Solgas Brings Another $Billion or so Change to Nigerian Steel Project

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Nigeria's national steel plant is still a work in progress after three decades of dithering, corruption, and fine intentions, with around $10 billion having been poured into the bottomless furnace over the years.

The latest development announced by the Nigerian government is a decision wrapped in a controversy. An agreement has been signed for a $1.04 billion joint venture and project financing agreement with the, Solgas Energy Consortium (billed in statements as a US company), for the rehabilitation, operation and commissioning of the nation's steel plant, the Ajaokutan Steel Company.

Under the agreement the Nigerian government will create a lien in favor of the US company. The total amount of funds to be spent on the project and a guarantee of Solgas's investment in the steel plant will be covered by the lien. In the period before the signing of the agreement Solgas had expressed dissatisfaction over government delays in signing the joint venture agreement. Solgas Petroleum is a Nigerian registered company, and the provenance of the project cash is not clear. Some of the firms engaged in various past phases of the project could be part of the consortium.

The major part of the money that the US company plans to invest is coming from a foreign loan to be guaranteed by the government. Solgas will get a 35% interest in the plant if the deal works and the projected 1.5 million tons of molten steel is pouring annually by 2005. Solgas is expected to execute civil engineering works, provide needed equipment, and facilities to operate the project, which is now claimed to be 95% complete.

Solgas is the latest in a list of companies that have involvement with Ajaokuta. These include Tyajprom Export of Russia, ASCL and Ferrostal from Germany and concurrently with Solgas, Kobe Steel from Japan. Last year the World Bank advised the Nigerian government to discontinue the project, which was claimed to be 80% complete at that stage.

Viewing the 2005 date with some derision critics of the new deal include employees of ACSL who insist that Solgas's efforts should, more appropriately, be channeled to the energy sector of the economy. The workers have also urged the government to disregard the recent advertisement by the Bureau of Public Enterprise, which invited expressions of interest in the sale and privatization of the steel company. They are also critical of the Solgas/Kobe Steel plan to use fasmelt technology which they claim is unproven as against blast furnace technology as used by 70% to 80% of world steel makers. Kobe claims its input will put an extra 500,000 tons into annual production. The workers have called for the Russians, who originally handled the construction of the project, to be recalled to rehabilitate and operate the project.

The iron and steel staff association of Nigeria (ISSSAN) has made strong criticisms of the profligate debacle of Ajaokuta over the years and the group supports the main elements of the workers standpoint. In particular they state that the Solgas/Kobe decision must have been taken in error.

Meanwhile the government soldiered, or lurched, onwards with an optimistic announcement on future resumption of full-scale production at the plant. The ministry of power and steel has 'disclosed' that the government has totally revamped the steel sector with production resuming for the first time in ten years.

At the same time the ministry said the national electric power authority (NEPA) now has a combined generation capacity of 4,000 MW, up from 1,425 MW in 1999. They stated that the increase in power output has not really been felt because with NEPA's improved performance demand has now grown to 10,000 MW. This figure is deemed to be conservative for Africa's most populous country.

Let the games and the battle continue. Hopefully Nigeria may have a successfully operating steelworks by mid-decade. If you can't stand the heat get out of furnace range.