Kenya has made a U-turn and revived plans to build its first natural gas-fired power plant in Mombasa after dropping the project in 2016.
Energy secretary Charles Keter has initiated fresh talks with the Treasury in preparing a financing structure for the 700-megawatt (MW) power plant that the government seeks to implement together with a private investor under the public-private partnership model.
In 2016, the ministry dropped the liquefied natural gas (LNG) power project in Dongo Kundu, Mombasa, which was estimated to cost Sh130 billion.
This came amid lukewarm investor response for the tender, having received only two bids.
Other interested firms had asked for a longer implementation period, beyond the set 18 months.
“We are reviving the gas power project plan in light of growing demand, need to diversify our sources and the expected lower consumer prices since gas fired power is cheap,” said Mr Keter, without offering details on the adjustments they will make to the fresh tender to raise investor appetite this time around.
Gas-fired electricity will cost less than Sh10 per kilowatt hour (kWh), or half diesel-generated power, which is currently Kenya’s expensive alternative whenever drought cuts hydropower production or a geothermal plant is out for repair, according to the CS.
Kenya, which is also moving to construct its first coal-fired power plant, had earlier made arrangements to import liquefied natural gas from Qatar through ships, and has now added LNG-rich Australia to that list.
The dropped gas-powered power plant was part of the government’s plan to add 5,000MW to the grid from 2013 to spur economic growth.
Among the bidders were China Petroleum, Tata Power in consortium with Gulf Energy, Globeleq, Mitsui and Company, Toyota Tyusho, Marubeni Corporation, Samsung C and T, GMR Energy, Quantum power and GDF Suez.
According to the terms of the botched tender, companies were required to show ability to raise at least $1 billion (Sh103 billion) at competitive terms and have strong balance sheets, with a minimum of $200 million (Sh20.6 billion).
Heavy fuel oil
The successful bidder for the Dongo Kundu plant was required to build a floating storage and re-gasification unit with sufficient capacity and infrastructure to supply natural gas to power plants using heavy fuel oil.
In July 2014, Kenya announced the discovery of commercially viable gas in Wajir after a successful exploration in Hadado, raising expectations of tapping the gas for power production.
Initially, Kenya was looking to build a pipeline to move natural gas from gas-rich neighbouring Tanzania to Mombasa, a deal which never materialised.
Kenya has also been cautious in its quest to construct more power plants, fearing the economy could be left with excess power and force consumers to pay for capacity charges on idle plants.
This would reverse government’s quest to deliver cheaper electricity.