Cablegate: Methane Development Continues Despite Disputes


DE RUEHLGB #0737 2290815
R 170815Z AUG 07





E.O. 12958: N/A
SUBJECT: Methane Development Continues Despite Disputes

REF: 04 KIGALI 218

1. SUMMARY. Lake Kivu still contains hope for Rwanda to solve one
of the biggest obstacles to its development - the unreliability and
high cost of energy in the country. The GOR partnership and
concession granted to Dane Associates has been dissolved, but
several other companies have appeared to continue the efforts.
Rwanda estimates that there is at least a 350 megawatt (MW)
potential for the lake andQ limiting individual concessions to 50

2. While the partnership between Dane Associates and the GOR,
called Kibuye Power 1 (KP1), has been dissolved by Rwandan courts,
work continues with the original technical sub-contractor - Ludan
from Israel. The GOR has taken over complete ownership of KP1 and
plans to produce 5MW of electricity through the methane conversion
process pilot project by the end of the year.

3. The Rwanda Energy Company (REC), owned 60% by the Rwandan
Investment Group (RIG) and 40% by ECOENERGY of Kenya is working on a
4 megawatts (MW) pilot methane project in Gisenyi. REC has hired
the South African engineering firm Philip Merkel and expects to
produce power by July 2008. Upon successful completion of the pilot
project, REC will be awarded rights to the full 50MW concession.
With an estimated 350 MW maximum capacity for energy produced from
methane on the Rwandan side of Lake Kivu, the GOR set each
individual concession to no more than 50MW.

4. REC also contracted French scientist, Professor Michel Harbouach,
to develop a 3MW project. Harbouach was very involved in the
identification of the potential held by methane in Lake Kivu, but
was never granted concessionary or contractual rights to the Lake.
An expert in the field, he examined Cameroon's Lake Nyos catastrophe
in which poisonous gas released from the lake killed many lake
dwellers. Harbouach produced some of the original feasibility
studies and reports on extracting methane from Lake Kivu. In fact,
Harbouach's original proposal addressed the environmental risk that
the gas poses to the surrounding area. He argues that extracting
methane from the Lake Kivu is necessary to prevent a disaster
similar to Lake Nyos's carbon dioxide explosion.

5. Additionally, W&S Beteilingungs AG from Germany applied for
concessions to convert Kivu methane into electricity, but the GOR
has not yet approved their request.

6. COMMENT. Often described as Rwanda's natural treasure, the
methane in Lake Kivu looks more and more promising to international
companies and investors. While the GOR must be vigilant to not let
the scramble over the highly prized concessions delay the production
of the much needed electricity, it must also ensure that it has
clearly defined plans for several more mundane, but as of yet,
ignored issues. For example, how to connect the electricity to the
national grid and how to create power purchase agreements with each
company. Each of these issues awaits negotiated solutions, and are
crucial to the actual production and use of methane-generated
electricity for Rwanda's cities and towns.


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