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Foundry Daily News

06. March 2008

The Essar project needs open dialogue

Source: Trinidad & Tobago Express

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!!!

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