Dangote factory to get reliable gas power supply by January - TPDC

01Dec 2016
The Guardian Reporter
The Guardian
Dangote factory to get reliable gas power supply by January - TPDC

THE ongoing saga of the Mtwara-based Dangote cement factory closing operations abruptly yesterday took a new twist with the state-owned Tanzania Petroleum Development Corporation (TPDC) pledging to connect the plant to a natural gas power generation infrastructure by January next year.

The $500 million cement mega-factory suspended operations last week citing high production costs associated mainly with an over-dependence on diesel due to the lack of reliable power from the national electricity and natural gas grids.

In its statement yesterday, TPDC said the government has taken a number of measures to ensure the plant gets a reliable power supply to continue its cement production activities, including holding meetings with the factory’s management and reaching agreements on the use of natural gas to supply the power.

“TPDC follows rules and procedures when it comes to setting natural gas prices in line with the type of customer. Customers are categorised in different groups such as industrial, personal (home use), vehicle use, and power production.

This means the price caps proposed by TPDC must be approved by the Energy and Water Utilities Regulatory Authority (EWURA) before they can be put into effect,” the TPDC statement said.

It added that although the Dangote factory was in the category of industrial customers, it wanted to buy gas at the lowest price, right at the drilling point when the gas is still raw and unprocessed.

This, the statement said, did not consider the fact that the gas has to be processed to reach agreed standards for users, and then transported through a pipeline, all of which involved further expenses.

“So TPDC cannot sell the natural gas at drilling point prices simply because the processing and transportation costs attached means to do that would not be commercially viable,” the statement asserted.

Commenting on the issue, Mzumbe University economist Prof Honest Ngowi said the factory’s shutdown is likely to have a multiplier social effect also involving many economic sectors, encompassing people (jobs), business revenues, right up to the survival of local financial institutions.

According to Ngowi, the plant closure also sends a negative signal to other potential investors aiming to establish similar industries in the country, who may now shy away after seeing how a fellow investor has being treated.

“The government should take this issue seriously and take immediate measures to rescue the situation,” he said.

The chief executive officer of the Institute of Management and Entrepreneurship Development (IMED), Dr Donath Olomi, suggested that the government and factory management hold a serious meeting aimed at resolving the matter for mutual benefit.

“A giant factory like Dangote cement should not be ignored and allowed to let go so easily because the (negative) impact will be huge and hard to fix. If their problem is power to run the plant, the government should see that they get it,” Olomi said.

Aziz Abdallah, a pilot by profession, said the reasons offered by the Dangote factory management for closing down operations are not strong enough, unless it has other reasons.

“What is troubling me is that the same local coal that the Dangote factory management is complaining about is being transported to our neighbouring countries every day for use in their cement factories…how can they be the first to see it as unworthy?,” queried Abdallah.

He called on the government to conduct a proper research into the issue, including getting to the bottom of the reasons behind the factory closure move.

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