Dangote to power cement plants with coal due to gas shortages

Alhaji Aliko Dangote,

*Alhaji Aliko Dangote.

…Companies to use 12,000mt of coal per day

Oscarline Onwuemenyi

30 September 2016, Sweetcrude, Abuja – Dangote Cement manufacturing company has turned to locally-mined coal to power its plants in a bid to end disruptions caused by gas shortages and lower its production costs.

“All our cement plants have been converted to coal,” Aliko Dangote, the company’s billionaire majority owner and chairman, told a business conference on Thursday, adding they would use 12,000 metric tonnes of coal each day.

Dangote’s move is unusual in an era when power generation is shifting away from coal. Coal used to generate U.S. power fell in April to its lowest monthly level since 1978, the U.S. Energy Information Administration said in a June report.

Natural gas, meanwhile, surpassed coal as the United States’ top fuel source for the third straight month, the EIA said.

However, gas shortages have plagued the country, with militants in the oil heartland of the Niger Delta regularly disrupting Nigeria’s oil and gas production.

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 has invested more than $5 billion to expand outside its home market in the past few years.

Dangote said Nigeria has become a cement exporter generating $1.25 billion of sales as against annual imports of $2.5 billion which the country would have spent before the sector was liberalised in 2002.

Last month, the company announced that it is in the process of adopting coal to power many of its plants in the country as against gas or low pour fuel oil, LPFO, which is costlier.

This decision, the company explained in a statement obtained by our correspondent in Abuja, is made easier due to the lower cost and widespread availability of coal as an alternative power source across Nigeria.

It noted that “At 13.25Mta, our Obajana Cement Plant in Kogi State, Nigeria, is the largest in Africa and one of the largest and most profitable cement factories in the world. Employing thousands of people, directly and indirectly, it was opened in 2008 as a 5Mta plant and has twice been extended in size.

“Although Obajana is primarily gas-fuelled, we recently commissioned coal facilities to fuel its kilns as well, being significantly cheaper as a backup fuel than the low pour fuel oil (LPFO) we had originally used.”

It added that “Our Ibese Cement Plant in Ogun State has four gas-fired cement lines with a combined capacity of 12Mta. Its first two lines were inaugurated in February 2012 and the second pair of lines came onstream in late 2014.

“Like Obajana, Ibese is abandoning the use of LPFO in favour of coal. Our Gboko Cement Plant in Benue State has 4Mta of capacity. Acquired originally during the privatisation exercise in Nigeria, we refurbished and upgraded the plant to its present capacity.

“Originally designed to use LPFO, Gboko is being equipped with coal milling facilities so that its kilns can run more cost-effectively on the cheaper fuel. Gboko was mothballed throughout most of 2015 as we shifted production to cheaper gas-fired lines at Obajana and Ibese.

“Over the past few years, the profitability and strong cash generation of our operations in Nigeria have helped us to expand our business across Sub-Saharan Africa with a mixture of integrated, grinding and import facilities,” it stated.

The statement further noted that “The Company that became Dangote Cement was founded at a time when Nigeria was almost entirely dependent on imports. Indeed, importation of cement was our main business for many years until the Federal Government launched the industrial policy of Backward Integration in 2002.

“This bold initiative was designed to reduce Nigeria’s dependence on imports by encouraging the industry to build enough capacity to serve Nigeria’s needs, not just in that decade but long into the future. Probably Africa’s most attractive market for cement, Nigeria has substantial limestone and energy resources, a large and increasingly prosperous population, strong GDP growth and a pressing need to improve infrastructure and housing on a massive scale.

“We have invested billions of dollars building new capacity that has single-handedly helped Nigeria to become self-sufficient in cement. In the process, we have created thousands of jobs across the country in factories, logistics, sales and support.”

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