Considering the importance of energy in the cement production process, Dangote Group is nursing the idea of buying over the onshore oil fields to be auctioned by the International Oil Companies (IOCs) in Nigeria.
According to its Group Executive Director and CEO, Dangote Cement Plc, Devakumar Edwin, who disclosed this to a foreign wire service in Lagos, the conglomerate is seriously thinking of investing in oil blocks both for gas and for oil.
“We’ve started talking with some companies who are divesting from onshore,” he said, declining to name them. The company also needs energy for its cement plants in the country, he said.
Among the IOCs that are planning to sell their onshore and shallow-water fields in the country amid persistent violence and crude oil theft include Shell, Chevron and San Ramon with smaller Nigerian companies taking their place.
Dangote “will require feed stock for the refinery,” Pabina Yinkere, the head of research at Lagos-based Vetiva Capital Management Ltd. also told the wire service via e-mail Tuesday. With its “aspirations of becoming a global cement name and the importance of energy in the cement production process, this could serve as a complement in the long run,” he said.
Dangote Group believes it can manage unrest and aggrieved communities in the region with corporate social initiatives, Edwin said.
“We know the terrain much better, we know the risks and we believe the risks can be managed,” he said. “The primary risk is people blasting your pipelines. I wouldn’t like to go and invest in a block, which is totally inland and then I have to start buying inland pipelines.”
Dangote’s complex will include a 400,000-barrel-a-day refinery, a 2.8 million-metric-ton urea plant and a petrochemical factory to produce polypropylene used to make plastics. The company plans to expand the refinery capacity by another 100,000 barrels, Edwin said.
Dangote Cement, the continent’s biggest producer of the building material and Nigeria’s largest company, is looking at expanding in three South American countries and has signed a preliminary joint-venture agreement with one company, according to Edwin, who is also the chief executive officer of the cement business.
“The countries we’re looking at have huge natural resources and growth,” said Edwin, declining to name the nations so as not to alert competitors. “There are many large players in that region” that “may easily try to shut down entry to new players but there’s still large scope of doing business,” he said.
Dangote Cement, with a market capitalisation of N3.9 trillion has three plants in Nigeria and plans to expand in 13 other African countries, bringing total capacity to more than 50 million tons by 2016. The company is also expanding in Asia and has signed limestone minning rights in Indonesia and Nepal, Edwin said.
Dangote will delay a planned listing of its cement company’s shares on the London Stock Exchange until at least next year when plants in countries including Cameroon, Senegal, Sierra Leone and Zambia are commissioned, Edwin said.