Oscarline Onwuemenyi 21 July 2015, Sweetcrude, Abuja – Corruption has become a byword in the nation’s oil and gas industry. But the mind-boggling and monumental fraud that characterised the US$3.5 billion Egina FPSO contract will stand out in the pantheon of shame, which has been a recent hallmark of the industry.
So much has been written about the contract fraudulently won by Samsung Heavy Industries Nigeria Limited, and which had all the imprints of the leadership of the Nigeria National Petroleum Corporation, NNPC, beginning from the then Minister of Petroleum, Mrs. Diezani Alison-Madueke; the then Group Managing Director of the NNPC, Mr. Andrew Yakubu; then Group Executive Director, NNPC, Mr. Abiye Membere; and the NNPC Secretary and Legal Adviser, Mr. Tony Madichie. This is one high profile fraud that has refused to go away from the public domain.
Observers have described what happened in Egina as simply “immoral, a total lack respect for Nigerians, and a rape of the Nigerian nation.”
According to one official who is close to the action, and who would remain anonymous to speak freely on the matter, the Egina FPSO scam will test the resolve of President Muhammadu Buhari’s administration to root out all forms of corruption in the oil and gas industry. The administration will be rated on how it is able to handle the matter and bring some sanity and transparency in the process, the official said.
He noted that, “In an environment where there is ‘shame’, the Egina FPSO scandal should make every member of the Board of Directors of NNPC feel very embarrassed to their bone marrows. That Total Upstream Nigeria Limited with all its claims to transparency is involved is shocking.”
He added that Total’s reluctance to stand up for transparency, accountability and fairness speaks volume about its much touted good governance and transparency policy. “Total’s posture in relation to the Egina FPSO contract is that its business interest is more important than good governance in Nigeria,” he stated.
It was no surprise that many jubilated when a Federal High Court on May 22, 2015, among other orders, restrained the National Petroleum Investment Management Services, NAPIMS, Nigerian Content Development Monitoring Board, NCDMB, Samsung, Total and their agents and privies from further taking any action towards the execution of the award of the Egina FPSO Project pending determination of that suit.
The contract for the Engineering, Procurement, Construction and Commissioning of a Floating Production, Storage and Offloading, FPSO, Unit is strategic to the successful delivery of the entire Egina Project. The understanding is that if the Egina FPSO contract is properly implemented, it will create employment opportunities for Nigerians, aid the acquisition of highly technical skills by Nigerians, and create opportunities in future to domesticate the construction of such projects in Nigeria.
The Egina Field Development Plan, comprising of Egina FPSO and other components was approved by NAPIMS and the Department of Petroleum Resources, DPR, in 2008 and 2009 respectively. In September 2009, Total Upstream placed adverts for tender for the award of Egina FPSO. It was in response that Samsung, Hyundai Heavy Industries and Technip submitted their respective tenders for the award of the contract. The submissions were jointly opened by the relevant regulatory authorities, namely NAPIMS and NCDMB on 9th February, 2010.
NCDMB and NAPIMS, in accordance with the laid down procedure, approved the list of prequalified tenderers in same 2010. The three-tiered NNPC approved tendering process of pre-qualification, technical and commercial evaluation was what the tender for award of Egina FPSO went through. At the end of the commercial analysis which followed the above laid down due process, Hyundai emerged the technically qualified lowest bidder. Technip was disqualified for submitting a non-compliant bid.
At the end of the process which spanned the period between 2008 and March, 30, 2012 – a period of 4 years – a memo signed by the Manager PSC Facilities, the General Manager, Production Sharing Contracts, and the Group General Manager, NAPIMS was presented to Mr. Membere who was then the GED Exploration & Production of NNPC. The memo recommended Hyundai for the award of the contract. Total also recommended the award with number EGI/C115 to Hyundai.
It is instructive to note that at the commercial stage of the tender, the initial bid of Samsung was US$3,545,678,824 while that of Hyundai was US$3,522,321,198. Between 17th and 24th February, 2012, commercial clarification meetings were held with NAPIMS to enable both Samsung and Hyundai clarify their bids. Following these meetings, Total requested for revised commercial proposal. Samsung submitted a revised bid of US3,308,946,840 while Hyundai submitted a revised bid in the sum of US$3,140,199,986. It was at the conclusion of this commercial evaluation process that Hyundai emerged the most responsive technically qualified lowest bidder.
According to our source, when there were rumours that the former GMD Yakubu and GED Membere were planning to tinker with the process at the instigation of Mrs. Diezani, many rebuffed it as unthinkable. When the rumours became high pitched that, indeed, the Egina FPSO contract will be awarded in contravention of due process, formal representations were made to the Presidency to preserve the sanctity of the system. “Regrettably, all of these efforts failed to stop the macabre dance that Diezani and her cohorts were poised to unleash on Nigeria.
Many observers believe that in the Egina FPSO saga, GED Membere subverted due process,” the source added. He (Mr. Membere) unilaterally invited Samsung and negotiated a discount of 5% which resulted in Samsung’s bid being reduced to the sum of US$3,143,499,498. In breach of basic rules of fairness and transparency, he did not remember to invite Hyundai for similar negotiation. Even at that, the final figure of Samsung (US$3,143,499,498) was still higher than Hyundai’s US$3,140,199,986.
Our source noted that in order to discredit the recommendation made by NAPIMS, GED Membere manufactured a story for the NNPC Group Executive Committee. “He claimed that NAPIMS added US$238million to Samsung’s tender and that no amount was added to Hyundai’s tender. Probably, what he needed was somebody to have reminded him that the said amount that was added represented taxes, Value Added Tax and contribution to Nigerian Content Development Fund which Samsung did not include in its tender, but, which Hyundai incorporated in its tender. Samsung was fully aware of this,” the source further said.
GED Membere further informed the Group Executive Committee that in the “risk with bidders” assessment, the sum of US$525,000,000 that was added to Samsung’s bid was much higher than the sum of US$336,000,000 that was added to Hyndai’s tender.
“Membere knew that these additions that were made pursuant to post-bid clarification meetings with both Samsung and Hyundai were assessed based on the fact that Hyundai has executed several projects in Nigeria in the last 23 years, and has a track record of successful completion, while Samsung was relatively coming in-country with no track record,” the source observed.
In an attempt to justify to the public the above referred backroom manoeuvring and total disregard of extant contracting strategy and due process, NNPC asserted that it was re-aligning the tender evaluation process in order to award the Egina FPSO Contract to the actual lowest, most competitive bidder. Of course nothing was further from the truth. “My arithmetic may be wobbly, but, certainly not to the extent that one will confuse Samsung’s re-aligned figure of US$3,143,499,498 as a lower and more competitive figure than Hyundai’s original figure of US$3,140,199,986,” the said.
According to him, “The Group Executive Committee of NNPC is sufficiently experienced enough to know that GED Membere’s ‘abracadabra’ was an aberration. Regrettably, in a way that gave the impression that the Group Executive Committee was part of the fiendish plot and only wanted to be presented with a ‘fait accompli’, the Committee proceeded to accept GED Membere’s hogwash, and in pursuance recommended Samsung to the Board of Directors of NNPC for the award of the Egina FPSO contract.”
Thus was the beginning of the crisis of legitimacy that has continued to haunt the Egina FPSO contract since 2012.
In January, 2014, LADOL, Samsung’s local partner on the project, filed a suit against it (Samsung) on the basis that the latter was seeking to exclude it as its local partner in the execution of the Egina FPSO contract. By the time the case was resolved and the dust settled, Samsung returned to NAPIMS with a US$300 million cost variation order. The fraudulent claim of US$300 million was presented at a time the project was yet to start.
The source noted that at different times, both Mr. Frank Ejizu, General Manager of Samsung and Chief Jadesimi, Chairman of LADOL, denied that there has been any variation. “Good enough, the cold prints of documents will always speak for themselves. The issue became hush-hush when they were confronted with Samsung’s Director J. R. Chung’s 98 page letter addressed to Total with reference number EGN-10-KSMG-AEMG-LET-00671 of 23 September, 2014. Of course, NAPIMS recommended it and NNPC Board of Directors approved of it. What a fraud on Nigeria and Nigerians by public officers who are supposed to protect their interest! Frank Ejizu is the brother of Iyke Ejizu, the agent of Samsung in Nigeria, and a close confidant of the former Minister of Petroleum. He is also a close friend of NNPC,” our source revealed.
“So it was that Samsung with no track-record of performance won the Egina FPSO contract for a sum higher than that of the lowest approved and recommended bidder, and in very questionable circumstances that was in blatant breach of due process,” he said.
He added that, “Samsung will want Nigerians to believe that it plans to create 50,000 jobs through the Egina FPSO contract. The question to ask is whether in its home country it has more than 10,000 people employed by it. The construction giant, Julius Berger, with its several years of service delivery in Nigeria has between 15,000 to 18,000 in its employ. From this perspective, one begins to understand the ‘monkey’ statistics of Samsung. It is all part of the scam aimed at hoodwinking Nigerians into believing that Samsung has substantial investment in Nigeria”.
The source, who called for the abrogation of the contract award, further stated: “President Muhammadu Buhari stated in his inaugural speech that he will ‘…ensure that there is responsible and accountable governance at all levels of government in the country. For I will not have kept my own trust with the Nigerian people if I allow others abuse theirs under my watch’. When the President made this statement, many heaved a sigh of relief, and saw it as the beginning of a new dawn for Nigeria.
“It was a departure from the recent past when in the face of evil and damning evidence of serious misdeeds of some Ministers and other appointees, the response to the public is always one of silence”.
The Egina FPSO scam fraudulently won by Samsung was neither a mistake nor a blunder, but, a well planned deliberate conspiracy that undermined and totally sabotaged national interest. Selfish personal interests and corruption are usually the motivation for sidelining due process, another source said. “For all the puffing and huffing of Total and its claims to transparency and anti-corruption, why would it be a part of this rape of Nigeria? Why would it allow itself to be enmeshed in a fraudulent transaction. Total disappointed Nigeria and Nigerians, and failed to stand to be counted when it mattered most.
“Nigeria is haemorrhaging now because respected entities like Total kept quiet in the face of evil. The thunders of heaven will not sleep until the injustice occasioned by the Egina FPSO scam is remedied with vengeance,” he said.
It must not be lost on Nigerians that Hyundai, Samsung and their compatriot, Daewoo, are interested in assisting Nigeria or Nigerian companies to develop. Far from it. Their goal is to promote the Korean economy. The lesson for Nigeria is to rethink our strategies. Our indigenous companies are dying while we continue to use our money to empower these foreign entities who have no allegiance to Nigeria beyond their own gains.