Yes, two Chinese companies, China Gezhouba Group Corporation (CGGC) and China Geo-Engineering Corporation (CGC), signed a contract to construct the dam. But the expected China Eximbank financing was never finalized. The Mambila dam fell victim to the review of President Obasanjo's murky "oil-for-infrastructure" deals ordered by his successor, the late President Yar'Adua, in October 2007. This was nicely detailed in an August 2009 Chatham House report, Thirst for Oil. The Chinese companies have a contract, but without secure financing, the project will not go forward.
As opposed to hydropower dams, which use a renewable resource, but are controversial for their environmental and social disruption, gas power plants use a natural resource that Nigeria has in abundance, yet is currently wasting in useless flares (see photos above and below, courtesy of BBC). Each site was projected to reach 1000+MW over time. For the first phase of 335MW, as former president Obasanjo recounted in "My Power Plant Story" (May 12, 2008):
We had to seek loan from China at concessionary rate to support two of the sites ... Omotosho and Papalanto [Olorunsogo] were built to the point of commission before I left government in May 2007. As at today, Papalanto [Olorunsogo], Omotosho ... are generating power for the grid.Nigeria Compass by lead reporter Charles Okonji:
- China National Machinery and Equipment Company (CMEC), the major state-owned firm which had completed the first phase, was awarded the EPC (Engineering, Procurement, and Construction) contract for Phase II of the Omotosho plant, for 750MW of additional thermal power.
- Shandong No. 3 Electric Power Construction Corporation (SEPCO III), the smaller Chinese firm that built the first phase of Papalanto, was also awarded the contract for the second phase of 750MW at Papalanto [Olorunsogo].
The financing for the second stage of Papalanto/Olorunsogo could also have been from China Eximbank. Building Bridges, a 2009 report* on Chinese infrastructure projects in Africa done by researchers at the World Bank, states (p. 26) that $300 million (or, on p. 57, $298 million) of the financing for Papalanto was secured from China Eximbank with a deal for China National Petroleum Company (CNPC) to purchase 30,000 barrels of oil per day from Nigeria's national oil company. Given that the first phase of Papalanto was financed in 2002 at $114 mil and that the first phase, at 335MW was less than half the size of the second phase, at 750MW, this financing of $298 or $300 million seems certain to be for Phase II. Would be interesting to know more about this oil-backed infrastructure deal. I haven't seen another hint of it anywhere. Has anyone else?
Ironically, despite their ongoing expansion, the Omotosho and Papalanto plants (first phase) were both operating well below capacity in 2009 ... due to inadequate gas supplies. A resource Nigeria has in abundance continues to burn across the Niger Delta, and Nigerians continue to experience famously "epileptic" power supplies. Perhaps it's time to reconsider the finance for Mambila?
*The 2009 report is confusing because it does not mention that the two power plants were constructed in two stages, with the first phase (2002-2007) financed by China. Yet it states that the size of the two stations will be 335MW, (actually the size for the first stage only). The second stage was for an additional 750 MW, although this was apparently scaled back to 500MW at Omotosho. The report also said that China Eximbank was financing the construction of the power plant at Geregu (built by the German company Siemens). This is highly unlikely, given that the purpose of China Eximbank is to finance exports from China, not Germany. Since the Building Bridges study provides no documentation for their information, it is hard to double check their sources.
It's quite obvious yet mysterious to me that President Yar'Adua seemed don't like to do business with China. From CNOOC's offshore oil concession bid, to $7b railway rehab project, to this hydropower project, all initiated by President Obasanjo but encounter problem after President Yar'Adua took power. The lesson to China on doing business is that,to rely too heavily on personal relationship (Guanxi) has its drawbacks. Would be interesting to watch the election in Zambia next year, while opposition leader Michael Sata threated to cut ties from China.
Because of financial and political spoils, signing a contract for a big infrastructure project is more attractive than actually building and operating it. This is one reason why so many deals are announced but then never materialize. I posted a post on Mambilla and corruption on my blog two years ago. An excerpt is below. You can read the full blog at www.internationalrivers.org/en/node/2588
Excerpt from Money for Nothing (Or How Corruption Fuels Dam Building in Nigeria)
Lahmeyer was supposed to carry out its Mambilla contract within 15 months, and collected $3.2 million for it. Yet nothing happened on the ground. The company only set up a bungalow near the future dam site, to create the appearance of project activities. The parliamentary committee which is investigating the matter claims that Lahmeyer has never even visited the project site, and asked the company to refund the money it received. (…)
Approving new projects is so lucrative that powerful politicians try to reserve decision-making powers for themselves. Under President Obasanjo, the technical experts of the energy ministry were kept out of the loop on new power plants. All decisions were taken by a committee which included the President and several influential ministers and state governors. Many contracts were awarded without competitive bidding. Some contracts were awarded to companies headed by former presidents and other powerful figures, and $50 million was paid to companies which did not even exist.
In the case of Mambilla, an earlier president had already awarded construction contracts in 1982, but nothing happened on the ground. The large project was so attractive that President Obasanjo created and chaired a special committee on Mambilla a few weeks before the end of his tenure. The President handed a new contract to China Gezhouba Group Corporation, the main builder of China’s Three Gorges Dam. The only other thing which has so far happened was a ground-breaking ceremony to inaugurate the project – the kind of ribbon-cutting event that publicity seeking politicians love.
This is fascinating, Peter. I remember your discussion of Mambilla. This makes a great deal of sense to me. I think the problems in Nigeria are not so much that Yar'Adua didn't like to do business with China, as much other business continued. The problem, I think, was with the murky oil-for-infrastructure set up. It could work, but it clearly didn't. Again, the Chatham House report details all of this in a very interesting way.
DB, why oil-for-infrastructure wouldn't work in Nigeria if it worked in other African countries? You know Sudan's Merowe dam has been inaugurated, Angola's railway is being rehabilitated, and DR Congo is also in hope of following this successful path. Is it something special in Nigeria?
I recently came across your blog and have been reading along. I thought I would leave my first comment. I dont know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.
It seems the wind turns again.
A major step in the nation's quest for self reliance in petroleum and associated products production was taken yesterday when the Nigerian National Petroleum Corporation (NNPC) and China State Construction Engineering Corporation Limited (CSCEC) signed an agreement for the joint sourcing of funds for the construction of three Greenfield refineries and a petrochemical plant estimated to cost $28.5 billion.
Pretty interesting comments! I wonder if there is a follow up and update..?
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