Why is LPG Becoming Valuable Energy Source for Cooking in Tanzania and East Africa?

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I recently spoke with an employee of a Ugandan company looking to diversify their business by setting up an LPG receiving and storage terminal in Tanzania. His company sought help in due diligence and all regulatory processes to establish an LPG storage business.

But before responding to his concerns, I wondered why they wanted to start the LPG project. 

“Our management has noticed that the East African population is transitioning from firewood, charcoal to LPG usage,” He said

If you look deep into our society now, the consumption of LPG has been growing in Tanzania and Sub-Saharan Africa.

We are no longer in those ages when people cook with wood logs. Now, we are simply using cooking gas(LPG), which we buy from retail shops or petrol stations.

When we were kids, we were told that the energy source was firewood. We used it to cook and do everything.

By the time we got used to firewood, the government announced that LPG was now _the_ clean source of cooking energy.

It was tough for many Tanzanians and Africans to embrace this new source of cooking energy.

Many feared that LPG was highly explosive and could endanger their home. Also, it was seen as a luxury reserved for the rich.

The beneficiaries’ awareness of the social benefits of using LPG was low. 

So, LPG l consumption was low. In Tanzania, forexample, the annual consumption of LPG was only 5,500MT in 2005.

Entering into the LPG business in Tanzania at those times was unprofitable because the market demand for cooking with LP gas was too small, and Tanzanians were unwilling to pay for it.

With the increasing price of firewood and charcoal and regular awareness campaigns, there has been a steady increase in the number of households using LPG. 

Today, most people in Tanzania are aware of LPG as a clean and healthy source of domestic cooking energy, and they are moving away from charcoal and firewood.

Like in any sector, the challenges have caused low penetration and consumption of LPG in East Africa. But the way we are approaching the challenges is by focusing on opportunities.

1. Inadequate investment in LPG infrastructure: This is the first issue in the sector. The projected increase in demand for LPG requires the rapid development of infrastructures, including LPG receiving and storage terminals, LPG refilling plants, LPG cylinder manufacturing facilities, and LPG transportation trucks.

 

2 Affordability: The other issue is managing affordability, including upfront costs for stoves and related equipment can present a large share of poor East Africans. Some companies have turned this barrier into an opportunity by employing the “pay as you go” business model.

3. Subsidy burden. The surging energy price has increased the cost of LPG cylinders in many East African towns. Some African governments like Malawi are in the process of removing VAT on LPG and cylinders to reduce the landed cost of LPG in the country. 

4. Skills Shortage. This skills shortage in the LPG sector presents opportunities for the development and training of LPG installers to ensure installers are trained and certified competent to install gas appliances safely.

Conclusion.

In general, market dynamics appear to represent growth opportunities for businesses and investors. With high population growth and improving the lifestyle of citizens, demand for LPG will be even higher in the future.

Opportunities Abound as Tanzania LNG Gains Critical Momentum.

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Watching how quickly the Tanzania government works with large super major multinational energy companies to tap into substantial natural gas reserves is impressive.

The LNG made big front-page headlines for weeks, and people are still discussing it months after.

The surprising (or unsurprising) thing about the news and development is that the attention it is garnering now makes all the hullabaloo in previous months a child’s play.

When it made newspaper headlines, we were told that;.

Tanzania has reached a successful conclusion, and a Host Government Agreement is now being drafted alongside a production-sharing contract covering the offshore acreage involved.

A final investment decision (FID), is expected in 2025, with the front-end engineering and design (FEED) phase preceding FID.

“Wow!” I hear you say. “Oil and gas here I come.”

The LNG global market’s rapid evolution provides the excitement of a hopeful potential market and peace of mind to new LNG-producing countries like Tanzania.

Emerging markets are increasingly in favor of spot market supply and short-term LNG purchase contracts as opposed to the traditional long-term LNG sale contract that LNG producers prefer for the certainty of financing of the LNG development projects.

The most significant advantage is that Tanzania is well situated geographically to serve the Asian LNG market; hence the growth in demand for LNG in China and India provide Tanzania with a promising market that will drive the development of LNG project in Tanzania and give assurance to the potential financier of the Lucrative market that will enable Loan repayment.

Furthermore, the EU focuses on natural gas liquefaction (LNG) from Gabon, Tanzania, and Mozambique; therefore, Africa feels such an uptick and will provide 220 billion cubic meters of natural gas in 2040.

Tanzania has been rapidly developing over the past few years.

This growth can be attributed to consistent public investment from the government in several sectors ranging from the energy sector to advancement in the telecommunication and finance sector.

ReconAfrica Secure Environmental Clearance Certificate to Drill in Namibia.

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In its recent announcement, the Canadian-based oil and gas company, Recon Africa, revealed they had received an environmental clearance certificate from the Namibia government to drill in the Kavango Basin.

The company plans to drill an additional 12 exploration and appraisal well. The drilling program starts July 4, 2023, and until July 4, 2026.

Here Are Five Proven Ways Tanzanians and Africans Can Earn Money In the Energy Sector.

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The population is growing in Tanzania and Sub-Saharan Africa, so energy demand is at an unwavering high. Despite huge opportunities, getting insights and reliable information remain challenges for many Africans. The article informs you of some of these proven ways.

1.Fuel retailing(petrol stations)
The increased number of vehicles on the road presents ample opportunities for petrol station investments and expansion.

Although the market is competitive and crowded, with suitable locations, sufficient capital, and good marketing strategies, investors can compete.
Providing superior experience through physical and digital interaction at your petrol station is your business’s key to a successful operation.

If you drive on the road, wondering how you would fill up your car is no longer an issue. Because you have many options and choices. Your tension is how you will find reasonably priced fuel and get good customer service.
Furthermore, customers previously drove to fuel filling stations, paid for dispensing fuel and left. Currently, they need speed and human touch.

2. Lubricants
Increasing the number of vehicles on the roads, the need for routine maintenance, and rising consumer awareness about the importance of engine health contribute to lubricant market expansion in Tanzania and Africa.

The proliferation of new brands creates stiff competition. But investors can build sustainable businesses with high-quality products, competitive prices, and good distribution channels.

Opportunities in the lubricants industry range from retail and wholesale distribution to lubricant blending and manufacturing business. Identifying the products customers need is critical to a successful lubricants business. Depending on your location, for example, in Tanzania, the fast-moving lubricants products ranges are petrol diesel engine, motorbike engine oils, diesel engine oils, manual gear oils, hydraulic oils, industrial gear oil, brake fluid, and grease.

3.Liquefied petroleum gas(LPG) business.
The population in Tanzania and Africa is in the transition phase, changing from firewood and charcoal to LPG usage. Ten years back, many people in Tanzania and Sub-Saharan Africa feared LPG was highly explosive and could endanger their homes.
Also, it was seen as a luxury reserved for the rich. However, consumption has grown exponentially (e.g., in Tanzania, the average annual growth is about 15%.

This growth in LPG consumption requires new investments such as storage and receiving facilities, refilling cylinder plants, LPG transportation trucks, and investment in LPG distributions.

4. Service and equipment supply
With the African energy sector gearing up for action, many energy projects are being pushed through the initial planning (FDP) and FEED gates. Projects such as Tanzania liquefied petroleum gas(LNG) and the East African crude oil pipeline (EACOP) present immense opportunities for equipment and service providers. Furthermore, ongoing gas productions activity in Tanzania offers opportunities for Tanzanians and African businesses,

5. Electric vehicle charging stations and compressed natural gas(CNG) stations.
We have known for decades now that significant changes in diesel and petrol prices can dramatically impact Tanzanians’ and Africans’ lives. When fuel prices rise, transportation fees and living standards increase.

Vehicles have been introduced that run on alternative fuels in Tanzania and Africa. Some cars run on natural gas or compressed natural gas(CNG) vehicles. There are electric vehicles too,

For example, Tanzania has the most significant number of electric vehicles than all-electric vehicles in East Africa combined. Furthermore, Tanzania has several CNG vehicles.

The biggest problem is that there is an easy way to fuel these alternative vehicles.

There needs to be more proper infrastructure for compressed natural gas(CNG) and electric vehicles in Tanzania and Africa.

So if you have vehicles running on CNG, your tension now is how will you fuel this thing up? This creates an opportunity for electric vehicle charging stations and CNG fuel stations. And it is a promising opportunity for the future.

Conclusion
Africans can make money in the energy sector through fuel retailing/petrol stations, lubricants, LPG sales, equipment, and service supply, electric vehicle charging stations, and CNG stations.

Now is our time.
I hope this article will inform and inspire Tanzanians and Africans.

How is This Young Man Builds a Successful Petrol Station in Tanzania Despite Losing Tzs 80million?

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“I lost Tanzanian shillings 80 million in the poultry business. Poultry birds are susceptible and generally suffer viral, bacterial, fungal, nutritional, and parasitic diseases. So all birds died, and I lost all my investment of about Tzs 80 million.

So I was looking for new opportunities. That’s where I came across your publications on petrol station business.”

“The publication informs me on selecting the right petrol station site location, the procedures and process to obtain permits and licenses. It enlighten me on the estimated costs of equipment and project and how to conduct market research.” Jackson Bennedicto Nyamussa, the founder of Otto Oil petrol station, said.

Jackson, now his petrol station business, sells at least 2,500 liters to 3,000 liters of diesel and petrol per day. He shared some advice on building petrol stations with a limited budget.

“What keeps our costs down is that we did some parts of construction on our own such as canopy and storage tanks. We also source all equipment from China which is relative inexexpensive.” He said.

 

Jackson said the challenge is in the retail fuel sector like any other.

 

“The biggest challenge we face is intense competition. Our petrol station sits close to sizeable multinational energy companies. They are big boys. They have access to huge financial muscles and experience in the energy business. But we get better everyday,” said Jackson.

Speaking on what motivated him, Jackson says:

“I am currently an employee. But there is a huge investment opportunity. I want to be independent and create employment for the country’s growing youth population.”

Jackson is curious and driven by success.

“I am still determining what the future holds. But my vision is to have a chain of petrol stations nationwide and even be a large LPG distributor.’ He said.

 

How is This Petrol Station Sells 200,000 Liters of Fuel Per Months In Tanzania?

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After working tirelessly researching, selecting a location site, acquiring all permits and licenses, and selecting vendors, Mr. John Mosha successfully started his new petrol station business in Arusha, Tanzania.

Once I met him in Dar es Salaam, I was eager to know his new petrol station business was performing.

“We are new in this energy sector. So we are still learning. But with one month of operation, we sell 5000liters to 6000 of diesel and petrol per day.” he said.

Let’s do the math on that. The current profit margin is Tzs 108 per liter. Tzs 108*200,000liters= Tzs21,600,000. That means Mr.Mosha collected Tzs 21,600,000 in the first month of the petrol station operation.

Mr. Mosha believes that flexibility, making the right decisions, and getting professional help is vital to achieving growth in the retail fuel sector.

“Our competitors have substantial financial muscles and more experience in the market. But you don’t have to be an engineer to run a successful petrol station. Your decisions must be flexible and fast because even losing Tzs 50 can limit your business growth.”

Speaking on the challenges Mosha said.

“Like any sector, the challenges are there, but the way we approach the challenges is to focus on getting insights and making the right decisions.”

“The first issue is location. Our petrol station is located in a very strategic area. We employ experts to help us with research to inform us as to whether the site is viable. This allows us to make decisions based on data and focus our time, money, and resources where we have the best chance to succeed.”

Will Electric Vehicles, CNG Displaces the Demand For Petrol Station In Tanzania

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Increasing the price of transportation fuels such as petrol and diesel primarily drives the adoption of CNG and electric vehicles in Tanzania.

With substantial proven natural gas reserves of at least 57 trillion cubic feet, the Tanzanian government has been introducing various initiatives to promote the adoption of compressed natural gas(CNG) vehicles.

Furthermore, Tanzania has the most significant number of electric vehicles than all-electric vehicles in East Africa combined.

The popular belief is that the rise of electric vehicles and compressed natural gas (CNG) vehicles will limit the growth of petrol stations.

The Future of Petrol Station and Fuel Retail Sector.

The lack of proper infrastructures for compressed natural gas(CNG) and electric vehicles in Tanzania and East Africa are restraining factors of the petrol station market growth in the region.

This is evident that demand for conventional fuel such as petrol, diesel, LPG, and oils will remain for decades.

And non-fuel products will become increasingly relevant in supermarkets, garages, car wash, food services, and other ancillary offers.

In general, market dynamics appear to represent growth opportunities for both international and local investors.

The Solar Water Pumps Market in Tanzania: Growth, Trends, and Opportunities.

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The market size for solar pumps in Tanzania is estimated to be USD 25 million. Solar water pumps are a lucrative market with a payback period of 4-6 years.

The low productivity in Tanzania’s agriculture sector and the shift toward renewable energy are expected to positively impact the solar water pump market.

The other trend is the government’s willingness and international investors to invest more in agriculture. For example, the Tanzania government has signed an agreement with the World Bank for a grant amounting to USD 4.5 million, which is set to help provide water to citizens.

This is evident that the solar water pumps market presents opportunities to manufacture, distribute and install affordable ones.

East Africa LNG Market: Industry Analysis and Forecast(2022-2030)

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There has been a series of world-class natural gas discoveries in deep water off Tanzania and Mozambique in the last ten years.

Exploration success has raised Tanzania’s profile as a potential supplier of LNG to Asian markets, along with neighboring Mozambique.

With over 214 trillion cubic feet(tcf) of proven natural gas reserves – East Africa has been touted as the next great LNG player.

Of those 214 trillion cubic feet of natural gas, 150 trillion cubic feet were discovered in Mozambique, and the remaining 57 trillion were discovered in Tanzania.

Europe’s interest in African oil and gas in its plan to diversify the suppliers away from the Russian supplier as a consequence of the Russian-Ukrainian war. African LNG will continue to increase in the rest of 2023 and the coming years.

LNG demand is anticipated to grow gradually, with a supply-demand gap expected to develop by 2025.

However, bringing the rest of the new projects onstream will take time, and building all these new onshore and offshore LNG plants.

Forexample, the final investment decision (FID) of long-awaited Tanzania liquefied natural gas(LNG)project is expected in 2025, with the front-end engineering and design (FEED) phase preceding FID. The LNG will be developed in the Lindi, south of the country. And Construction time will likely be five to six years, suggesting the large-scale project could come on-stream around 2030.

Eni’s Marine XII project will not reach its total capacity of 3 million tonnes per year until late 2025.

TotalEnergies of France is not likely to begin commercial operations on the Mozambique LNG project before 2025, and the U.S. giant ExxonMobil will need even more time to launch its Rovuma LNG project in Mozambique since it has yet to reach the FID stage.

The report aims to give you a deeper, more complete understanding of the African LNG market dynamics and structure by analyzing the market segments and projecting the East Africa LNG market size.

Tanzania Lubricant and Blending Market: Growth, Trends, Opportunities, and Forecast(2021-2028)

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Lubricants are important products in terms of ensuring that various machines operate smoothly and do not fail prematurely in order to minimize operational costs in any organization that uses such machines. It is also equally important to ensure that lubricants are formulated, manufactured, handled, and used appropriately to safeguard the given machine’s moving parts that require lubrication and are safely used and disposed of.

In all East African countries, lubricants are either blended/manufactured locally through imported feedstock materials or imported as finished products. In Tanzania, for example, in 2021, 85% of the consumed lubricants were locally blended, and the remaining was imported as finished products. Lubricants consumption continues to increase in almost all countries due relative increase in machines that use lubricants, especially in the automotive and manufacturing industries.

Read also: Tanzania Liquefied Petroleum Gas Market- Industry Analysis and Forecast (2021-2028)

The consumption of lubricants in Tanzania has continued to increase at an average rate of 12% per year, and it will most likely continue to grow.

This report aims to give investors and companies a deeper, more complete understanding of the general overview of the lubricants industry in Tanzania. It covers the regulatory framework and high-level market structure (product importation, consumption, existing players, infrastructure, pricing regime, and industry growth trends).

The profile also covers the required additional cost-effective investment options based on Lubricants import/consumption projections, required facilities codes, standards, estimated investment cost structure, and a list of required equipment/devices for a small lubricant blending and Filling plant, including required permits.