Dangote, TPDC sign 20-year deal on supply of natural gas

Tanzania Petroleum Development Corporation (TPDC) and Dangote Cement yesterday signed a 20-year deal that will see the cement maker produce electricity for the production of cement at Dangote’s Mtwara plant using natural gas, a Tanzanian newspaper reported.

“The plant will convert to gas over the next 2 months at a cost of 2 billion Tanzanian shillings ($876 million) and will increase power output to 40 megawatts from 22 megawatts,” Jagat Rathee, Tanzanian country manager for Dangote Cement said.

Actual generation of electricity from natural gas will start within two months from now, he noted.

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.

According to him, infrastructure have already been constructed with installation of natural gas pipeline from block value station one (BVS1), a 132 metre distance to the cement factory. Again, the company has its system from diesel to natural gas consumption.

“We are currently doing some test before complete consumption kick off,” he noted.

The company which has only increased consumption from about 2,500 tonnes per that to about 5,000 tonnes in response to a lower supply that has seen price increasing is expected to further increase its cement making to 6,000 tonnes per day when the use of natural gas starts.

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

The factory will consume at least eight million cubic feet of natural gas from more than six million litres of diesel per month at a total cost of about Sh10 billion.

Dangote Cement will be the 42nd industry to be connected to the use of natural gas in the country, according to TPDC’s acting manger director, Kapuulya Musomba.

It will also bring the total amount of natural gas consumed by factories in the country to 23 million standard cubic feet per day.

“Our goal is to connect as many industries as we can. With this agreement, we are obliged to supply natural gas top Dangote for a period of 20 years,”

Dangote cement is investing a total cost of $915,953.59 (about Sh2 billion at the prevailing exchange rate) in the first phase of the gas to electricity power generation.

Meanwhile, TPDC is also 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.