A new deal between Tanzania Petroleum Development Corporation (TPDC) and Dangote Industries Tanzania could result to a fall in cement prices in the domestic market.
The two signed a 20-year deal for supply of cost effective natural gas to generate electricity at Dangote’s cement plant in Mtwara. This will consequently increase production and eventually reduce cement prices.
The deal comes as good news amidst reports of the country facing an acute shortage of building material, which resulted to the government banning the exportation of the commodity pending fulfillment of domestic market demand. The shortage of cement pushed the price from between US $4 and US $6 for a 50 Kg bag to between US $8 and US $10 in some areas.
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Diesel generating electricity
Through the deal, the factory will produce up to 35 MW of electricity from natural gas and later increase to 45 MW, a move that will enable it to increase its production capacity from 2,000 to 6,000 tons per day and reduce production cost.
Speaking at the signing of the deal, TPDC acting Managing Director Engineer Kapuulya Musomba said Dangote Cement is among seven factories which were lined-up for connection to power supply during the 2018/2019 fiscal year.
According to Dangote Industries Chief Executive Officer (CEO) Jagat Rathee, the company has been using an average of 106,000 liters of diesel daily to produce between 2,000 and 2,500 tons of cement. “High production cost due to reliance on electricity generated from diesel-fired turbines is the major challenge facing the plant,” he added.
Dangote has a capacity of three million tons and is so far the largest cement factory in Tanzania, boasting of about 500 million tons of limestone reserves, which can meet the demand of the plant for the next 149 years.
Natural gas supply
Major installations for the supply of natural gas to the cement plant are currently being finalized and it is expected that the factory will start using the new energy source in the next 30 to 45 days. Mr. Rathee says natural gas will make prices of cement more affordable.
Engineer Musomba says Dangote will become the 42nd factory to use natural gas for production; with the plants using only 15 million cubic feet (mcf) of the natural gas out of the country’s proven reserves of over 57 trillion cubic feet (tcf).
In the first phase of the 20-year deal, TPDC will supply eight million cubic feet to Dangote which will be increased in the second phase to 20 million cubic feet. Engineer Musomba however said that the Energy and Water Regulatory Authority (EWURA) will set tariffs for the gas to be sold.
Tanzania started using gas for generation of power in the year 2004 and two years later in 2006 started connecting the source of energy to industries in Tanzania, a project which is being implemented by Pan-Africa Energy Tanzania.
Engineer Musomba however explained that the exercise of supplying gas to the industries is now undertaken by TPDC, stating that Dangote Tanzania becomes the second factory to be supplied by the national oil company after tiles making factory, Goodwill (Tanzania) Ceramic Limited in Mkuranga, Coast Region.
