Dangote saves Sh5 billion by using gas in Tanzania

Mtwara. The use of natural gas in the 256 lorries of Dangote Cement Factory has saved about Sh5 billion that would have been spent on fuel procurement to facilitate transportation of its products since they were installed with a gas system from March, last year, to June, this year.

According to an analysis by The Citizen, based on the trend of oil prices, travel time and gas volume per a lorry, the factory would have spent more than Sh11 billion on fuel purchases, but the company’s management says gas has saved 45 percent of its fuel budget for the lorries.

Apart from the use of gas in the lorries, the factory also uses a gas system for the operation of cement production plants and generates 750 watts, which comes from 10 percent of the pressure of 16 gas bars it buys from the Madimba Gas Processing Plant in Mtwara Region.

However, as the factory gets benefits, the government, which is in charge of the projects, has admitted that it has not yet started using the gas, despite owning 15,742 vehicles, 14,047 motorcycles and 373 plants as Speaker Dr Tulia Ackson ordered government vehicles to be switched off when parked to cut fuel spending. Clarifying, the manager of the Gas Processing plant at the factory Francis Simon said the use of natural gas saves 45 percent of fuel costs, which prompted the imports of other 150 lorries fitted with the system.

The move reflects the 2016 Natural Gas Price Regulations that show the use of such gas in vehicles, factories and homes saves approximately 40 percent of the revenue that would have been spent on fuel energy. This is equivalent to reducing Sh40 in Sh100 spent.

“The benefits are huge, we plan this year to bring other 150 vehicles and build a gas filling station in Dar es Salaam so that when a vehicle runs out of gas it fills up there on the way back to the factory (Mtwara),” Mr Simon told reporters last week during their visit to the factory under the Petroleum Upstream Regulatory Authority (Pura).

When asked if they could advise the government to see the importance of using gas in vehicles as an alternative, the Executive Director of the Tanzania Petroleum Development Corporation (TPDC), Dr James Mataragio, said: “Of course, that is why we have been building Compressed Natural Gas (CNG) filling stations.” The government’s main budget for the year 2022/23 shows that the government spends Sh558 billion for the procurement of vehicles, operational fuel and spare parts per year while planning to sell the vehicles to some employees, a move that will save the spending of Sh500 billion.

Aggrey Jimmy, Dar es Salaam Zone Sales Manager, said gas has managed to reduce production costs, but added that the challenge of rising diesel fuel prices has hampered plans to fulfil its promise of lowering the price of a cement bag to Sh8,000.

He said the factory contributes between 27 and 30 percent of the total cement market in the country while facing a huge price competition in its markets in northern, southern and Dar es Salaam zones.

“Gas has reduced almost half the price of fuels, but we still have about 70 percent of the vehicles we rent out for industrial activities that use fuels. So, production costs are still affected by fuels, but gas is the hope of lowering prices,” said Jimmy.

Isihaka Mchinjita, spokesperson for the energy sector at the ACT Wazalendo party, said the government is supposed to be at the forefront of convincing Tanzanians and industries to use gas in their vehicles.

According to a report on the 2016-2045 Tanzania Comprehensive Natural Gas Use, 8.8 trillion cubic feet of gas is expected to be used for electricity, 0.5 trillion cubic feet to be used in households, and 3.6 trillion cubic feet to be used in industries and 0.6 trillion cubic feet to be used in vehicles.