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Nigeria’s NatGas Shortages Increase Coal Demand

Power plant

Natural gas shortages and a desire to lower costs have led to a decision by Dangote Concrete in Nigeria to switch from natural gas to power its operations with less popular coal.

Majority owner and chairman Aliko Dangote stated that all of its cement plants have been converted to coal, and that those plants would use approximately 13,000 tons of coal per day.

The shift toward coal and away from cleaner natural gas is unusual because in April of this year, the use of coal for generating power in the United States dropped to its lowest level since 1978. But while gas in the U.S. has eclipsed coal in terms of power generation, Nigeria is facing shortages and interruptions in its natural gas supplies due at least in part to militant activity in the nation that has targeted oil and natural production and distribution.

Dangote is the largest cement producer on the African continent, and produces just over 48 million tons per year. By 2019, the company hopes to produce between 81 and 84 million tons annually, and by 2020, its hopes are higher at 110 million tons per year. Dangote has spent over $5 billion dollars in recent years to expand its reach beyond its home market.

According to Dangote, the country of Nigeria has become a cement exporter and generates $1.25 billion in sales. Dangote compares that figure to the $2.5 billion in costs the country would have incurred for the product before regulations on the cement sector were eased 14 years ago.

The Dangote Group also announced this week that it is planning to make an investment of $20 billion in “downstream petrochemical and backward integration in agriculture.” The multi-faceted effort will include projects such as fertilizer, gas pipeline, and backward integration in sugar and rice production. Aliko Dangote said that these latest efforts would create over 250,000 jobs.

Other benefits, according to Dangote, will include a diversified economy and foreign exchange earnings.

Lincoln Brown for Oilprice.com

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