The
Essar project needs open dialogue
PORT SPAIN
Petroleumworldtt.com
03 09 08
Essar Iron and Steel Plant is moving full speed
ahead towards fulfilling its construction milestone
of having its four million tonnes steel plant ready
by late 2009. And it is ploughing ahead against
a murky backdrop of stoic support from the Government
and utter disdain and abomination from citizens.
Narayan Govindaswami, the Essar Group's steel
mill project manager, admitted that of the four
countries- Trinidad, Venezuela, Bolivia and Brazil-
that the Essar Group was looking at setting up
a steel mill, Trinidad was the most attractive.
Government enticed the Indian steel conglomerate
with a red carpet invitation to Trinidad to set
up a US$1.7 billion steel plant on 200 hectares
of Caroni land.
The key and most vital feature of that attraction
may have been the price of natural gas that the
Government had proposed to Essar.
Essar targets annual production of 4.5 million
tonnes pellets, three million tones HBI and 2.5
million tones hot rolled coils. In addition it
proposes to make flat steel available to local
industries. Essar is expected to use some 140 mmscfd
of natural gas. The pricing formula in the gas
supply contract is reported to have been a source
of tension between the Government and the NGC.
It is understood that original gas proposals put
forward by NGC could not find favour with Essar
who enlisted the Government's help in securing
softer gas pricing terms that are at odds with
NGC's.
It
is not the first time that Government has bent
over to support a steel project by lower gas prices.
Ispat was granted price concession to develop its
Mega Mod plant in the late 1990s. The famous Nucor,
in its first incarnation in T&T was granted
a special low price on the grounds that it was
seeking to commercialize new technology. True enough
Nucor folded after a few years of production. Both
Government's obsession with a steel mill is even
more disturbing than its quest for aluminum. There
is every indication that these projects might fail
to make the NGC market clearing price and the state
company is asked to bear additional risks.
Readers need to understand that NGC does not possess
its own gas
supply.
It purchases fixed volumes of natural gas from
the major suppliers- bpTT, BGT&T,
and EOG Resources- through long-term Take or Pay
contracts. These volumes of gas are then sold to
the downstream manufacturers at negotiated pricing
formulae to ensure that the state company obtains
a reasonable return on its commercial venture.
The fact that NGC continues to make substantial
profits means that the state flagship is actually
cross subsidising foreign capital and undermining
its own long-term viability. This has serious adverse
ramifications whenever there is a downturn in the
other profitable aspects on its business.
Besides offering subsidised gas, Government is
also constructing through the National Energy Corporation
(NEC)- a subsidiary of NGC-a new port and pier
facilities for some US$160 million for Essar and
other users. The imminent destruction of the mangrove-the
habitat of marine menagerie- is of obvious concern
to the fisher folk; and to underscore the contempt
and indifference to the humble villagers?
The
major and baffling question is whose interest
is the Government seeking? Why has the Government
rejected apparent sound commercial principles to
embrace and entice a foreign conglomerate to erect
its steel plant here in T&T.
The
Prime Minister says that the plant is a crucial
part of Government's plan to make this country
an industrialised nation and that Government wants
to ensure an adequate supply of steel to the local
market for the creation of a foundry industry in
T&T. If that is the case, we need to ask why
it has not happened before. What are we doing with
Essar that is going to be different from what we
did with Ispat? How much are we willing to sacrifice?
Does industrialization have to mean subsidized
gas prices to foreign entrepreneurs, increased
health risk to the population, wanton destruction
of forests and fauna, irrefutable decimation of
wildlife and fishing?
The
perplexing dichotomy is that Government is prepared
to dole out its limited reserves of gas
towards its industrialisation thrust and yet professes
to understand the salient issues of climate change
and global warming. The Prime Minister's own recognition
after attending the Commonwealth Heads of Government
Summit in Uganda last year is noteworthy. He implied
that T&T was guilty of putting a lot of carbon
oxides or greenhouse gases that caused the global
warming effect and was mindful of the heavy penalties
the country could face under the Kyoto Protocol
under developed country status. He stressed that
the country did make a commitment and will take
whatever action needs to be taken.
The environmentalists, villagers, fisherfolk,
students and increasing number of citizens agree
that action should be taken. But there continues
to be a gap between the desire for rapid industrialisation
and the need to preserve the environment. An Essar
steel plant will provide us with additional steel
for export and some employment. At the same time
it will aggravate the emission of carbon oxides
and will inflict damage to the population, the
marine landscape and its natural habitat. The situation
cries out for open dialogue which is just not happening.
At the end of the day, the big loser will be Trinidad
and Tobago!!!
Story
by Energy Correspondent from Business Express
-energyczartt@yahoo.com
The
Trinidad Express
Wednesday, March 5th 2008
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