS/DPs EWURA TANESCO REA TPDC

TGDC IOCs OMCs PICL

The Department of Energy

The Department of Energy was established in 1985 to spearhead attainment of energy supply security in the country through prudent management of the Energy Sector and the resource. The Department therefore, seeks to:

Ensure access to affordable and reliable energy supply by Tanzanians and promote environmentally friendly energy use;

Ensure energy supply security by creating and maintaining a proper balance between demand and supply of energy in the country;

Regulate the Energy Sector by developing effective policies, legislation and guidelines; encourage investment in the Energy Sector and ensure compliance with legislation;

Promote effective and efficient energy service delivery by understanding stakeholder needs and improving strategies to meet such needs;

Promote optimal use of the energy resources by developing sound policies, plans, technologies and legislation;

Ensure that the use of energy resources is prudently done for the benefit of the present and future generations;

Promotes access to modern energies by improving connectivity levels and providing affordable energy services and

Promote local participation in the Energy Sector.

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ENERGY POLICIES AND LEGISLATION

Policy Framework:

The National Energy Policy, 2015;

The Public Private Partnership Policy, 2009;

The Standardized Power Purchase Agreement and Tariffs (<10MW) (2008);

The Model Production Sharing Agreement, 2013; and

The Model Power Purchase Agreement, 2015.

Legal and Regulatory Framework:

The EWURA Act, 2001;

The Public Private Partnership Act, 2010;

The Petroleum Act, 2015;

The Electricity Act, 2008;

The Rural Energy Act, 2005;

The Value Added tax, 1997 (As amended);

The Income Tax Act, 2004

The Occupational Safety and Health Act, 2003 and

The Environmental Management Act, 2004.

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ENERGY SECTOR PROFILING

Energy Supply

Tanzania has abundant energy resource such as hydro, natural gas, , uranium, wind, geothermal, , solar, tidal and waves. However, much of these resources are largely untapped. The total primary energy supply in Tanzania is dominated by biomass mainly from firewood and charcoal for about 85 percent. As shown in Figure 2, other sources of energy include petroleum (9 percent); electricity (4.5 percent) and other renewable energies (1.2 percent). The resource potentials are summarised hereunder:

Natural gas resource (GIIP) is about 55.08 TCF as of September, 2015 as shown in the Figure 3 hereunder

Coal resource is estimated at 1.9 billion tons of which 25% is proven;

Hydro potential stands at 4.7GW of which only 12 percent has been developed;

Biomass resources potential for power generation is estimated at above 500 MW;

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Uranium deposits of about 200 million pounds have been discovered in various sites capable of producing power;

Wind sites with speed ranging from 5 to 10 m/s have been identified (Appendix 1).

Geothermal potential is estimated to generate about 650MWe (Appendix 2)

Solar insolation is prevalent and averages at 200Wp/m²; (Appendix 3)

As of September, 2015 and as shown in Table 1: Power System Installed Capacity Available Station No. of Units Installed Capacity 17/9/2015 Figure 4, total on-grid generation installed Kidatu 4 204.00 99 2 Kihansi 3 180.00 78 capacity is 1,226.24MW composed of hydro Mtera 2 80.00 40 N/P Falls 2 68.00 53.04 561.84 MW (or 45.1 percent), natural gas Hale 2 21.00 7.95 Nyumba ya Mungu 2 8.00 3.75 441MW (or 35.44 percent) and liquid fuel of Uwemba 3 0.84 - TOTAL HYDRO 561.84 281.74 243.40MW (19.5 percent). As shown in Songas UGT1_UGT6 189.00 142.6 UGP1 12 102.00 77.7 Table 1 of the total installed capacity, 24 TGP 5 45.00 42 UGP2 3 105.00 0 percent is owned by Independent Power TOTAL GAS PLANTS 441 262.3 IPTL 10 103.00 92.3 Producers (IPPs), 5.6 percent by Emergency DIESELS (TANESCO) 3 7.40 1.91 AGR (UB) 63 50.00 51.3 Power Producers (EPPs) and the rest by AGR (TG) 26 20.00 20.1 Nyakato Plant 10 63.00 31.75 TANESCO. TANESCO also imports power TOTAL LIQUID FUEL PLANTS 243.4 197.36 SYSTEM TOTAL 1,246.24 741.4 from Uganda (8MW), (5MW) and (1 MW). TANESCO is planning to commission a 150MW gas fired power Plant called Kinyerezi –I in October 2015. TANESCO also owns and operates the interconnected main grid transmission line of the level of voltage 220kV, 132kV and 66kV connecting the major load centers.

Tanzania is a net importer of the petroleum products. Through Petroleum Bulk Procurement System, Tanzania imports for both local market and neighboring landlocked Figure 5: Petrolum Products Trends countries. In 2014, the total 1993 1964 consumption of petroleum products 1770 per annum was about 2.9 billion 2042 2026 1832 Kerosene liters growing. The annual demand Diesel Petrol for petroleum products averages 7 2198 2290 2153 percent. During the period under review, 1,190,440/MT of petroleum July August Sept products was imported.

During the period under review and as shown in Figure 5 the petroleum products prices remained relatively stable. Such trend is attributable to stability of TZS against USD and declining price trends of petroleum products in the world market.

2Exclude Isolated grids such as Somanga Fungu (7.5MW), Mtwara (18MW) and Others. It also exclude TPC (9MW), Tanwat (1.5MW) and Mwenga Hydro (4MW) 12

ENERGY DEMAND

Tanzania has a population of about 50 million Figura 6: Energy Consumption Patterns people with an average growth rate of 2.9 percent per annum. About 75 percent of the 4.2% 3.1% Tanzanian population lives in the rural areas. 5.8% Residential Its GDP is around US$ 48 billion (December, Industry 2014) and is growing at an average of 7 14.4% Transport percent per annum. Tanzania envisions becoming a middle income country by 2025. 72.5% Agriculture This will require raising the average income Others per capita from the present US$ 1,038 to about US$3,000 per annum. To achieve this goal availability of adequate, reliable, and affordable energy supply to propel the needed socio-economic transformation cannot be overemphasized.

The average electricity daily demand is in the range of 950MW and 1,000MW. The highest recorded in December, 2014 is 934.62 MW. In 2010, the energy consumption in different sectors and as shown in Figure 6 was as follows: residential (72.5 percent); industry (14.4 percent); transport (5.8 percent); agriculture (4.2 percent) and others (3.1 percent). Demand side management has become complex as residential account for large share of energy consumption.

By September 20153, the electricity consumption per capita on average is 108kWh/year. This is small compared to world average consumption of 2500kWh/year and 550kWh per year for Sub-Saharan Africa. The Government is planning to increase electricity consumption per capita to at least 236kWh/year by 2015/164. The demand for electricity is estimated to be growing at 10 percent and 15 percent per year. To meet this demand, the government is planning to increase generation capacity to almost 10,000 MW by 20255.

Electrification Programme

As of August, 2015 about 30 percent of the Mainland Tanzania population was connected with electricity services. However and as shown Appendix 3, the large portion of the country is not connected to National Grid. To stimulate socio- economic transformation and achieve Tanzania Development Vision 2025 agenda the government is planning to increase the connection levels to 50 percent by 2025 and more than 75 percent by 2033. To achieve this end, TANESCO targets to connect on average 250,000 customers per year. TANESCO connected 143,113 customers in 2013; 233,000 in 2014 and 26,698 from January – March, 2015.

3 PDB Report, 2015. 4 MEM, Strategic Plan 2011/12 - 2015/16, November 2012. 5 MEM, Electricity Supply Industry (ESI) Reform Strategy and Roadmap 2014-2025, June 2014. 13

KEY ENERGY SECTOR STATISTICS

S/No. INDICATOR VALUE GENERAL STATISTICS 1. Total Population (million - EST) 50 2. Rural Population ( % Total Population) 75% 3. Population Growth 2.7% 4. GDP (US$ Billion) 48 5. GDP Growth Rate 7% 6. GDP Per Capita (US$) 1,038 7. Headline inflation 6.4% ELECTRICITY INDUSTRY 1. Total On-grid Installed Capacity 1,246.24 MW 2. Total Off- grid Installed Capacity 76.43 MW 3. Generation mix (% Hydro/thermal/Liquid fuel) 45/33/22 4. Imported Electricity 14MW 5. Total IPPs Installed Capacity 517 MW 6. Total EPPs Installed Capacity 70MW 7. TANESCO Total Capacity 929.24MW 8. Maximum Power Demand 934.62MW 9. Electricity Connection level 30% 10. Electricity Access level 40% 11. Total Customers Connected with electricity services 1,409,966 12. Ration of No. of customers per employee 229 13. No. of Customers Connected in Q1 of 2015 26,698 14. Electricity Consumption per Capita per annum 108kWh 15. No. of Districts Electrified 120 16. % of Districts not Electrified 10% 17. No. of Villages in the Country 15,209 18. No. of Villages Electrified 4,718 19. %. of Villages not Electrified 68.98% 20. Max. Transmission Voltage 220kV 21. Total losses – Technical and None - Technical 18% 22. Total Commercial losses - % 8% 23. Average Electricty Tariff per Kwh (US$ Cents) 16 24. TANESCO Revenue Collection Efficiency 96% 25. installed Capacity (on/off grid) 78MW 26. Solar Installed Capacity 5.3 MWp 27. Co-Generation Installed Capacity 37MW

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PETROLEUM INDUSTRY UPSTREAM 1. Number of PSAs signed 25 2. Number of Active PSAs 21 2 3. Explorable Potential Area 534,000Km 2 4. Explored Area 159,000Km 5. % Explored Area Total Potential 30% 6. Number of active Exploration Companies 16 7. Number of Drilled wells 90 8. No. of wells Discovered 61 9. % of wells discovered and appraised with gas 68% 10. Total Natural Gas Discovered (GIIP) 55.08 TCF 11. Number of dry wells 29 12. Number of producing gas wells 12 13. Total Recoverable Natural Gas (est.70% of GIIP) 38.56TCF DOWNSTREAM 86 to 92 1. Daily Natural Gas Production - Songo Songo (MCFT) 60 2. Daily Natural Gas Production - Mnazi Bay (MCFT)

3. No. of Industrial Customers using Natural Gas 40 4. No. of Power Plants run on Natural Gas 5 5. No. of Institutions using Natural Gas 3 6. No. of Motor vehicles using Natural Gas 35 7. No. of Households using Natural Gas 70 6 8. Total Volume of Petroleum Imported per Annum - Litres 4,714,866,825 9. Total Petroleum Imports during the quarter in Q1 of 2015 - MT 1,190,440

10. % of Petroleum Import For Local Market - MT 52% 11. % of Petroleum Import For Transit - MT 48% 12. No. of Licensed Oil Wholesalers 88 13. No. of Licensed Oil Retailers 990 14. No. of Licensed LPG importers 6 15. No. of Licensed Consumer Installation 2 16. No. of Licensed of Lubricant 8 17. No. of Licensed Bunkering 2 18. No. of Licensed Storage 1 19. Total Annual of LPG imported (MT) based on 2014 imports 65,611 20. Total Annual LPG imported (MT) in Q1 2015 18,275

6 Based on 2014 imports 15

KEY DEVELOPMENTS IN THE ENERGY SECTOR

Key developments in the Energy Sector include assessment of Energy Sector Governance and Implementation Status of Strategic Projects.

THE ENERGY SECTOR GOVERNANCE

The governance in the Energy Sector entails Institutional set Up, Legal and Regulatory Frameworks.

Institutional Set Up

1. TPDC Re-organization

In April 2014, the Government re-organized TPDC by approving a new organizational structure. The re-organization came into culmination in August 2015 when persons to fill in TPDC vacant management positions were recruited. The re- organization aimed at increasing Government participation in the Petroleum Industry, establishing an Independent Petroleum Upstream Regulator, and developing infrastructure in the petroleum industry. As part of re-organization, TPDC subsidiary companies were revived as follows:

Gas Supply Company Limited is responsible for the midstream and downstream operations in the gas value chain including management of new natural gas infrastructure; and

Commercial Petroleum Company is responsible for midstream and downstream operations in the petroleum sub-sector including management of Strategic Petroleum Reserve, Oil Refinery and Oil Commercial Trading and Distribution.

2. TANESCO Re-organization

In June 2014, the government approved and published the Electricity Supply Industry Reform Strategy and Roadmap 2014-2025. The instrument aimed at increasing efficiency, quality of services, and availability of affordable and reliable power supply, satisfaction of stakeholders, enhancing transparency and competition and reducing government subsidies to the electricity sub-sector. The Roadmap envisages unbundling TANESCO over a period of 11 years.

In the immediate term (July 2014-June 2015), the reform efforts concentrates on TANESCO financial position turn around, creating business units along functional lines, establishing an Electricity Infrastructure Procurement Coordinator, a Task Force and a Change Management Team. The reforms in the short-term (July 2015 - June 2018) focuses on unbundling of generation function from transmission and distribution segments by December 2017. In the medium term, July 2018 - June

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2021, the key market changes will involve unbundling of the distribution from the transmission segment, based on social, economic and financial factors. Major achievements so far include review of section 41(6) of the Electricity Act 2008 to allow private generators to sell power directly to bulk off-takers and the development and operationalization of Model Power Purchase Agreements for specific technologies. Appendix 4 summarizes the status implementation of the Immediate Term activities.

Legal and Regulatory Framework

Key legislation enacted during the period under review include: the Petroleum Act, 2015, the Oil and Gas Revenues Management Act, 2015 and the Tanzania Extractive Industries (Transparency and Accountability) Act, 2015.

1. The Petroleum Act, 2015 - The Act was assented in August, 2015 by His Excellency, President of the United Republic of Tanzania, Dr. Jakaya M. Kikwete covering Upstream, Midstream and Downstream segments. The salient features of the Act are:-

Repeals the Petroleum (Exploration and Productions) Act, 1980 and the Petroleum Act, 2008;

Establishes system for joint exploration with Tanzania Mainland and Tanzania Zanzibar for overlapping exploration blocks;

Establishes the Oil and Gas Advisory Bureau (OGAB) to advise the Cabinet over Oil and Gas Industry;

Establishes the Petroleum Upstream Regulatory Authority (PURA) to regulate upstream and LNG activities;

Designates TPDC as a National Oil Company (NOC);

Grants NOC exclusive rights to exploration and development licenses and collection of natural gas from producers for distribution to customers;

Confers upon NOC rights to manage Government interests in oil and gas value chain;

Promotes Local Content in petroleum value chain through purchasing/procurement of and using local goods and services; and

Empowers Local Government Authorities (LGAs) to coordinate programmes agreed with Companies on corporate social responsibilities.

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2. The Oil and Gas Revenues Management Act, 2015 - The Act ensures optimal collection and prudent spending of revenue to be accrued from oil and gas industry. The key highlights of the Act are:

Establishes Oil and Gas Fund and Fiscal Rules to govern disbursement from the fund;

Restricts the use of the Funds for credit, guarantee or to collateral;

Empowers LGAs to collect a service levy as approved by the National Assembly;

Requires Fiscal Rules to be changed by not less than two thirds of the total number of members of parliament;

Empowers PURA to audit exploration, development, production and sale of oil and gas recoverable cost; and

Empowers the Bank of Tanzania to manage the Fund and subject it to audit by Controller and Auditor General (CAG) quarterly.

3. Tanzania Extractive Industries (Transparency and Accountability) Act, 2015 - The Act promotes transparency and accountability in the Extractive Industries namely Energy and Minerals. The key features of the Act are:

Imposes obligation to the Minister to disclose all Mining Development Agreements (MDAs) and Production Sharing Agreements (PSAs) except for information that is confidential as the Committee may determine. All other information contained in agreements shall be subjected to disclosure;

Establishes the Extractive Industries (Transparency and Accountability) Committee;

Creates obligations for Government to disclose revenues received from extractive companies;

Empowers CAG to investigate discrepancies arising from payments and receipts from extractive industries at TEIT request;

Imposes obligation to extractive industries companies to disclose payments, sales, capital expenditures, and Local Content, Corporate and Social Responsibilities (CSR) payments;

Imposes obligation to Government agencies to disclose revenue collected from mining, oil and gas operations;

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Provides powers to the Minister to publish in the Gazette specifying other natural resources to be subjected to the disclosure requirement of the Act; and

Imposes of offences and penalties to persons and companies who fail to provide document and information required under the Act; and in the case of false information.

4. The National Energy Policy, 2015 - The Policy is a result of merging various policies including: the Petroleum Policy, the Local Content Policy, the Subsidy Policy, the Natural Gas Policy, the Renewable Energy Policy, the Bio-energy Policy and the Revised 2003 National Energy Policy to simplify administration. The salient features of the Policy are:

Enhances investment climate to attract private capital in the Energy Sector;

Promotes community groups and financial institutions in the provision of modern energy services;

Ensures energy charges are based on prudently incurred costs of efficient operations;

Improves Energy Sector planning through integrated plans;

Promotes effective and transparent subsidy regime by ensuring targeted, objective based and transparent subsidy regime;

Introduces Feed-in-Tariffs to promote renewable energy technologies and integrates renewable energy technologies in buildings and industrial designs;

Promotes energy efficiency and conservation in all sectors of the economy by promoting use of efficient technologies;

Enhances switching from wood fuel usage to biogas, bio-fuels, compressed natural gas, liquefied petroleum gas and electricity;

Promotes Tanzanians participation in the petroleum industry; and

Supports cross border projects and investments within EAC, SADC and AU Partner States in the Energy Sector.

5. The Model Power Purchase Agreement - In August 2015, the Government issued Model Power Purchase Agreements for seven energy technologies; namely:-

Hydro Model Power Purchase Agreement;

Natural Gas Model Power Purchase Agreement;

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Oil Model Power Purchase Agreement;

Coal Model Power Purchase Agreement;

Geothermal Model Power Purchase Agreement;

Solar Model Power Purchase Agreement; and

Wind Model Power Purchase Agreement.

6. Natural Gas Utilization Master Plan - To ensure sustainable development of the Energy Sector, natural gas sub-sector in particular, in August, 2015, the government in collaboration with stakeholders developed Natural Gas Utilization Master Plan (NGUMP). NGUMP will be subjected to public consultations commencing September, 2015.

It is a strategic document that promotes inter-sectoral coordination in the design and implementation of natural gas development activities;

The NGUMP, among other things, aims at ensuring security of supply and promotes local content in the natural gas value chain; and

7. Finance Bill, 2015 and Budget for 2015/16 - The Bill and the Budget for the year 2015/16 were based on economic growth, control, inflation, a reduction in providing tax exemptions as well as increasing revenue. Key highlights relevant to Energy Sector include:-

Removal of tax exemptions on government projects that are financed using non – concessional loans, except for those projects that had such exemptions prior to 1st July, 2015;

Introduced “Special Strategic Investment” projects for tax exemptions purpose for investment of at least US$ 300M and that directly employ at least 1,500 people; and

Increase in fuel levy from TZS 263 to TZS 313 per litre for both diesel and petrol to be utilized in rural electrification projects.

IMPLEMENTATION STATUS OF STRATEGIC PROJECTS

In 2013, Tanzania launched Big Results Now (BRN) initiative to spearhead implementation of strategic projects based on a business unusual concept. Twenty nine (29) projects were nominated in the Energy Sector. The projects included: seven power generation projects; seven power transmission projects; fourteen power distribution projects and one Natural Gas Infrastructure project. The implementation status of two projects is provided in Appendix 5.

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1. National Natural Gas Infrastructure Project: In 2012, GoT through TPDC embarked in implementing a 1.255 billion USD project. The project consisted of construction of a 547 km natural gas transportation pipeline running from Mtwara, Lindi, Coastal regions to and two processing plants at Madimba – Mtwara (210 mmscfd) and Songo Songo Island - Lindi (140 mmscfd). The pipeline will be able to transport between 784 mmscfd and 1002 with compression. Figure 7 shows the pipeline network from Madimba to Kinyerezi, Dar es Salaam. The transportation pipeline and the processing plant at Madimba (Mtwara) is 100 percent complete and is expected to be commissioned in October, 2015. On the other hand, Songo Songo Island Processing Plant is 99 percent complete.

2. Kinyerezi – I (150 MW): The Government through TANESCO is implementing Kinyerezi I - 150MW gas fired plant, which reached the following stages: Procurement of equipment is 100 percent completed; all four turbines with a total of 150 MW their installations are completed; all five 50MVA their installations are completed; construction of administration block, Control Room, Workshop, Warehouse completed by 100 percent; erection of fuel Reservoir tanks completed; erection of Gantries for 132/220kV completed; erection of towers for 132kV and 220kV transmission lines from Kinyerezi to Kipawa and Mbezi respectively are completed remaining stringing of wire for 132 kV line while 220kV from Kinyerezi to Kimara is completed by 100 percent. The Government made a payment of USD 151.4 million (83 percent of the total contract price USD183 million). The plant is expected to be commissioned in October, 2015.

3. Mnazi Bay Gas Development Project: An up to 10mmscfd processing plant transporting in a 27km, 8” pipeline from Mnazi Bay to Mtwara Municipality is in place. The MB -1 well is supplying 2mmscfd to 18MW capacity power plant at Mtwara. In August, 2015, Maurel and Prom drilled MB–4 and completed connecting the gathering station located at MB-3 to collect gas from MB-2, MB-3, MB-4 and MSX-1wells. This development makes Mnazi Bay to contain five wells. Implementation Status of other strategic projects is provided in Appendix 5.

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INVESTMENT OPPORTUNITIES

Petroleum Sub-sector: Exploration activities for oil and gas are being promoted. In addition, infrastructure development such a transportation pipeline from Dar es Salaam to Central, Southern and Northern Corridor transportation pipeline; Dar es Salaam – Mwanza – Kigoma Petroleum Pipeline; Mtwara, Lindi, Pwani and Dar es Salaam regions distribution; and LNG and Petrochemical facilities.

Renewable Energy Sub-sector: Development of Renewable energies mainly solar, geothermal, wind and biomass is promoted. Investment in the manufacturing of renewable energies equipments in Tanzania is also encouraged.

Electricity Sub-sector: Investment in generation, transmission and distribution networks is promoted as private investment or through PPP. Focus is on improving generation mix by increasing renewable energies and coal fired power plants contributions.

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CHALLENGES IN THE ENERGY SECTOR

The Energy Sector faces numerous challenges including the following:

Creating a financially and commercially viable sector – Sector reforms

Financial resource constraints for infrastructure expansion – PPP promoted

Attracting more private sector investments to the sector – Sound Policies

Expansion of access to electricity – Increase Generation

Increasing power supply security and reliability – Diversify Generation

Reducing system losses (technical and non- technical) – Maintenance & technology

Improving TANESCO financial condition – Sector reforms; and

Inadequate resource to fund Energy Sector reforms.

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FUTURE OUTLOOK

Tanzania is planning to be a power hub for East and Central Africa regions. As a result, it is actively participating in regional power interconnections linking North and South such as the Eastern Africa Power Pool (EAPP) and the Southern Africa Power Pool (SAPP). This interconnection provides opportunities for power trading in the region, security of supply and system stability.

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KEY PLAYERS IN ENERGY SECTOR

Key players in the market include:-

Ministry of Finance (http://www.mof.go.tz/)

The Energy and Water Utilities Regulatory Authority (www.ewura.go.tz),

The Tanzania Electric Supply Company Ltd (www..co.tz),

Tanzania Petroleum Development Cooperation (www.tpdc-tz.com),

Petroleum Importation Coordinator Ltd (www.picltz.com)

The Tanzania Investment Centre (www.tic.co.tz), and

The Rural Energy Agency (www.rea.go.tz).

TGDC

The Permanent Secretary, Ministry of Energy and Minerals, 5 Samora Machel Avenue, P.O. Box 2000, 11474, Dar-es-Salaam, Tanzania. Tel: +255 22 2117156/9 Fax 255-22-2120799 E-mail: [email protected] Website: www.mem.go.tz

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APPENDICES

Appendix 1: Wind Potential Sites (MEM, 2015)

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Appendix 2: Geothermal Potential Sites (MEM, 2015)

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Appendix 3: Tanzanian Solar Map

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Appendix 4: The National Grid System (TANESCO, 2015)

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Appendix 5: ESI Reform Immediate Term Actions implementation Status (July, 2014 – June, 2015) MAJOR ACTIVITIES STATUS Establish a Task Force with mandate to MEM established a task force in August, monitor the implementation of the Roadmap 2014 EWURA established a task force in January, 2015 National Steering Committee established in June, 2015 Establish a Transformation and Change TANESCO formed a TCMT in September, Management Team (TCMT) at TANESCO to 2014 manage the reform process Initiate valuation of TANESCO’s generation, Technical and Financial Evaluation transmission and distribution assets completed for Consultant engagement Carry out management information system Deloitte & Touche engaged for service audit Improve TANESCO financial performance Retired 112MW Symbion-DSM, 50MW Symbion – Dodoma, 55MW Symbion - Arusha and 100MW Aggreko EPP by December 2014 Establish EIPC , Standard PPA and MPPAs approved in August 2015 EIPC Concept Note in place awaiting TANESCO’s Board approvals Designate Grid Control Center as Independent ISO Rules in the make by EWURA and is System Operator (ISO); to be effective in December, 2015 Reviewing of the Electricity Act, 2008, in Replaced with Section (56) in the particular, Section 41(6) Tanzania Extractive Industries (Transparency and Accountability) Act. 2015 Capacity building to MEM, TANESCO, REA and Human needs assessment done for EWURA EWURA and TANESCO and training is ongoing Develop of Grid Codes to guide transmission Draft Grid code in place and Rules are and distribution operations being developed. Review tariff structure EWURA is carrying Cost of Service Study (COSS) Improving financial management and Each zone envisages submitting accountability for each zone by June, 2015. provisional statements by the end of third quarter, 2015 Ring fence the core functions into strategic Subject to completion of TANESCO’s business units (SBU) by December, 2015. assets evaluation Establish market information desk at MEM, Not Done REA and Regulator in March, 2015. Ring fence Dx into several zones by Seven zones established December, 2015.

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Appendix 6. Summary of BRN Projects Implementation Status S/N Project Name Implementation Status Project cost 1 Mwanza (HFO), Completed and Commissioned in 2014 USD 59 million – 60MW GoT financing 2 Kinyerezi I, 150MW. Construction completed and it is on USD 183.3 million Power generation testing. The project will be -Financier: GoT using natural gas commissioned in October, 2015 (Simple Cycle) 3 Kinyerezi II, 240MW Government, TANESCO and Financiers USD 334 million Power generation have concluded negotiations on project Japan Bank for using natural gas financing and loan agreement signed International (combined cycle) in March, 2015. Completion expected Cooperation – in 2017. 85% Government – 15% 4 Kinyerezi III, JV arrangements with Shanghai USD 369.8 million 300MW Phase 1 to Company of China be followed by signed. Phase 11-300MW. Feasibility study completed Power generation approved by TANESCO’s Board of using natural gas Directors and EWURA and (Simple Cycle) submitted to MoF for approval Treasurer Registrar has approved the project. Completion expected end of 2017 5 Kinyerezi IV, 300MW JV arrangements with China Power USD 400 million Power generation Investment Company completed. using natural gas Project Concept Note to be tabled (Combined Cycle) to TANESCO’s Board of Directors for discussion and approval. Expected commissioning end of 2018. 6 Singida Geo Wind Land acquired, ESIA certificate issued USD 136 million Phase I, 50MW and Compensation completed PPA negotiation ongoing Expected completion in December 2016 7 Kilwa Energy Phase I PPA finalized USD 365 million (Somanga Fungu), Addendum to Implementation 210MW Agreement – Comments received from MEM are under review by Lenders. Power Purchase Agreement Direct Agreement – Executed with TANESCO on 14 August 2015 Gas Supply Agreement Direct Agreement – Final document provided to TPDC for their review and execution Shareholder Agreement with

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TANESCO – Under review by TANESCO Gazetting of incentives approved by NISC pending with Tanzania Investment Centre Phase I to be commissioned by end, 2016 8 Iringa - Shinyaga Contractor mobilized to site and USD 441.13 million (Backbone construction of all 4 lots are on Transmission), progress 400kV, 690km Overall Status - Forecast: 83% Actual: 69% Iringa – Dodoma (Lot 1):Forecast: 93% Actual: 91% Dodoma-Singida (Lot 2): Forecast: 89% Actual: 67% Singida – Shinyanga (Lot 3): Forecast: 91% Actual: 87% Substations (Lot 4): Forecast: 60% Actual: 52% to be commissioned by June, 2016 9 North East Grid Negotiations between the Ministry USD 692.7 million Kinyerezi-Chalinze- of Finance and EXIM bank of China Segera -Arusha, is in progress Transmission 400kV, ESIA study completed. 764km To be commissioned by June, 2018 10 Makambako – 580km site clearance completed, USD 91.43 million Songea, Contractor for Distribution sub- Transmission Line project on site and for 220kV Transmission sub-project the contractor is mobilizing and the project to be commissioned by June, 2016 11 North West Grid Phase I (Mbeya- Sumbawanga) USD 664 million Transmission ESIA study completed, Upgrading of (Mbeya, 220kV feasibility study to 400kV level Sumbawanga, ongoing. To be Commissioned by Kigoma, Nyakanazi), September, 2018 400kV 1,148km 12 Transmission Procurement USD 244.375 Singida - Arusha - • Evaluation of Technical Proposal million Namanga, 400kV, for consultant services was 414.4km completed on 28th August 2015 and final report submitted for approval by TANESCO Tender Board and Lenders. • Tender for Substation advertised on 3rd July 2015 and submission date extended to 20th November 2015.

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• Tender for Transmission lines was advertised on 10th July 2015 and submission date extended to 21st October 2015. Financing • Loan Agreement between GoT and JICA reached on 29th Sept 2015. For AfDB Loan Agreement signed on 29th April 2015. • Rural Electrification: Bid documents for works under review for advertisement. 13 Transmission • EIA was obtained in February USD 176 million Chalinze – Dodoma, 2015 400kV, 350km • The Draft Contract for Consulting Services for Feasibility Study and supervision of the project has been approved by the Attorney General. PMU is finalizing Contract signing between TANESCO and the awarded Consultant, M/s SMEC. 14 Transmission • TANESCO has approved the Final USD 150 million Somangafungu– Loan Term sheet from TIB for Kinyerezi DSM, project financing. TANESCO is 400kV, 198km finalizing the process of opening Account at TIB for transactions of the credit facility which amount to an aggregate of TZS 79.5 bil. For compensation of PAPs and MUSD 98.1 for other contract cost inclusive of EPC cost • TANESCO has instructed PAPs to submit their relevant documents to their local governments based on instruction given and the same will be submitted to TANESCO for compensation purposes. The Tender Board has approved M/s Byuksan Power Co., Ltd of South Korea for provision of consultancy services of the Project 15 Bulyanhulu – Geita • EIA certificate for the 220 kV USD 30 million 220kV, 55km Bulyanhulu - Geita Transmission Transmission line Line route has been issued with rural • Valuation of properties along the electrification Transmission line corridor (55km) components is completed. Report preparation is ongoing. • Collection of social economic data for preparation of Resettlement

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Action Plan (RAP) is completed. Report preparation is on going • The Contract for the Consultancy Services with M/s Shaker Consultancy Group of Egypt has been signed since 15th June 2015 16 Ngara, Biharamulo Implementation awaits for counterpart TShs. 71.5billion and Mpanda (ORIO) funds - Completion time is expected to March, 2016 17 Electricity V Project Distribution Works USD 43.16 million (Sub-station and Construction of MV, LV lines, distribution lines) installation of distribution transformers and street lights completed by 100% 3,580 customers out of 8,400 customers connected Overall completion of Distribution works: 94% Substation Works Ilala ss- energized on 19th August, 2015 Njiro ss - energized on 11th September, 2015 Sokoine ss – works completed by 53% 18 Village Electrification Tender Document has been prepared, TShs 20 billion Scheme along awaiting for availability of funds to Mtwara-Somanga start procurement process for the contractors 19 Sustainable Solar Installation of 300 solar PV systems TZS 4.544 billion Market Packages to public facilities is completed. (SSMP I)-8,300 Installation of PV systems to 8000 customers. private facilities is in progress. To be completed December 2015 20 Sustainable Solar The evaluation of bids was completed TZS 24 billion Market Packages in February, 2014. Installation of (SSMP II). blueprints for all 8 Lots has been completed and verification is underway and is to be completed June 2016 21 Small Hydropower A total of 1,396 out of 2,600 USD 2.5 million Projects (SHP) connections have been made for (TZS 4 billion) Provided With Mwenga SHPP. A total of 100 out of Performance Grant 922 connections have been made for (Mawengi, Mwenga Andoya SHPP. Connection to other and Mbagamao). customers is in progress. 22 Underline Tender Document has been prepared, TZS 124 billion Distribution waiting for availability of funds to start Transformers to procurement process for the Electrify Villages contractors. To be completed June along Transmission 2016

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Lines. 23 Attend all Pending Project implementation is in progress. TZS 145 billion and new A total of 2,679 customers were Applications for connected from 15th to 21st October Customer 2015..Total number of pending Connections customers is19,585 (180,000 customers). 24 Electrification of 51 Consultant to supervise design and TZS 54.18 billion Villages under construction has been engaged. Backbone Evaluation report for works contract Transmission under Lot 1,2 & 3 submitted to (BTIP)-24,300 Lenders for approval. Tender awards customers. scheduled for October 2015 and the project is to be completed in June 2016 25 Rural Electrification Project implementation is in progress TZS 881 billion Project under To be completed in December 2015 Turnkey Phase II (250,000 initial customers).

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