Sunday, September 12, 2010

Malaysia's Sarawak Dam May Be a White Elephant

The multibillion-dollar Bakun dam, deemed a catastrophe for the environment and tribal people, may be too costly to operate. The dam, located in Sarawak state, is finally nearing completion after a series of setbacks since its approval in 1993.

But there are still delays in getting the government’s permission to begin the flooding process and there is no deal yet to purchase its 2,400 megawatt output. With scrapped plans for an undersea cable to feed electricity to the Malaysian peninsula, the Sarawak government is the only feasible buyer — leaving it with a very strong hand. Aside from shouldering construction costs, developers need to compensate tribal people forced from their ancestral lands and suppliers affected by delays.

With indigenous people from the Bakun catchment area resettled and valuable timber resources felled, the dam has been ready to be flooded since April. But the state government has not given the go signal, saying it is still evaluating river levels and the impact on boat transport.

The next of Sarawak’s mega-dams, the Murum, which is being developed by the state government, is scheduled to be up and running by 2013. Alongside power purchase negotiations, the federal government was also said to be discussing selling the entire Bakun facility to the state government, but this was stalled due to pricing and finance problems. The Bakun dam project reportedly cost 7.3 billion ringgit ($2.4 billion) to build. It was reported in July that the federal government was seeking 8 billion ringgit, while the state government’s offer was only 6 billion ringgit.

The Bakun’s output far exceeds existing energy needs in Sarawak, a relatively undeveloped Malaysian state, and is destined for industrial users such as aluminium smelters, but these are still on the drawing board. The main problem is that there is currently no demand for such a big capacity yet, and in order for Sarawak Energy to purchase the dam, they would need adequate funding. As there is no real demand yet, this project risks becoming a white elephant.

Extract from an article by Sarah Stewart for Agence France-Presse

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