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Revealed: Hurdles to setting up CNG filling stations in Tanzania
A car converted to run on compressed natural gas. PHOTO | FILE
What you need to know:
- The high cost involved in the construction of compressed natural gas (CNG) filling stations is hampering the setting up of the facilities in Tanzania, according to industry players
Dar es Salaam. The high cost involved in the construction of compressed natural gas (CNG) filling stations is hampering the setting up of the facilities in Tanzania, according to industry players.
At least 5,000 vehicles have so far been converted to use CNG in the country as motorists seek relief from spiralling petrol and diesel prices by switching to natural gas, which is much cheaper, with Tanzania boasting among the largest reserves in Africa.
But while the initial cost of converting a vehicle from petrol or diesel to CNG is relatively high, the country is also grappling with high costs of setting up CNG filling stations.
The Citizen has learnt that establishing a single CNG filling station costs up to twice as much as what is needed to set up a petrol and diesel filling station in an urban setting.
“In short, one needs about $1 million (about Sh2.6 billion) to build a decent petrol and diesel filling station in Dar es Salaam, but a similar CNG facility costs not less than $2 million (about Sh5.2 billion),” BQ Contractors Limited chief executive John Bura told The Citizen.
BQ Contractors Limited is currently building a CNG filling station in Goba, Dar es Salaam.
Mr Bura said the necessary structures are already in place and work is now being undertaken to install the relevant equipment, which he described as “very expensive”, adding that the facility is expected to be completed towards the end of the year.
He said people seem to have lost interest in converting their vehicles owing to the existence of only three operational CNG filling stations in Dar es Salaam, specifically at Ubungo, Tazara and Kipawa.
“We used to receive up to five vehicles daily, but we now deem ourselves lucky if we convert one vehicle every week.”
The cost factor means that the number of CNG stations has remained low despite efforts to encourage the use of alternative fuels and cut imports of petrol and diesel, whose prices in the global market are beyond the country’s control.
It also explains why companies and individuals approved to set up CNG filling stations are taking a long time to build them.
Tanzania Petroleum Development Corporation (TPDC) has so far issued permits to at least 30 private entities to set up CNG filling stations in various parts of the country.
TPDC gas business manager Gilbert Simon told The Citizen that the state-owned corporation is currently building a large CNG station along Sam Nujoma Road near Mawasiliano Towers in Dar es Salaam and a smaller one in Kibaha, Coastal Region.
“Additionally, we have issued permits to 30 companies that are interested in setting up CNG stations. They include established fuel retailers such as Total, Lake Oil and Puma,” he said.
He noted that potential investors are required to submit their project plans before permits are issued, but most projects take a long time to get off the ground as investors look for financing.
Echoing Mr Bura’s views, Mr Simon said building a CNG station is much more expensive than setting up a petrol and diesel filling station, adding that CNG facilities must conform to standards set by the industry regulator.
“The Energy and Water Utilities Regulatory Authority regulates the CNG business and all companies that wish to set up CNG retail outlets must adhere to standards and safety guidelines set by the regulator,” he added.
However, Mr Simon expressed optimism that the number of CNG stations in Dar es Salaam will increase significantly in the not-too-distant future, with the owner of the Kipawa station also building another facility on Sam Nujoma Road.
Puma Energy Tanzania is in the process of engaging contractors for proposed CNG stations in Mwenge, Tanki Bovu and Tegeta in the city, he said.
Mr Bura, on the other hand, appealed to the government to offer incentives to investors wishing to set up CNG filling stations and vehicle conversion facilities.
“Also, many potential local investors are being discouraged by high interest rates charged by financial institutions. This issue needs to be looked into if the industry is to take off as expected,” he said.
Deputy Prime Minister and Energy minister Doto Biteko said in April when seeking Parliament’s approval for his docket’s Sh1.88 trillion budget for 2024/25 that the government will continue to develop natural gas distribution infrastructure in Dar es Salaam, Mtwara, Lindi and Coast regions.
Activities planned for execution this financial year include conducting environmental and social impact assessments, coming up with designs and constructing natural gas distribution infrastructure in industrial areas in Coast Region.
“The government will also complete the construction of CNG stations, including a main station at the University of Dar es Salaam and smaller stations at Kairuki and Muhimbili hospitals in Dar es Salaam,” Dr Biteko said, adding that the private sector will continue to participate in the construction of CNG facilities.
