Gas pipeline from Tanzania to cut cost for Kenyans

A landmark project that has been long-awaited, the gas pipeline from Tanzania to Kenya is set to revolutionize the energy sector in both countries and bring about significant economic benefits. The pipeline, costing an estimated $1.1 billion, is part of a Memorandum of Understanding on Cooperation in Natural Gas Transportation that was signed by former Kenyan President Uhuru Kenyatta and Tanzanian President Samia Suluhu in May the previous year. CNBC Africa recently sat down with Gabriel Mwangónda, Managing Director of Segax Group, to discuss the progress and potential impact of fast tracking this transformative project. Mwangónda highlighted the importance of this collaboration between the two countries, emphasizing that the gas pipeline project holds immense advantages for both Kenya and Tanzania. He mentioned the substantial investment of around $1.2 billion USD earmarked for the construction of the pipeline, with Tanzania benefiting from the transportation fee. Additionally, the project is expected to lower energy costs in Kenya and reduce reliance on charcoal and other expensive sources of energy, ultimately leading to a more cost-effective and sustainable energy solution. Addressing the slow take-off of the project, Mwangónda explained that these types of contracts are intricate and require careful consideration before implementation can commence. While the initial signing signaled intent, various factors such as contractual agreements, financing structures, and procurement processes needed to be ironed out before actual construction could begin. He reassured that progress was underway, and the public and private sectors were working towards realizing the project. The financing structure of the pipeline project raised questions about the contribution of each country. Mwangónda indicated that the Kenyan government was likely to engage the private sector to secure funding for the majority of the project, with Tanzania opting for a loan model in a previous gas pipeline project. The current initiative is expected to follow a public-private partnership (PPP) model, where private sector involvement is pivotal to the project's success. One of the key objectives of the gas pipeline project is to lower energy tariffs in Kenya, benefiting both commercial enterprises and households. While the exact capacity and exporting power from Tanzania to Nairobi remain undisclosed, the project aims to enhance electricity generation and supply, as well as provide cleaner energy options for cooking and transportation. Tanzanians already enjoy a significant portion of their electricity generation from gas, with plans to expand the usage of Compressed Natural Gas (CNG) for various applications. As the project progresses, questions around the scale of electricity generation, the number of households connected to the pipeline, and the utilization of CNG for transportation and industrial purposes will likely be clarified. The transformative nature of the gas pipeline project could pave the way for a more sustainable and cost-efficient energy sector in Kenya and Tanzania, fostering economic growth and regional cooperation.