East Africa
Tanzania , Nigeria ' s Dangote Cement haggle over price of natural gas
Tanzania is in talks with Nigeria ' s Dangote Cement on the supply of natural gas to a manufacturing plant for the building material , 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 . The company , whose majority owner and chairman is Africa ' s richest man , Aliko Dangote , halted production at the plant at the start of December 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 said .
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 . Meanwhile , three companies plan to invest as much as 20 trillion shillings ($ 9.2 billion ) in Tanzanian cement production in projects that could double the nation ’ s installed capacity , Trade and Industry Minister Charles Mwijage said .
The government of East Africa ’ s second-biggest economy , with gross domestic product of $ 45 billion , has infrastructure projects planned , including the $ 10 billion Bagamoyo port development , a $ 7-billion railway and a $ 4-billion crude oil pipeline from neighboring Uganda that will require cement .
Units of HeidelbergCement AG of Germany , Jona , Switzerland-based LafargeHolcim Ltd and Afrisam Investment Holdings Ltd . of South Africa already operate in the country and have installed annual capacity of 10.3 million metric tons . Production in Tanzania is about 7.1 million tons a year , while local consumption is 4.1 million tons , according to Mwijage . The surplus is exported to neighboring countries such as the Democratic Republic of Congo .
Demand for cement is expected to grow as much as 8 percent a year in the “ medium-term ,” London-based Exotix Partners said in an October research note . Last month , Lake Cement Ltd ., a closely held Tanzanian producer , announced plans to almost quadruple capacity to 1.9 million tons by building a new plant at Bagamoyo at a cost of $ 150 million , according to Standard Investment Bank , the Nairobi-based lender .
Dangote Cement Plc , owned by billionaire Nigerian investor Aliko Dangote , last year commissioned a 3-million ton plant in Tanzania ’ s southeastern region of Mtwara . The plant stopped production last week on some technical issues that have now been fixed , spokesman Carl Franklin said in e-mailed comments . When Dangote began production in Tanzania in February , it undercut competitors such as Tanzania Portland Cement Co . and Tanga Cement Co . by selling at about $ 80 per ton , compared to a national average of about $ 90- $ 100 per ton , according to Exotix . “ We expect aggressive cost management strategies from all players to protect the bottom line ,” Exotix said in its note .
2016 Business Times Africa 13