Tanzania’s Natural Gas Reserves: Economic Promise or Missed Opportunity?

Tanzania is blessed with over 57 trillion cubic feet (tcf) of proven natural gas reserves, positioning it among Africa’s significant emerging energy hubs. The discovery of large offshore gas fields along the Indian Ocean coast, particularly in Mnazi Bay, Songo Songo, and Block 1, 2, and 3 offshore fields, has generated excitement among investors and policymakers alike.

Natural gas offers the potential to transform Tanzania’s energy landscape, support industrialization, and fuel regional exports. However, despite the resource’s magnitude, the country has struggled to convert reserves into sustainable economic growth, industrial development, and broad-based social benefits. Without strategic planning, Tanzania risks underutilizing a resource that could be central to its long-term development.

Economic Potential of Natural Gas in Tanzania

1. Power Generation

Natural gas provides a cleaner, more efficient alternative to hydro and coal-based electricity. Gas-fired power plants can stabilize electricity supply, reduce power shortages, and lower energy costs for industries and households, supporting Tanzania’s ambitions to become a regional manufacturing hub.

2. Fertilizer Production and Agriculture

Domestic natural gas can be used to produce ammonia and urea fertilizers, reducing Tanzania’s reliance on imports and boosting agricultural productivity. Local fertilizer production can lower costs for smallholder farmers and improve food security, aligning with national development goals.

3. Industrial Parks and Manufacturing

Gas can power industrial parks, petrochemical plants, and downstream industries, creating jobs and promoting value addition. Local utilization ensures that energy resources contribute directly to domestic economic growth rather than remaining a purely export-oriented commodity.

4. Liquefied Natural Gas (LNG) Exports

LNG projects have attracted international investment, positioning Tanzania to tap into regional and global energy markets. LNG exports can generate foreign exchange, attract further investment, and strengthen the country’s balance of payments.

Challenges in Maximizing Gas Potential

Despite the clear economic opportunities, several factors constrain Tanzania’s natural gas sector:

1. Project Delays and Financing Challenges

Large-scale gas projects require massive upfront capital. Delays in project execution, combined with high financing costs, slow down both domestic gas utilization and export development.

2. Regulatory and Policy Complexity

Complex licensing, inconsistent regulatory frameworks, and overlapping mandates among government agencies create uncertainty for investors and developers. The lack of a clear, strategic gas utilization policy reduces predictability and discourages long-term investment.

3. Limited Domestic Utilization

Although Tanzania has made progress in LNG export projects, domestic consumption remains limited. Industries and households still rely on imported fuels, missing an opportunity to use local gas to drive industrialization and reduce energy costs.

4. Community Perception and Social Benefits

Local communities often perceive limited benefits from natural gas projects, especially when employment, social services, and local infrastructure improvements are insufficient. Without transparent revenue-sharing and inclusive development, natural gas development risks social tensions.

5. Global Energy Transitions

The international shift toward renewable energy and carbon neutrality adds another layer of complexity. Tanzania must balance long-term gas development with environmental sustainability and climate commitments.

Way Forward: Maximizing Tanzania’s Gas Potential

To fully harness natural gas for national development, Tanzania should pursue a strategic and integrated approach:

1. Develop a Strategic Gas Utilization Policy

A clear policy should outline priorities for domestic industrial use, LNG exports, power generation, and downstream processing, ensuring that gas resources support sustainable economic growth.

2. Promote Transparent and Competitive Contracts

Contracts with investors and operators should be transparent, enforceable, and aligned with long-term national interests, reducing the risk of disputes and enhancing investor confidence.

3. Expand Domestic Industrial and Household Use

Policies should incentivize gas utilization in fertilizer plants, industrial parks, and residential energy, creating broad-based economic benefits rather than relying solely on exports.

4. Build Local Capacity and Skills

Investing in technical training, local content, and workforce development ensures that Tanzanians benefit from employment opportunities in the gas sector and related industries.

5. Engage Communities and Ensure Inclusive Benefits

Revenue-sharing mechanisms, social infrastructure investment, and community engagement can mitigate social tensions and ensure that natural gas development uplifts local populations.

6. Balance Gas Development with Sustainability Goals

Environmental safeguards, emissions standards, and climate-resilient strategies should be integrated into gas projects, aligning energy development with Tanzania’s climate commitments and sustainable growth objectives.

Outlook

Tanzania’s natural gas reserves represent a once-in-a-generation opportunity to accelerate industrialization, generate revenue, and improve living standards. However, the country risks turning this promise into a missed opportunity if strategic planning, policy clarity, and domestic utilization are not prioritized.

By adopting a comprehensive gas strategy one that combines domestic industrialization, LNG exports, transparent governance, and community benefits, Tanzania can ensure that its vast reserves fuel economic growth, regional influence, and long-term prosperity.