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Ajaokuta Steel faces major obstacle due to NNPC pipeline
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Thursday, 22 Nov 2012

Daily Times Nigeria reported that an oil pipeline belonging to the Nigeria National Petroleum Corporation that passes through the Escravos River in Warri, Delta State, is the major obstacle militating against the operations of the Ajaokuta Steel Company located in Kogi State.

Ajaokuta Steel Company is the largest integrated steel company in West Africa; and has cost the federal government an estimated USD 7 billion since it was commissioned by the Shehu Shagari government in 1979.

In an exclusive interview with a former top management officer of the company, who did not want his name published, it was gathered that successive ministers and other top officials of the Ministry of Mines and Steel Development have preferred to ignore this issue in order to be assured of the regular government funding that has continued to flow into making the company work.

A most recent example of this, according to our source, is the Interim Management Committee set up by the federal government in 2008 after then President Mr Umaru Yar'Adua terminated the contract between Nigeria and Global Infrastructures Nigeria Limited, owned by a member of the Mittal family of India. When the 14 member IMC was set up, government gave said it would stay for six months to oversee the affairs of the company; pending when a proper management team would be appointed. Instead of six months, the committee stayed in Ajaokuta for four years and five months until it was disbanded just a few days ago.

While the committee lasted, it failed to put back the company into productive use in spite of claims that they have the capacity to do so. For the 53 months that they stayed in Ajaokuta, the committee members spent NGN 15.9 billion in salaries of workers alone. The current wage bill of Ajaokuta Steel stands at NGN 300 million monthly. This is outside other monies spent on overhead. Until today, the company is yet to become productive.

Sources said that "Ajaokuta Steel Company was designed to use the blast furnace technology. The company's blast furnace is the biggest in Africa. The technology uses coking coal and other raw materials to produce billet. Producing billets in large quantity is what distinguished it from other technologies, and the plant was 98% ready before it was discovered that the NNPC pipeline in Escravos would pose a major challenge. Efforts to get the pipeline off the neck of the system at that initial stage failed. When that happened, the management then resorted to finding whatever means to get billet from anywhere in order to use them to roll out steel so that government and the nation would say that the plant is working. And that is what has been going on. The coking coal was to be imported from either Brazil or any other country where you have it in commercial quantities. When you bring it in, the system was designed in such a way that the consignment comes from Warri through the Escravos River down to the Delta Jetty, located close to Delta Steel Aladja, from where the material would then be taken to Ajaokuta through the railway. Because of the NNPC pipeline, mother ships cannot birth at Warri Port and you need mother ships to bring in the coking coal. That is what has stalled the whole process these past 25 years."

On what should be done to solve the problem, source said the NNPC pipelines must be completed relocated or lowered deeper into the water to make way for mother ships to pass and birth at the ports, insisting that the company can never function no matter who it was given to.

According to him, the Escravos problem was one of the reasons the Indian company could not fulfill its obligations, leading to the termination of their contract. He said that "The contract between the federal government and GINL on Ajaokuta contains a clause that gave some obligations to the federal government as condition leading to the success of the deal. One of the obligations of government was to dredge the Escravos and remove the NNPC pipelines. Government did not fulfill its own obligations but went round to terminate the agreement. That is why GINL went to the international arbitration court in London claiming billions of Naira against the government."

Confirming this development, a source at the Ministry of Mines and Steel Development agreed that the NNPC pipeline at the Excravos is a major obstacle and must be removed before Ajaokuta can work.

He said that "Escravos is shallow; we cannot bring in mother vessels because of the pipeline. The ministry had at a time requested for the lowering or relocation of the pipeline but NNPC said they cannot because it would disrupt crude oil flow. The NNPC does not see steel as an important issue that should warrant such disruption."

This pipeline has also been identified as a major obstacle to maritime operations in the country as it contributes to the congestion at the Lagos ports. According to the former Ajaokuta Steel manager, the pipeline is causing more harm than good to the nation's economy. He said that "Do you know that it is because of the pipeline that the Warri Port, which is larger than the ones in Lagos, is not functional? Every day, an average of 150 ships birth at Lagos ports and stay for days before being cleared. If the pipeline is removed or lowered, mother ships would begin to birth at both Warri Port and Delta Jetty which would reduce the congestion in Lagos ports and therefore positively affect business in the country because more ships will come into the country with increased revenue to the nation."

Source - Daily Times Nigeria


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