Gas pricing differences hobble Dangote Cement in Tanzania
Authorities of Dangote Cement in Tanzania have started discussions on how to run production machinery on gas from the Tanzanian state-run Petroleum Development Corporation as part of moves to cut down on production costs.
Though negotiations are held up over prices, the $500 million cement factory in the south-eastern Tanzanian town of Mtwara, set up last year with an annual capacity of three million tonnes, runs on expensive diesel generators and has sought government support to reduce costs.
The company, whose majority owner 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 said talks were expected to conclude in January, with price disagreements yet to be resolved.
Tanzanian PDC said: “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 cannot sell natural gas to final consumers on at-the-well price because there are additional costs incurred in processing and transporting the gas.”
Tanzania announced in February that it had discovered an additional 2.17 trillion cubic feet of possible natural gas deposits in an onshore field, raising its total estimated recoverable natural gas reserves to more than 57 tcf.
Dangote 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.
It is Africa’s biggest cement producer.
The company plans to roll out plants across Africa. In Tanzania, Dangote seeks to double the country’s annual output of cement to six million tones.