A Review of the Nigerian Energy Industry

Delayed projects: NNPC says it will not be stampeded into abandoning due process

17 December 2012, Sweetcrude, Abuja – The Management of the Nigerian National Petroleum Corporation, NNPC has stated that it will not be stampeded or browbeaten into abandoning its firmly established process of contract award by what it termed calculated media blackmail ostensibly by the IOCs and other interested parties.
In its reaction to a flurry of media reports credited to some International Oil and Gas Companies, IOC’s accusing it of deliberating stalling the execution of some multibillion dollar projects in the sector, the NNPC noted that the Industry concern is normally expected in the process leading to the award of major Oil and Gas Projects.
“NNPC has an established procedure of contract and project approval which includes conduct of economic analysis to establish project viability and Federal Government’s take from investments in the upstream’’.
NNPC explained that this procedure must be followed and IOC’s cannot stampede the Corporation into taking decisions that may be inimical to the nation because of their pecuniary interests.
On the claim that the NNPC has not held its periodic Group Executive Committee meetings to discuss some major projects like the TOTAL Egina deep offshore project and endorse same to NNPC Board for approval, the NNPC stated thus:
“This claim is untrue as GEC meetings are being held weekly or fortnightly. However, Erha North Phase 2 and Egina Project contracts have not been discussed yet at these meetings because NNPC Management is critically reviewing the overall economics of the project in view of their high cost estimates in order to establish their validity, maximize Federal Government’s take and ensure comparative price competitiveness vis-a-vis benchmarks.’’
On the allegation that the Group Executive Director, Exploration and Production of the NNPC, Abiye Membere was behind a phantom contract splitting attempt of the Egina Project just as he allegedly did with the previous Bonga Southwest project, the Corporation stated that such allegation is totally misplaced and untrue.
The NNPC informed that the alleged contract splitting of Bonga Southwest was never on the cards as there was never a time that SNEPCO proposed three Floating Production Storage Production offloading facility (FPSOs) for Bonga Field Development.
“Membere also did not scuttle Bonga Southwest/Aparo Project six years ago. He was the GM, PSC Division of NAPIMS in 2006 and helped to move forward the strategy for a leased FPSO project for Bonga Southwest /Aparo project. He was deployed from this position to another position in NNPC’s Engineering& Technical Directorate in 2007 during a routine Management re-organisation exercise.”
The Corporation explained that the said Bonga South/Aparo was recycled for concept re-evaluation in 2009 when dearth of bidders were recorded on the major packages at the technical stage and with a potential of only one bidder emerging to the commercial stage of the FPSO tender. `This decision to recycle Bonga was taken by NAPIMS Top Management and not Engr. Membere’.
Also on the report that the NNPC blamed lack of funding as the cause for the alleged lull in the execution of the project, the Corporation described the allegation as untrue and laughable. “This claim is untrue as there is no funding challenge in PSC because operators fund the investment 100 percent’’.
The NNPC Management stated that despite the spate of attacks, it remains focussed on its core mandate of ensuring that the Federal Government and the Nigerian people derive maximum benefit from the proceeds of the nation’s hydrocarbon resources.
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  • When due process results in undue delay or outright loss of investment, the managers of the process must take responsibility for failing to show initiative. While we thank the NNPC managers for trying to obtain the optimum benefit derivable from the affected projects, it is important to note that hydrocarbon resources are no longer an exclusive preserve of a few countries. Even here on the African continent there are several new frontiers begging for investment. Essentially, the world wouldn’t wait for Nigeria to move when it wants to, decisions must be made in a timely manner. We understand that the bids validity dates for most of these projects had already expired and been shifted to the end of this year. How long does it take to conduct a cost benefit analysis and to determine if these projects are good for Nigeria or not?

  • Easier said than done