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Seeds of hope for African power.

After years of clashed hopes and failed privatisation promises, the


shoots of a power sector renaissance can finally be seen across Africa.
Investors are at last beginning to tap into the continent's
renewable energy resources, while many long-delayed hydroelectric
schemes are being developed on the back of Chinese investment. Some
progress is still being made on cross-border power sector integration,
but perhaps the most heartening development is that African natural gas
reserves are now being tapped to supply African power plants. Report by
Neil Ford.
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Until now, African gas export potential has grabbed most of the
headlines. The International Energy Agency predicts that the volume of
African gas supplied to European customers will triple between 2006 and
2030, as new liquefied natural gas (LNG) plants are developed on the
Gulf of Guinea and new pipeline projects carry ever more North African -
and perhaps even Nigerian - gas under the Mediterranean Sea to EU
markets. Yet with Africa's own demands for power sector feedstock
unfulfilled, the increased focus on the export market is beginning to
cause some tension.

The Nigerian government has already threatened to block the


development of new LNG liquefaction trains if foreign oil and gas
companies do not ensure that supplies to domestic power plants are

guaranteed before export requirements. President Umaru


Yar'Adua's appeal in April 2008 for greater production for the
domestic market had little impact, so the Minister of Gas, Emmanuel
Odusina, has now instructed all foreign firms to draw up concrete
proposals on how they plan to increase their production for Nigerian
thermal power plants. He said: "We must prioritise domestic gas
supply over any LNG project, since the country needs power. The federal
government's policy and regulations on gas supply to the domestic
market are not up for discussions or negotiations any more."

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Such sentiments appear well meaning but the state-owned Power


Holding Company of Nigeria's (PHCN) failure to increase national
power generating capacity over the past two years has been truly
astounding. Despite reported progress on at least eight new gas-fired
plants over the past five years, national capacity still stands at about
3,000MW, about the same level as when President Olusegun Obasanjo came
to power in 1999.

The billions of dollars of investment appear to have made little

impression. Militant attacks on gas pipelines have had some impact but
successive government promises have not improved the country's dire
power supply situation.

However, Yar'Adua's administration has pledged that the


delayed projects will soon be completed, bringing generating capacity up
to 8,537MW by the end of next year. Foluseke Somolu, the senior special
assistant to the president on power sector reform, commented: "All
ongoing rehabilitation of existing generating plants will have been
completed. The new stations will have been almost all completed and
commissioned."

Existing upstream projects should increase the amount of available


gas from 1,281 million cubic feet a day (mcf/d) at the end of 2007 to
2,146 mcf/d by the end of next year, so there should certainly be
sufficient feedstock with or without further supply commitments.

Although it possesses far smaller gas reserves than Nigeria's


187 trillion cubic feet (tcf), Tanzania certainly seems to be taking
more advantage of its gas fields. The Tanzania Petroleum Development
Corporation (TPDC) has increased the official figure on proven reserves
to 3.3tcf, allowing state power company Tanesco to develop two new
gas-fired plants. The Tanzanian power sector was almost totally
dependent on hydro schemes until the Ubungo power plant was brought on
stream as part of the Songas gas to power project in 2004.

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Using gas from the Songo Songo field off the coast of southeast
Tanzania, the plant was expanded to 180MW in 2005 but stronger economic
growth means that additional generating capacity is desperately needed.
Tanesco has therefore decided to develop the 45MW Tegeta and 200MW
Kinyerezi gas fired plants, which are due to come on stream by the start
of 2010 and 2011 respectively. As a result of investment in new thermal
power plants, national generating capacity is set to rise to 1,212 MW by
the end of 2011.

Further down the coast of East Africa, the government of Mozambique


is also keen to retain more of its gas for domestic power production. At
present, most output from the Temane and Pande fields is piped to
Sasol's synthetic fuel plants in South Africa, while Mozambique
relies almost entirely on the Cahora Bassa Dam and other hydroelectric
schemes.
Matola Gas Company's (MGC) chief executive, Bruno Morgado,
said: "We're demanding that the pipeline supply us annually
with at least 10 million gigajoules per year of gas, so that we can
respond to the increasing demand for gas resulting from the development
of the Matola and Maputo industrial park." The state-owned power
utility, Electricidade de Mocambique (EDM), also hopes to construct a
l,000MW gas fired plant next to the Temane field. As with Cahora Bassa,
some output will be consumed domestically but most electricity could be
exported to South Africa and other parts of the Southern African Power

Pool (SAPP).

Eskom's manager for investment strategy, Andrew Etzinger, has


already stated that the South African power parastatal could be
interested in signing a long term power purchase agreement (PPA) with
EDM, which would allow the Mozambican firm to secure finance for the
venture.

South African power supply woes

Such exports are much needed given South Africa's own power
supply woes. Eskom had a power production surplus for many years and was
able to export as much electricity as the other members of the SAPP
required. However, higher than anticipated economic growth and
electricity consumption resulted in power cuts at the start of 2008 that
are likely to be repeated on a seasonal basis for the next three or four
years.

Three moth balled coal-fired plants are being redeveloped, while


Eskom has opted for gas-fired facilities in coastal areas.

The 588MW Ankerlig open cycle gas turbine (OCGT) plant and the
438MW Gourikas OCGT facility, both near Cape Town, were brought on
stream at the end of 2007 and other gas-fired plants have been proposed
for both the Western Cape and coastal KwaZulu-Natal.

Coal-fired production is cheaper than gas in South Africa, but both


Cape Town and Durban lie far from the Mpumalanga coal-fired power
plants, so a large proportion of electricity is lost in transmission to
the country's second and third cities. Additional new generating
capacity will be provided by the 4,788MW Medupi coal fired plant, which
is under construction at Lephalale in Limpopo Province, but Eskom is
keen to utilise the SAPP to import as well as export electricity.

Apart from Mozambique, electricity could be imported from


neighbouring Botswana, where CIC Energy of Canada plans to construct the
2,500MW Mmamabula coal fired plant on the coalfield of the same name.
This would be many times greater than Botswana's own power needs,
so South Africa is expected to benefit from the project which will be
located close to its border. Another Canadian firm, Saber Energy
Corporation, plans to develop a thermal power plant in the same region
using coal bed methane (CBM), again with the export market in mind.

Eskom remains excited about the potential for importing electricity


from another SAPP member, DR Congo, in the longer term. The World Energy
Council (WEC) is currently trying to attract investment in the Grand
Inga scheme on the lower reaches of the River Congo.

The venture would have generating capacity of 40GW, making it the


biggest hydro scheme in the world, but investment costs have been put at
$40bn, plus a further $40bn for the transmission links required to carry
electricity from Grand Inga to the rest of Africa. Given the jumbo price

tag and the still poor security situation in DR Congo, the project looks
an outside bet, but Eskom seems optimistic that it can eventually be
developed.

It is the hydro sector that has dominated power sector developments


in much of West Africa in recent months. As part of its diplomatic
offensive to increase Chinese influence in Africa, Beijing has agreed to
help develop a series of large hydro schemes in the region. Perhaps most
notably, it is enabling the construction of the 400MW Bui hydro scheme
in the Brong Ahafo region of Ghana. Of total development costs of $622m,
Export Import Bank of China has provided a $292m buyer's credit
facility and the Chinese government has supplied a $270m loan, while the
dam and power plant are being developed by Chinese state owned company
Sino Hydro.

Chinese firms have already developed the 120MW Imboulou Dam in


Congo-Brazzaville, while China National Machinery & Equipment Import
& Export Corporation is investing in Gabon and has agreed to develop
the 3,900MW Mambila hydro project in Nigeria.

China National Water Resources and Hydropower Engineering


Corporation (CWHEC) is currently completing the 300MW Tekeze Hydro Power
Project (THPP) in Ethiopia's Tigray Province at a cost of $350m,
while other schemes have been mooted in half a dozen other African
states.

By combining Chinese investment in large scale hydro schemes with


small scale renewables projects and tapping African gas reserves for
African power projects, the continent's poor record on power
generation and supply could finally be set for improvement.

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