Songas turned Songo Songo island gas into cheap power for Dar es Salaam

In the late 1990s Dar es Salaam generated much of its power from imported liquid fuels, and TANESCO — the state utility — could not cover its own operation and maintenance costs. Emergency diesel generation was expensive, power cuts recurrent, and the utility's weak finances scared off anyone who might have financed a fix. Songo Songo island's gas field had been discovered in 1974, 25 kilometres offshore, and had sat undeveloped for a quarter century because no single balance sheet could carry the field, the pipeline and the power plant together.

The 2001 structure, financed by a $183 million IDA credit with EIB, AES and CDC money alongside, refused to put the chain in one pair of hands. Gas production went to a PanAfrican Energy–TPDC venture; Songas built the 25 km marine and 207 km onshore pipeline and took over the Ubungo plant (112 MW, upgraded to 125 MW); TANESCO stayed the single buyer. Transport pricing was contractual and transparent, and nearly all revenue from incremental gas sales flowed back to consumers as lower transport charges, to the government as gas fees, and to the producers.

Execution forced two refinements. AES exited in 2003 and CDC took over its equity; when procurement came in under budget, project savings were restructured into a $43 million capacity-charge buy-down plus a 68 MW Ubungo expansion. Gas reached Ubungo in 2004. Energy cost at the plant closed at $0.064/kWh against a $0.092 target and a $0.09–0.12 appraisal range, and the economic rate of return hit 35% versus 26% projected. Twiga Cement switched its kilns off heavy fuel oil and 2.5 million tonnes of CO2 were avoided. The outcome was rated satisfactory with low risk.

Unbundle the gas chain; let IDA cash buy down the tolls

Unbundling let each piece raise money on its own risk: the pipeline did not hang on TANESCO's balance sheet, and the field did not wait for the utility to recover.

Transparent transport pricing meant every incremental industrial gas sale automatically cheapened power for everyone, aligning the utility, consumers and new gas demand.

The buy-down spent grant money on the one number that set prices for consumers — fixed capacity charges — rather than subsidising bills at the meter.

Gas at $0.064/kWh undercut the $0.09–0.12 cost of liquid-fuel-fired generation, giving TANESCO a commercial reason to dispatch it first.

When the buyer is weak, don't stack every risk on one concession: split the chain so each link has one owner and one job, then buy down fixed charges with concessional cash.

Songas gas became the anchor of Dar es Salaam's supply, and the buy-down held TANESCO's purchase tariff down from 2007 onward. When southern gas fields were linked to the coast by the 2015 Mtwara pipeline, natural gas covered roughly half of Tanzania's generation. The regulator EWURA, stood up as the sector framework matured, has overseen midstream and downstream gas since 2006, and the 2016 Kinyerezi I plant ended Songas's monopoly on gas-fired power. The gas producer PanAfrican Energy was renamed Orca Energy in 2018 and still produces Songo Songo gas.