Nigeria set to lose $15bn Egina project investmentTuesday, December 4th, 2012
04 December 2012, Sweetcrude, Houston - INDICATIONS are that Nigeria may lose the $15 billion Egina project investment being promoted by Total Upstream Nigeria Limited, TUNL, owing to the inability of the management of the Nigeria National Petroleum Corporation, NNPC, to approve the investment plan.
If approved by the NNPC management, 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 Nigerian content development.
It was gathered that the bids validity for the Egina project had expired on November 9th this year and that an extension of the offers’ validity was pushed to the 31st of December, 2012.
However, even though the bids had gone through due process within a 2 year period during which Total collaborated with NAPIMS to put out calls for tender, the current NNPC management has refused to move the project forward, insisting on further reduction of the cost of the project.
Checks revealed that the Egina field development plan was actually approved by NAPIMS and the Department of Petroleum Resources on the 10th October 2008 and 4th March 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, NCDMB and Total representatives.
The current group managing director of the NNPC, Andrew Yakubu had signed off on the relevant documents for the Egina project plan to be taken to the NNPC Group Executive Council, GEC, when he was the Group General Manager in charge of NAPIMS.
Industry operators who spoke on condition of anonymity say they find it inexplicable that since taking office as group managing director, Andrew Yakubu, has sat on the side-lines and done ‘absolutely nothing to move the Egina project forward.
A Total official who spoke with us recalled that during the commissioning of the USAN project; key statements were made by President Goodluck Jonathan, Mrs. Diezani Alison-Madueke, the minister of petroleum resources and Mr. Christophe de Magerie, President of Total Group.
Mr. de Magerie said despite the uncertainties in the industry occasioned by the non-passage of the PIB and the concerns around the fiscal terms, the company was aligned with the development aspirations of the government, especially as regards major projects to provide increased oil output, revenue for the country, employment and capacity development.
Responding, both President Jonathan and the petroleum minister acknowledged the impact of a project like USAN, adding that Nigeria needs to support such initiative with significant impact.
Both Mr. President and Diezani Alison Madueke categorically committed to giving Egina all the necessary support.
In a key note address presented at the 2011 and 2012 Nigeria International Oil and Gas conference and exhibition, President Jonathan talked about the Egina project, and government’s commitment to achieving some Nigerian content milestones with the project.
Investigations reveal that even though following his appointment, the current group executive director in charge of NNPC exploration and production division, Abiye Membere met the project already wrapped up and ready for review at the group executive council of the corporation, he insists on alternative reviews, by-passing managers within the NAPIMS structure and inviting contractors independently to renegotiate figures on items that has gone through the rigorous NNPC three tier tender processes, with them.
It was gathered that Mr. Membere had also invited one of the contractors that lost out during the tender stage, making assurances he could get the company to execute projects, to the chagrin and consternation of other stakeholders.
In a letter addressed to the managing director of Total Upstream Nigeria Limited, the NNPC requested that Total should invite the remaining bidders on the Egina contract packages for negotiations aimed at further reducing the cost of the FPSO package.
However, in a response, Total noted that the estimated final cost of the Egina project packages 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 this 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 EPC and drilling services contracts.
“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.”
Despite this clarification however, the NNPC group executive director in charge of exploration and production remains adamant, failing to hold group executive council meeting where the Egina project would have been discussed and forwarded to the board for consideration.