PENANG, Malaysia - Transnational aluminum
smelters, some teaming up with Malaysian partners,
are beating a path to Sarawak state with an eye to
surplus power from the problem-ridden Bakun Dam.
The much-delayed dam in Sarawak on Borneo
island was
originally scheduled for completion in
2003, but is now only expected to gradually
generate electricity from late 2009.
Faced
with soaring electricity tariffs and raw-material
costs, many aluminum plants have closed shop in
the United States and Europe. Major smelters are
now scouring the globe for places where
electricity is cheap, and their sights have
narrowed down on Bakun's excess potential even as
environmentalists worry about the impact that the
dam, and now the smelters, would have on the
environment.
In particular, smelters from
China, the world's largest aluminum user, have
been showing a keen interest in Bakun. Last year,
more than 40 smelters stopped production in China
because of higher costs and government moves to
curb pollution - resulting in a loss of more than
half a million tons of aluminum.
The
2,400-megawatt Bakun hydroelectric-dam project was
approved by the administration of former prime
minister Mahathir Mohamad in 1994, amid an outcry
that the dam would submerge rainforests covering
an area the size of Singapore and displace
thousands of indigenous people.
Planners
ambitiously aimed to channel 70% of the dam's
generated power across the South China Sea to
peninsular Malaysia by laying more than 600
kilometers of submarine cables. It would have been
the longest undersea transmission line in the
world and an expensive proposition.
Ekran,
a local firm, was awarded the contract to manage
the project, while the construction contract went
to the Zurich-based multinational Asea Brown
Boveri (ABB). But by 1997, with the onset of the
Asian financial crisis and amid disputes over cost
overruns, the government announced that it was
delaying the project and paid compensation to the
firms involved.
In 1999, it was announced
that the dam would be scaled down. The
submarine-cable idea, its technical feasibility
always in major doubt, was scrapped, but work on
the river-diversion tunnels began and have now
been completed.
In 2001, the government,
perhaps mindful of the work already done since
1996, decided to stick to the original 2,400MW
capacity. But without the undersea cables, the
economic justification for the dam - to channel
electricity to the more industrialized peninsula -
evaporated.
"It's utterly unnecessary,"
said one Sarawak-based political analyst of the
dam, declining to be identified for fear of
repercussions. "The only people who need the dam
are the Sarawak politicians and their cronies."
Moreover, he added, Sarawak has a wealth
of alternative energy resources such as natural
gas. According to the Bintulu Development
Authority, the state has a total known gas reserve
of about 50 trillion standard cubic feet.
On Bakun, the government faced a stark
choice: cut its losses - some RM2 billion (US$500
million) already spent - and prevent any further
environmental damage or pour more money - a
further RM5 billion to RM6 billion - into an
ever-deeper hole. It decided to press on.
The government, through an outfit called
Sarawak Hidro, took over the management of the
project. A Malaysia-China Hydro joint-venture
consortium, led by a Malaysian firm, Sime Darby
Berhad, is now constructing the dam. Already there
are reports of cost overruns and delays.
But what to do with all that surplus
electricity from the dam? After all, the
neighboring states of Sarawak and Sabah have
comfortable reserve margins. Electricity demand in
Sarawak remains modest (currently less than
1,000MW). Bakun's power could be distributed to
the rest of Borneo, which is politically divided
among Malaysia, Brunei and Indonesia.
Meanwhile, enter the giant multinationals,
teaming up with local firms, seeking approval to
build a smelter in Sarawak. The production of
aluminum requires a huge amount of electricity,
accounting for close to 40% of production costs,
which explains why many smelters are built near
major sources of electricity supply.
One
visitor to a popular local current-affairs blog
summed it up: "Bakun Dam is the solution to
Sarawak's power shortage. But they forgot Sarawak
has no power shortage. That's no problem to the
dam's promoters - just create a shortage by
building an aluminum plant. That way, they succeed
in finding a problem for the solution."
Even business weekly The Edge seemed to
agree: "In Sarawak, the main reason the federal
government is allowing an aluminum smelter is to
salvage Bakun." Among companies The Edge reported
as bidding for approval to build a smelter is
local firm Smelter Asia, teaming up with China
Aluminum International Engineering, which
reportedly wants to set up a
500,000-tonne-capacity plant that would consume
about half of Bakun's output.
Another
Malaysia-China consortium is seeking approval for
a $3.2 billion smelter. The local firms in this
consortium are Cahya Mata Sarawak (CMS) and Press
Metal.
Giant multinationals reportedly
also in the running are Australia-based Rio Tinto
Group, BHP Billiton teaming up with Mitsubishi
Corp, and the Alcoa Group.
Smelter Asia is
owned by tycoon Syed Mokhtar Al-Bukhary, who has
warm ties with former premier Mahathir. CMS, on
the other hand, is a well-connected group with
diversified interests in Sarawak led by Sulaiman
Abdul Taib, the son of powerful Sarawak Chief
Minister Taib Mahmud.
Critics point out
that one unit, CMS Cement, which is capable of
producing some 2 million tonnes a year, has a
near-monopoly on cement in Sarawak, while another,
CMS Steel, produces 300,000 tonnes of steel bars
and wire rods.
In 2004, the group
announced that CMS Energy had been awarded a 51%
stake in a contract worth RM130 million for
"design and execution of the hydraulic steel
structure package" of the dam. The group is thus
well placed to benefit from the dam's construction
work, which requires huge amounts of cement and
steel.
Apart from the questionable
justification for Bakun, environmentalists are
worried about the polluting effects of smelters.
Smelters emit perfluorocarbon (PFC), which is
detrimental to humans, animals and vegetation and
has global-warming potential.
"Communities
in the adjacent areas would be affected by its
polluting emissions once it is built," said Wong
Meng Chuo, a college lecturer and social activist
who spent many years working among communities in
Sarawak. "It is also of concern that the industry
would bring changes to the social structure as
well as to the cultural practices of the
community."
From experience, he said, such
changes are always more of a negative nature since
the community is often ill-prepared for them. The
smelter's impact on the natural environment "could
be devastating, especially in a developing country
like ours where law and enforcement [are] lax".
"I think it's a dirty industry," agreed
the political analyst who did not want to be
identified. "We don't need it in Sarawak at a time
when the environment has already been terribly
degraded through logging and the rivers polluted
through siltation and sedimentation."
