A Review of the Nigerian Energy Industry

Controversy trails $15bn Egina oil field project

Roseline Okere

03 December 2012, Guardian, Lagos – THE $15 billion (N2.4 trillion) offshore Egina oil field project, may have run into a fresh controversy, threatening prospects of additional 150,000 barrels of crude oil per day to the national output, to further compromise the nation’s production profile, which was recently assailed by serial flooding in the Niger Delta region.

Indeed, from indications within the Nigerian National Petroleum Corporation (NNPC) and Total Upstream Nigeria Limited, approval for the commencement of production in the oil field may have hit the brickwall.

The deadlock may have been further fuelled by management changes within the NNPC Group, with the appointment of Andrew Yakubu as Group Managing Director and Abiye Membere as the helmsman of Exploration and Production Division of the oil giant.

Already, the bid validity for the Egina oil field project had expired on November 9, even though an extension of the offers’ validity was pushed to December 31.

It was gathered that despite the fact that the bid had gone through due process within a two-year period during which Total collaborated with National Investment Management Services (NAPIMS) to put out calls for tender, NNPC has refused to move the project forward, insisting on further reduction of the cost of the project.

The Guardian learnt that the Egina field development plan was actually approved by NAPIMS and the Department of Petroleum Resources on the October 10, 2008 and  March 4, 2009, and that the tender went through the NNPC three tier tendering process of pre-qualification, technical and commercial evaluation with the active participation of NAPIMS, Nigeria Content Development Management Board (NCDMB) and Total representatives.

Checks also revealed that Yakubu had signed off on the relevant documents for the Egina oil field project plan to be taken to the NNPC Group Executive Council, when he was the Group General Manager in charge of NAPIMS.

Some analysts who spoke on condition of anonymity wondered why NNPC was not bothered about the progress of the project, which would have added 150,000 barrels of oil per day to the country’s production.

Also, it was gathered that Membere met the project already wrapped up and ready for review at the group executive council of the corporation, but, insisted on alternative reviews, by inviting contractors independently to renegotiate figures on items that had gone through the rigorous NNPC three tier tender processes, with them.

In a letter dated November 15, addressed to the Managing Director of Total Upstream Nigeria Limited, and signed by M.A Fidi, the Group General Manager of NAPIMS, requested that in line with discussion at a meeting with Membere, Total should invite the remaining bidders on the Egina Floating Production, Storage and Offloading (FPSO) package for negotiations aimed at further reducing the cost of the FPSO package.

Membere told The Guardian Sunday, that the current cost of the project, which Total offered for the project, was too high, adding that the Federal Government would be running at a loss, if it accepts such offer.

According to him, the corporation had given Total some time to make up its mind concerning reducing the cost per barrel of oil, or else, it would be forced to invite other bidders for negotiation.

He assured that any company that wins the bid at the end of the negotiation would have all the technical know how to handle the project.

However, in a response, Total noted that the estimated final cost of the Egina FPSO contract with the recommended bidder is in line with the market price, “as extensively presented to both NAPIMS and the NNPC”.

The company noted that “any intention of reducing the value of the FPSO contract by re-launching an invitation to both remaining bidders would have a negative impact on the Egina project schedule and most likely the Egina project costs due to the additional request of extension to all the on-going bids for the Egina facilities and drilling contract.

“And in addition to a disruption of the call for tender process, it will disturb the good execution of the FPSO contract which most likely would result to an increase of the final value of such contract”.

If approved by the Nigerian National Petroleum Corporation (NNPC), it is anticipated that thousands of engineering and fabrication jobs will be created locally both in the pre-construction and construction phases, there will be massive inflow of capital and significant growth recorded in installed capacity, among several other quick wins for Nigeria content development.

*This piece was culled from the Guardian newspapers.

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  • The Nigerian government must note that promotion of Nigerian content can only happen when projects get moving. 100% of zero is zero. Nigerian content cannot happen without projects.