December 8, 2016

Tanzania in talks with Dangote Cement over gas price

Tanzania in talks with Dangote Cement over gas price

Alhaji Aliko Dangote

By Franklin Alli with Agency report

TANZANIA is in talks with Dangote Cement on the supply of natural gas to its manufacturing plant, but negotiations are currently held up over prices, said a government body in the East African country. The $500 million cement factory in the south-eastern Tanzanian town of Mtwara, set up last year with an annual capacity of 3 million tonnes, runs on expensive diesel generators and has sought government support to reduce costs.

Alhaji Aliko Dangote

Alhaji Aliko Dangote

The company, whose majority shareholder and chairman is Africa’s richest man, Aliko Dangote, halted production at the plant last week over technical issues.
State-run Tanzania Petroleum Development Corporation (TPDC) said talks were expected to conclude in January, with price disagreements yet to be resolved.

“Dangote has held protracted talks with TPDC on the pricing of natural gas. The Dangote Cement factory has asked for gas supply at below market prices, equivalent to the price of raw natural gas from producing wells,” TPDC said in a statement.

“TPDC cannot sell natural gas (to final consumers) on at-the-well price because there are additional costs incurred in processing and transporting the gas,” it continued.

Tanzania announced in February it had discovered an additional 2.17 trillion cubic feet (tcf) of possible natural gas deposits in an onshore field, raising its total estimated recoverable natural gas reserves to more than 57 tcf.

Dangote, Africa’s biggest cement producer, has an annual production capacity of 43.6 million tonnes and targets output of between 74 million and 77 million tonnes by the end of 2019 and 100 million tonnes of capacity by 2020.

The company plans to roll out plants across Africa. In Tanzania, Dangote seeks to double the country’s annual output of cement to 6 million tonnes.

Minister for Industries, Trade and Investments Charles Mwijage has confirmed that the government’s investment arrangement with Dangote Cement that were granted by former President Jakaya Kikwete’s administration are still in place. He said that the government would do nothing to compromise Dangote Cement’s investment in the country and described its entry as a ‘game changer’ by reducing the price of cement, according to the Citizen newspaper. The comments were made in response to media speculation regarding a production shutdown at the cement producer’s Mtwara plant.

Mwijage said that Dangote Cement could cut its production costs by using local coal or gas. The Tanzania Petroleum Development Corporation has been in negotiations since October 2016 to supply gas to the cement producer.

He also added that another cement producer, Engro, is considering building a cement plant and that the government is willing to offer it the same incentives as those given to Dangote Cement.