13 April 2018

Tanzania: Dangote Set to Start Using Natural Gas

Dar es Salaam — Dangote Cement plant in Mtwara will start using natural gas in its production by the end of next month, The Citizen has learnt.

The development creates hope that production at the country's largest cement producer will not be affected by electricity challenges, resulting in a number of benefits to consumers such as reduced prices.

The move follows the completion of infrastructure, complete with installation of a natural gas pipeline from Block Valve Station one (BVS 1), a 132 metre distance to the cement factory.

A source at the cement factory told The Citizen that currently, the company is transforming its systems from diesel to natural gas consumption.

"We are currently switching off our diesel systems and installing those that will use of natural gas. I am certain that once we start using natural gas as source of power, we will save a lot in production costs," he said, preferring anonimity since he is not the official spokesperson of the company. According to him, the factory is now forced to use six million litres of diesel per month at a total cost of about Sh10 billion.

"With natural gas, our operational costs will go down and ultimately, the price of cement will also be reduced," he said.

This would obviously be good news to Tanzanians who have experienced a rise in cement prices during the past three months.

Currently, a 50 Kilogram bag of cement retails at a minimum of Sh13,000 in Dar es Salaam, up from around Sh11,500 four months ago.

The Public Relations officer at Tanzania Petroleum Development Corporation (TPDC) confirmed to The Citizen on Wednesday that the installation of the pipeline to the plant has been completed since in mid-September last year.

"TPDC has completed its phase one mission of connecting the industry with natural gas for electricity generation...it is now the task of the firm to change its operational systems and utilize gas," he said.

According to him, Phase One of the project was funded by Dangote Cement at a total cost of $915, 953.59 (about Sh2 billion on the prevailing exchange rate).

In another development, TPDC is now implementing the second phase worth $3.75 million including tax that will see another natural gas pipeline being installed at the cement plant for heating and production activities.

Mr Munisi said constructors for the next phase were already waiting for funds to begin the construction of the pipeline from BVS 1 to the firm.

He said Phase Two of the project was aimed at providing at least 19-45 million cubic feet per day.

Still no side has revealed at what price the natural gas would be sold to the company.

"We have agreed on the price but it is confidential. I cannot tell you," he said.

However, The Citizen understands that the two parties have been negotiating the price since 2016, whereby Dangote Cement had wanted to buy a million cubic feet of natural gas at $4.00, while TPDC insisted that it would only sell it at $8.00.

The Energy and Water Utilities Regulatory Authority (Ewura), the regulator, had proposed an indicative price of $4.25 per unit to cement companies.

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