ALSCON: BRAVING THE SCOURGE OF GAS PIPELINE VANDALISM
By Hugo Odiogor
When the Aluminium smelter company came on stream in early 1990, Nigerians were optimistic the country's requirement in the consumption of its product and creation of employment for the citizens would make the project a worthy addition to the overall effort to reduce the gap in inequality as well as advance the process of economic growth and development.
The presence of high quality gas at relatively cheap cost in the Niger-Delta region of Nigeria propelled the Federal Government in the early 80s to explore ways that the resource could be exploited to create jobs, stimulate the local economy and earn foreign exchange for the country through export.
The philosophy of setting up the company in Ikot Abasi was welcome as the country was already setting up steel complexes in Ajaokuta and Aladja. The steady process of industrialisation imbued hope in Nigerians especially as the high cost of energy had forced many global aluminium firms in Europe and America to relocate their smelters to Third World countries where the cost of energy was relatively cheap.
German company, Ferrostal AG was a major partner in the turnkey project which included other foreign companies notably from America. By early 80s, the negative impact of gas flaring on the oil-bearing communities in Nigeria and other less developed countries and the issue of global warming had begun to draw serious global attention from environmental activists and governments and the government began to think about economic use of the gas resource.
Aluminium production is an energy-intensive business. Energy constitutes 30% of the production cost. Indeed, cheap, sustainable source of energy is a vital requirement for an aluminium plant to be competitive. Thus, the relatively cheap and sustainable source of gas among other benefits was the key consideration for the establishment of the smelter. This also informed ALSCON's corporate pay-off: 'Turning waste (flared gas) to wealth.'
The decay and rot
The much expected gains of the Aluminium Smelter Company suffered a setback by a combination of factors ranging from political intervention to the changing global environment and political instability in Nigeria took its toll on the young company and it did not take long before the company became idle.
From June 1999 to 2007, the smelter was privatised. Before its operations were suspended in 1999, only 75% of the facilities in the plant were completed and only 216 out of 432 pots were completed.
Equipment in the company were maintained but they did not meet operational specifications and as would be expected, some technology and equipment were out of date. There was loss of skills base as some members of staff were forced to leave as a result of suspension of production.
Resuscitation of ALSCON
Production began in earnest in February 2008; one year after the Russian Aluminium Smelter, RUSAL, took over the plant in Ikot Abasi, but not without the following challenges. First it must be said that Aluminium smelting requires massive power: Most smelters utilise hydro power (MOSAL in Mozambique, VALCO in Ghana, and Scandinavian smelters.)
The production process requires constant, regular power: 365/27 or the plant could face a serious catastrophe. In fact, the consequences of power failure include the caking of molten metal which solidifies and could result in massive financial loss, particularly loss of raw materials, high cost of repairs and loss of man-hours
Dr. Albert Dyabin who is in charge of Government Relations said: 'Aluminium production process is unique in many ways unlike other production processes. You cannot switch off the pots except when one or a few pots are isolated for maintenance purposes.'
The challenges of gas disruptions
One of the major challenges that ALSCON has faced is the disruption of its operations arising from the act of pipeline vandalism, especially by young people in the host communities. Thus, ALSCON smelter has survived six gas disruptions resulting often in complete shutdown of the production system. Loss of 233 pots which is about 50% of the total production capacity has resulted in significant financial losses.
Lost production/income + raw materials+ loss in man-hours.
Each time there is disruption of gas supply, the company has to put together a detailed remedial work plan. This involves total excavation of the hardened molten aluminium in each of pots with the use of powerful jack hammer (a very costly and energy-sapping work.
ALSCON on the Nigerian economy
But Dr. Dyabin said: 'Despite these huge challenges, the smelter has continued to produce metal and has been exporting since 2008 while sales to the domestic market began later.' Since Rusal took over the company, it has initiated modernisation programme.
It commenced international sales in May 2008 and commenced domestic sales later - thus boosting the national economy through direct sales to local firms such as Qualitex Aluminium, First Aluminium and Tower Aluminium. Through both local and international sales, the nation's smelter complements efforts by government to generate and conserve foreign exchange.
The resuscitation of ALSCON by RUSAL offers a rare regional strategic business model -the establishment of a full production cycle from raw material to aluminum - all within the West African sub-region thus promoting ECOWAS' long-held dream of economic integration among West African states.
Within this cycle, ALSCON processes alumina refined from the bauxite deposits of Guinea into aluminium ingots thus ensuring that transportation and logistics costs associated with imported products are reduced to the minimum level.
By providing quality aluminium to local manufacturers, ALSCON helps to reduce the nation's dependency on more expensive imported metal and this also helps to reduce the price of finished products for consumers. Over 42,000 tons of ingots are produced despite persistent disruptions in gas supply. Dyabin said there is 'no need to import aluminium ingots into the country anymore.'
Despite the persistent gas supply disruptions since 2007, the company has made some appreciable impact on the immediate local community, the host state, Akwa Ibom and the nation.
RUSAL took over a caretaker staff of 357, now staff numbers have increased to 730.
Majority of the staff are from Akwa Ibom State. One thousand workers are employed by service providers as a result of ALSCON activities. The Export Processing status granted to the company is expected to attract more investors into the region to create more jobs for the people and help reduce the high level of unemployment in the country.
Corporate Social Responsibility
Power Generation: In September 2007, 5 MW of power was released to PHCN for distribution to Ikot Abasi urban and the community has enjoyed reliable electricity since then. This has improved the living conditions of the people in the community and improved services provided by local hospitals, banks and small businesses etc. It has enabled local businesses to reduce operating costs and plan activities effectively.
Investment in Education: ALSCON is committed to investing in the future generation of people to help ensure that the future management of ALSCON is predominantly in the hands of the local people.
Dyabin said despite projects executed for the community, some unscrupulous youths in the community have continued to threaten the corporate operations of the company through vandalising the pipelines conveying gas to the plants.
'We live a nightmare every day because each time the pipelines are vandalised, and aluminium pots with molten products cake, it takes so much human effort to physically break the caked molten aluminium, families are thrown into uncertainty and the social and economic life in the community comes to a halt, our supplies to local and international customers are disrupted, in fact, this is a major act of sabotage.
We want to appeal to the traditional rulers, religious organisations youth leaders in the state and those in the diaspora to educate these bad eggs. If you destroy your own property, no outsider will sympathise with you because there are so many communities that are not as fortunate as Ikot Abasi, We must thank Governor Godswill Akpabio for being so supportive and sympathetic to our plight, we want to move Akwa Ibom State to the next level in industrial development, that is the way to create wealth and reduce poverty, this is a collective commitment of all men and women who wish Akwa Ibom State well.'