Displaying items by tag: Gas

Tanzania: Dangote Cement plans to start using natural gas at its Mtwara plant by the end of May 2017. The decision follows the completion of a new gas pipeline near the plant, according to the Citizen newspaper. The plant has been using temporary diesel generators. A source quoted by the newspaper said that the unit has been using 6Ml/month of diesel at a cost of about US$4.4m. In late 2016 Dangote Cement made a deal with the government to supply natural gas to its cement plant at Mtwara following a temporary shutdown at the site.

As readers in colder climes will understand: nobody likes a gas bill. Save some pity for LafargeHolcim Bangladesh then this week, as it faces attempts to hike the price it’s paying.

As reported by local press the government-run Jalalabad Gas Transmission and Distribution Systems (JGTDS) is trying to raise the rate for natural gas to the cement producer. Allegedly, LafargeHolcim Bangladesh is paying a lower unit cost for gas supplied to a power plant at its Chhatak cement plant than the fixed amount set by the country’s energy regulator. LafargeHolcim Bangladesh says the rate was set in a gas sales agreement (GSA) signed between JGTDS and its predecessor, Lafarge Surma Cement, in January 2003. The state body meanwhile has referred the issue up the chain of command to the Energy and Mineral Resources Division under the Ministry of Power, Energy and Mineral Resources.

JGTDS says that the plant is consuming around 450,000m3/day of gas. Of this, about a quarter is used to run the power plant and the remainder is used to power the cement plant’s kiln. The plot thickens though as LafargeHolcim Bangladesh is actually paying above the industry tariff for gas of US$0.09/m3. Commentators reckon the price of gas is set to rise in the future. Naturally the cement producer wants to stick to the pre-agreed price for the economic viability of the country’s main integrated cement plant. The Spanish embassy, representing Cementos Molins one of the owners of the company along with LafargeHolcim, has even gone as far as intervening in the argument.

The pressure is on LafargeHolcim Bangladesh because its sales revenue fell slightly year-on-year in 2016 but its fuel costs rose by 12%. As the country’s sole clinker producer it suffered from falling international clinker prices in a nation full of grinding plants. So far in the first nine months of 2017 its sales revenues have risen a little yet its profit has more than halved. Any change to its fuel costs would seem likely to damage the company at a delicate moment.

Energy costs for cement plants are nothing trivial as the graph above shows. It uses data from the German cement industry but the key takeaways are that the calorific ratios of the different types of energy cement production uses don’t directly correlate to the cost. Hence, in Bangladesh and other countries where the electricity grid might be unreliable or expensives, running one’s own captive power plant makes sense both for cost and supply reasons. As an aside that may not be applicable to Bangladesh right now, the stark disparity between the energy produced by alternative fuels and their cost proportion is a great reason to use them if the necessary supply chains can be organised. LafargeHolcim launched local operations for its waste management wing Geocycle in December 2017 so this point has not been lost the company.

The situation in Bangladesh is reminiscent of the bind Dangote Cement found itself in towards the end of 2016 in Tanzania. A dispute over gas prices for its Mtwara plant led to company boss Aliko Dangote negotiating personally with President John Magufuli to protect his investment. Governments want inward spending in the form of new industrial plants and multinationals want assurances on some of their costs, like fuel supplies, before they reach for the chequebook. However, if one side is seen to be getting too good a deal then the relationship can break down. LafargeHolcim Bangladesh may have bagged itself a scandalously low gas deal and the Bangladesh government may also be breaking an agreement. Bear in mind though, that with sales of nearly US$28bn in 2016, LafargeHolcim took in revenue nearly one tenth of Bangladesh’s gross domestic product. If the two parties don’t reach an accord, the consequences for both parties could be negative.

Bangladesh: LafargeHolcim Bangladesh has entered into a dispute with the government-run Jalalabad Gas Transmission and Distribution Systems (JGTDS) over the price of natural gas for a captive power plant at its Chhatak cement plant. JGTDS has argued that the cement producer is paying less than the rate fixed by the country's energy regulator, according to the Financial Express newspaper. However, LafargeHolcim claims that it is paying a tariff set by a gas sales agreement (GSA) signed between JGTDSL and Lafarge Surma Cement in January 2003. The row has been referred to the Energy and Mineral Resources Division (EMRD) of the Ministry of Power, Energy and Mineral Resources for clarification.

Australia: Adelaide Brighton has signed new gas and electricity contracts in South Australia. It has entered into an agreement with Beach Energy for the supply of gas to its South Australian operations. It has also entered into an agreement with Infigen Energy for the supply of its electricity requirements to the Birkenhead and Angaston cement plants and Klein Point Quarry on the Yorke Peninsula in South Australia. The new agreements are intended to manage the company’s energy requirements and costs following a series of blackouts in the region.

The cement producer said that its energy strategy includes: a portfolio approach to energy supply and procurement benefits; consumption management and operational efficiency; the aim of obtaining 30% of energy supply from alternative fuels in the medium term; use of alternative cementitious materials in place of more energy intensive products; cost recovery through vertical integration and long term customer relationships; and financial strategies.

Tanzania: Nigeria’s Dangote Cement has struck a deal with the government-run Tanzania Petroleum Development Corporation (TPDC) to supply gas to its cement plant. Company chairman Aliko Dangote met with President John Magufuli on 10 December 2016 to negotiate the agreement, according to Reuters. The agreement follows a dispute between Dangote and the TPDC over the price of gas. Magufuli said that Dangote could now buy gas directly from TPDC. No price details were released. In late November 2016 Dangote’s representative in the country denied that a stoppage at its plant was related to high production costs.

Australia: Adelaide Brighton Cement has signed a sales agreement with Beach Energy to supply processed gas for one year from its Mooba processing plant. Supply of the gas is expected to start on 1 January 2017 and it will replace the previous deal that the companies had for raw gas.

Tanzania: Minister for Industries, Trade and Investments Charles Mwijage has confirmed that the government’s investment arrangement with Dangote Cement that were granted by former President Jakaya Kikwete's administration are still in place. He said that the government would do nothing to compromise Dangote Cement’s investment in the country and described its entry as a ‘game changer’ by reducing the price of cement, according to the Citizen newspaper. The comments were made in response to media speculation regarding a production shutdown at cement producer’s Mtwara plant.

Mwijage said that Dangote Cement could cut its production costs by using local coal or gas. The Tanzania Petroleum Development Corporation has been in negotiations since October 2016 to supply gas to the cement producer. He also added that another cement producer, Engro, is considering building a cement plant and that the government is willing to offer it the same incentives as those given to Dangote Cement.

Nigeria: Dangote Cement has switched to using coal at its cement plants in response to disruption to gas supplies and to lower input costs. The cement producer intends to use 12,000t/day of coal, according to Reuters. "All our cement plants have been converted to coal," said owner Aliko Dangote.

Oman: Raysut Cement has commissioned and completed a gas pressure reduction unit at its plant in Salalah. The upgrade will enable the plant to increase its production capacity to 140,000t/yr from 130,000t/yr. This is expected to increase the profitability of the company. The cost of the project was estimated at US$5.45m when it was first announced in December 2015.

Oman: Raysut Cement is upgrading its gas supply station at its Raysut plant in Salalah. The installation will let the unit receive an additional 40,000m³/day of gas for use as fuel to increase cement production to about 140,000t/yr.

Other on-going upgrades by the cement producer include the implementation of the parent company’s joint venture project with Barwaaqo Cement Company in Somaliland. At Duqm Port, construction has been completed on the company’s cement handling terminal, which is expected to formally begin commercial operations in the third quarter of 2016.

Civil works on a new packing plant, which features a 150t/hr rotary packing machine with auto truck loader, is underway. The facility is expected to be commissioned by the end of October 2016. Work on the installation of 12,000t capacity silos is also in progress at the company’s Pioneer Cement in the UAE. The new facility will be commissioned by the end of November 2016.