Main Areas of Growth Opportunities in the Energy Sector in Tanzania
Many parts of the energy industry are in flux today, with rapid changes induced mainly by oil prices, intense competition, and regulations.
These rapid changes are creating opportunities as well as pitfalls.
Some segments in our industry seem profitable and mature, such as forexample, importing, storing, distributing, and marketing petroleum products.It also changing rapidly, especially in retailing petrol station sub-sector. And these changes create significant opportunities to be exploited. However, failure to understand and adjust to this change will lead to substantial erosion of profitability and loss of opportunities.
The retail petrol station subsector has been very stable. The industry was dominated by three major brands. However in recent years, many small independent entrepreneurs have been investing in petrol station projects. The Kalibrate market study revealed that over 150 petrol were under construction in 2021. This indicates more people are taking advantage of this growing segment in Tanzania.
Recently we have seen rapid growth of service stations, which besides selling petrol, diesel, kerosene, cooking gas, and engine oil, offer car washing services, coffee shops, car repair services, a restaurant, supermarkets, and shopping malls.
They can sell a huge volume of fuel profitably at low markups because the overhead cost of a retail outlet can be spread between fuel and other complementary services.
The rapid flux in retail petrol stations is creating opportunities. The chains of petrol stations selling fuel and other complementary services are expanding. This indicates that there good profit opportunities for innovative entrepreneurs.
Liquefied petroleum gas is also a profitable growth area. With regular awareness campaigns, there has been a steady increase in the number of households using LPG. Today, most people in Tanzania know LPG as a clean and healthy source of domestic cooking energy, and they are moving away from charcoal and firewood.
The annual LPG consumption in Tanzania grew from 5,500 metric tonnes in 2005 to 145,800 in 2019.
There are more opportunities for the LPG value chain for entrepreneurs and investors looking to address supply constraints in the domestic market, including LPG refilling points countrywide and establishing local LPG cylinder manufacturing units.
Furthermore, the demand for residual fuel oil has declined rapidly in the past years, mainly because of the substitution of natural gas.
Other Energy Areas
Opportunities for profitable investment opportunities clearly exist to an even greater degree in the oil and gas development project or upstream oil and gas exploration and production projects, as industry insiders call it
The oil and gas exploration and production area is growing slowly in Tanzania but is a very profitable sector with numerous good investment opportunities. Upstream oil and gas exploration and production projects remain profitable despite their slow growth because the energy demand is growing in Tanzania, so new oil and gas reserves must be discovered to add to the supply chain.
