Tanzania: Pipeline Woes for this Gas Giant

Ask Tanzanians what the gas bonanza has done for them. For starters, anyone who owns property in the port city of Dar es Salaam has seen that property value sky rocket; real estate sales are filling pockets beyond anyone’s wildest dreams and those renting to oil and gas personnel are enjoying a new era of self-sufficiency. Surrounded by neighbors who are more difficult to deal with, Tanzania is an investors’ paradise relatively speaking.

That’s why the protests over the construction of a new $1.225 billion pipeline, which began in late January and quickly turned violent, have shaken the foundations. There are now concerns that this crucial pipeline will meet with too many delays, if it is built at all. The planned 532km-long pipeline will pump natural gas from the Mtwara region to the port in Dar es Salaam to produce 2,780 Megawatts of electricity (a major achievement in a country suffering from chronic power problems). It is a joint project between a Chinese company and the Tanzania Petroleum Development Corporation (TPDC).

The flashpoint for this is the Masasi district (Mtwara region), where protests hit the streets on 27 January, and security forces responded with a level of brutality that will only serve to give the protests greater momentum. Four people were killed and 25 others injured in clashes with security forces. Not only was the pipeline damaged, but local shops and houses were destroyed, including some belonging to local political figures. A local court house was burned to the ground. 

The violence has now ceased, and a sense of calm has been restored, but the government’s handling of the situation means that it is not over yet. This planned pipeline is likely to experience further delays.

The government is now “investigating” the cause of the protests because its theory is that those who took part were not from Mtwara, but had been paid to descend on this venue—that they were hired saboteurs. Officials, however, do not offer any possible motivations for such an implanting of protesters to this region. And the response—this clear attempt to downplay the protests and to remove any credibility they may have had—is fomenting further unrest over the issue. The 44 arrests the followed the protests will also not sit well with the local population. 

This is where internal politics could get tricky for foreign investors. What the Tanzanian prime minister is insinuating with his accusations of staged protests is that his political opponents are attempting to spread disinformation and unrest in Mtwara in an attempt to derail the foreign investment that would clinch the PM’s legacy as the man who turned Tanzania’s economy into an African power house. The underlying cause of the protests is that the residents of this region have been convinced they will not benefit from this pipeline that will transit massive amounts of natural gas through its territory. Ultimately, however, it is the Tanzanian government’s failure to advertise these benefits properly that has opened the door to unrest.

So, while recent offshore discoveries of some 33 trillion cubic feet of gas in Tanzania and an overall comparatively low-risk environment still make Tanzania the darling of East African gas, investors should be prepared for a slightly bumpier road ahead as the country set out to build up the necessary infrastructure to bring all this to market. Its pipelines and a planned liquid natural gas (LNG) terminal may experience some hiccups.

This also could set the stage for the emergence of a wider East African trend. East African governments are doing too little to promote what they are doing on the energy scene and they need to pursue a much more intuitive public relations campaign. For now, they are bulldozing through projects without setting the foundation among their regional populations. If unrest can reach this level in Tanzania—the model of stability in this region—it can soar in neighboring countries.