03 February 2014, Lagos – The contract awarded to Samsung Heavy Industry and Lagos Deep Offshore Logistics by Total for the development of fabrication and integration yards for Egina and future projects is generating furore, bad blood and intrigue, and if not addressed could jeopardise the take off of the project. The matter may become subject of litigation as LADOL is alleging an underhand dealing by some powerful Nigerians to deprive it of its due share of the project.
But the major contractor, Samsung Heavy Industry, has said that it is acting on the briefs it got and the fact that the latter does not have the needed facility to carry out the project as planned.
Financial Vanguard investigation has shown that a memo from the State House Abuja dated 20th January, 2014 signed by the Senior Special Assistant to the President to the Minister of Transport and copied the Chief of Staff to the President, approved paragraph 2 i-iv of the prayers of an earlier letter sent to the President from the ministry.
The Ministry of Transport had asked the permission of the President thus, “that the FPSO project can be located at Agge, Bayelsa State, when the facilities to handle such operations are developed. In addition, the FPSO can be conveniently located at any dedicated oil and gas terminal.
“All Oil and Gas related cargoes must be handled only at the designated terminals as in the letter from BPE. Operators are, however, free to choose ports of discharge of their cargoes within the designated terminals at Onne, Warri and Calabar ports. Vessels coming to Nigeria with cargoes particularly oil and gas related cargoes, except petroleum products, must first go to the appropriate NPA/Concessioned terminals to be cleared by Customs and other relevant authorities, terminal operators, shipping lines etc and to pay necessary dues/charges. In order to maintain transparency and promote healthy competition in the sector, all port development facilities under the jurisdiction of the Federal Ministry of Transport/NPA should be carried out in accordance with extant public procurement and infrastructure development laws and policies.”
Financial Vanguard investigation showed that on the 16th of September 2013, ”The Managing Director (MD), LADOL, through a letter dated 16th September 2013, which was received at the Presidency on the 25th of November, informed the president that it had finalised its joint venture with Samsung Heavy Industries Limited to build Africa’s only fabrication and integration facility.
She further informed the president that “The fact that Samsung is partnering ‘with a wholly owned indigenous Nigerian company sector to build this facility is a credit to this administration’s effort of ensuring indigenous participation in the maritime and petroleum sector. Over the next two years, LADOL will be investing $350 million in the Lagos facility and an additional $150 million in a new facility in Agge, Bayelsa State; both facilities will create 100,000 direct and indirect jobs. She prayed the president to assist in ensuring smooth operation of its facilities in Lagos and Agge during the construction by directing relevant ministries to assist by:
“Allowing all vessels involved in the Egina project that need to call at LADOL to sail directly into LADOL to save cost, time and avoid double handling. LADOL already has approval to receive two international vessels each week. This waiver will only be for Egina project facility construction and operation period; assigning additional personnel as requested to their offices in the LADOL Free Zone to support the construction and operation of the facilities which will be carried out 24 hours a day and seven days a week; ensuring that project cargo not delivered directly into the zone be processed within 24 hours and transferred to the zone within the same time.
Any pending and or operations at LADOL in Lagos and Agge be fast tracked and approved as a matter of urgency; establishing a presidential oversight team to oversee the work being done at LADOL for Egina, harmonise efforts of the various government agencies and to ensure both compliance with government regulations and the smooth running of the construction and operation phases at LADOL”.
Based on this request to the president, the Presidency asked for the view of the Minister of Transport on the issue. According to Financial Vanguard’s investigation, in his comment on the request of LADOL: the Honourable Minister of Transport (HMT), through a letter Ref. No. T.0160/s.197/JA·7 dated 22nd November 2013, informed the president and said: “The Maritime Workers Union had, in June 2013, written the president and copied the ministry, protesting against the construction of proposed floating, production, storage and offloading (FPSO) in LADOL facilities in Lagos. The ministry had directed the Nigeria Ports Authority, NPA, to look into the matter.
“The NPA had observed among others, that it would not be technically and operationally possible to install a FPSO facility at the proposed location due to the width and draft of the Lagos channel which cannot accommodate the facility as a result of limited room for safe manoeuvring.”
The ministry, it was gathered, “while considering NPA’s observations reviewed the request from LADOL and concluded that it would not be technically and operationally safe to approve the construction of FPSO facility project in Lagos. However, the ministry will support and encourage the construction of the FSPO in Agge, Bayelsa State, being a green field which is with requisite draft and without any objection from NPA.”
The memo signed by the Chief of Staff to the President said, “The basis of the claim of LADOL that approval has been granted to it to receive two international vessels a week is rested on the Federal Republic of Nigeria Official Gazette dated 4th December, 2008 wherein the effective date of the government notice is stated to be 27th September 2010. “However, the authenticity, and legality of the Gazette are in doubt for the following;
“The clarification issued by the Bureau of Public Enterprises (BPE), dated 10th July 2008 showed the types of cargoes designed for each concessioned terminal; the Nigeria Customs Service in December 2010 drew the attention of the Minister of Finance that the earlier approval given to LADOL to receive ships from foreign waters contravened provisions of Section 12 of the Custom and Excise Management Act (CEMA) Cap C. 45 LFN 2004 which states that such authority lies with the president.
“Consequently, the Minister of Finance in February 2011, advised the Ministry of Transport to obtain the explicit approval of the president to enable LADOL operate within the law as the Ministry of Finance had earlier in 2010 indicated support for declaring the LADOL Free Zone as a Deep Offshore logistics base with Apapa Pilotage District.
The Federal Ministry of Justice had indicated, vide letter Ref No. S.I. 885 of 20th November 2013, among others, that “Government Notice No. 284 was irregularly issued and is ultra vires because of the unnamed Permanent Secretary who purportedly issued it.” In addition, the law under which the designation was made was not stated.
Furthermore, no person or authority took responsibility for the designation.”
Last week, based on the emerging controversy, LADOL took Samsung Heavy Industry and its allies to court, over what it termed plots to exclude it from the juicy $3.8 billion Egina Oil platform project, which it jointly won late last year. Also joined in the suit at the Federal High Court before Justice Aneke on Friday, January 24, are, Total Upstream Nigeria Limited (Total), Nigerian Content Monitoring Board (NCDMB), and the Minister of Petroleum Resources.
The $3.8 billion facility located 130 kilometers offshore was conceived by Total Upstream Nigeria Limited in collaboration with the Nigeria National Petroleum Corporation (NNPC), and is expected to take off by the end of 2017.
The Egina platform will be the first of its kind in Africa with a projected production capacity of 200,000 barrels per day (bpd) and a storage capacity of 2.3 million barrels.
In the proceedings which were issued for LADOL by Professor Fidelis Oditah, QC, SAN, LADOL seeks 19 relief against Samsung and other defendants, asking the court to make a declaration that a contract awarded by Total to Samsung on or about 15 March, 2013 for the construction and installation of a floating production storage and offloading unit (FPSO) at Total’s Egina oilfield in oil mining lease (OML) No 130 in deep offshore Nigeria (the “Egina FPSO Project”) is subject to the Nigerian Oil and Gas Industry Content Development Act 2010.
Other relief being sought by the company includes a “declaration that the Egina FPSO Project contract was awarded by Total to Samsung, with the approval of the Nigerian regulatory authorities including NNPC, NAPIMS, NCDMB and the Ministry of Petroleum, on the basis inter alia that a significant proportion of the steel fabrication and the integration of the FPSO topsides would be carried out at LADOL’s yard in the LADOL Free Zone, Tarkwa Bay, Lagos.
“A declaration that the Egina FPSO Project contract was also awarded by Total to Samsung on the basis inter alia of Samsung’s representations and assurances to the Nigerian regulatory authorities that Samsung would build and operate training facility in the LADOL Free Zone for the training and education of Nigerians.
“A declaration that the Egina FPSO Project contract was bidded for and obtained by Samsung on the basis of a joint venture and/or arrangement between Samsung and LADOL for the development, construction and operation of an offshore fabrication yard and FPSO integration facilities in the LADOL Free Zone for the purposes, amongst others, of the Egina FPSO Project (Joint Arrangement).
“A declaration that having bidded for and represented to the Nigerian regulators that LADOL was its local content partner and on the basis of the Joint Arrangement, obtained the award of the Egina FPSO Project contract; it is not open to Total and Samsung unilaterally to exclude LADOL from the execution of the said contract”.
LADOL, said to be the only wholly Nigerian indigenous oil and gas service provider, is further seeking a declaration that the purported exclusion of the company from the execution/performance of the Egina FPSO Project contract by Total and Samsung is a violation of the Act and consequently is of no effect whatsoever.
Also being sought are, “an order, pursuant to section 68 of the Act, cancelling the Egina FPSO Project contract, on the basis that the purported exclusion of LADOL from the performance/execution of the Egina FPSO Project contract and Samsung’s failure to build a training school in Nigeria (as it had promised it would) are a violation of the Nigerian National Content law.”
The company further wants a disqualification of Samsung from bidding for or participating in any capacity whatsoever in any projects, operations, contracts or subcontracts in the Nigerian oil and gas sector.
Findings revealed that the collaboration between LADOL and Samsung began in early 2010, when Total announced its intention to begin the development of its Egina oilfield.
*Gabriel Omoh – Vanguard