Despite court order, GE directs Arco to vacate Agip’s contract site

30 July 2015, Lagos – Despite the subsisting order of a Federal High Court that all parties should maintain the status quo, General Electric (GE) International Operations Nigeria Limited has directed Arco Petrochemical Engineering Company Limited to demobilise from the multi-million dollar maintenance service contract for gas turbines and related equipment for OB/OB, Ebocha and Kwale Gas plants in Delta State.

ArcoThe contract is being executed for Nigerian Agip Oil Company (NAOC), operator of NNPC/NAOC joint venture.

In a letter dated July 27, 2015, which was signed by the Chief Operating Officer of GE in charge of Oil and Gas, Mr. Uzochi Nwagwu, the company referred to an earlier letter dated May 29, 2015, where it had directed Arco to commence demobilisation with effect from June 1, 2015.

The July 27 letter, which was obtained by THISDAY, also directed Arco to complete the demobilisation on July 31, 2015.

“After that date, GEION’s contract with NAOC will terminate and GEION will have no presence on site. Therefore, Arco, as GEION’S subcontractor is hereby instructed to complete demobilisation at the same time and cease any presence on site by close of business on July 31, 2015, at which point the contractual relationship between Arco and GEION will terminate,” Nwagwu.

GE’s letter, which drew the attention of the Group Head of Human Capital Management at Arco, Mr. Ben Omotomiye to the directive, also warned Arco that any actions it might take in breach of the contract between Arco and GEION or in violation of its duties at law might result in damages to GEION and or NAOC.

“In this regard, we reserve all rights. This letter and the demobilisation are without prejudice to our rights under our contract or at law,” Nwagwu added.

THISDAY gathered that while the National Petroleum Investment Management Services (NAPIMS), a subsidiary of the NNPC had directed NAOC to award the joint venture contract to Arco , the Italian firm has insisted on awarding the contract to Plantgeria.

In letter addressed to the Vice Chairman and Managing Director of NAOC, Mr. Massimo Insulla, the NNPC’s Group General Manager in charge of NAPIMS, Mr. Jonathan Okehs warned the Italian firm that NAPIMS would not support any cost expended on NAOC maintenance services, arising from NAOC’s execution of such services with Plantgeria.

The letter with reference number NAP/GD/GM/84, which was dated June 13, 2014 and obtained by THISDAY also stated that “NAOC proposal to execute an interim award contract with Plantgeria for a replacement tender of which award recommendation has not been presented for NNPC Board consideration and approval is declined and not approved.”

Okehs directed NAOC to “immediately commence negotiation with Arco Petrochemical Limited with a view to awarding a six-month stop-gap contract using the manpower loading that was approved for the 2013 stop gap contract.”

Okehs reminded NAOC that NAPIMS had earlier advised it to hold negotiation with Arco Petrochemical on April 29, 2014 but the Italian oil major apparently ignored the advice.

But Insulla had in letter dated April 23, 2014, which was addressed to the NNPC, recalled that the JV partners had in June 2006 awarded the contract to GEION, with Arco as technical partner.

According to him, on the expiration of the contract in October 2011, the JV partners awarded a one-year stop-gap contract to GEION and with Arco as the partner, while the JV partners agreed to commence tender for a replacement contract in early 2012.

“Due to prolonged tender timeline, caused by the complexity of the service and the need to fully comply with the Nigerian Content Development and Monitoring Board (NCDMB) and JV requirements, GEION, with Arco being a technical partner, was further engaged under a renewed stop-gap contract till the end of 2013,” Insulla explained.

He further disclosed that the JV partners have jointly concluded the tender process for the award of the said replacement contract to the bid winner, Plantgeria Nigeria Limited.

Insulla stated that in accordance to the Joint Operating Agreement (JOA), NAOC had in a letter dated January 24, 2014 requested NAPIMS and POC Nigeria Limited to approve the award to the bid winner.

According to him, while the approval of NNPC’s Board for the bid winner is being awaited, NAOC as the operator has also recommended that a stop-gap contract be also awarded to the bid winner, Plantgeria Nigeria Limited, pending the approval of the said bid winner for the main contract.

He acknowledged that NAPIMS has insisted that NAOC should negotiate with Arco with a view to awarding the stop-gap contract to Arco, instead of the bid winner.

The NAOC boss however argued that it would be against procurement due process to award a stop-gap contract to Arco, since Arco participated in the tender process and did not win.

He also pointed out that such award to Arco might expose the Joint Venture to needless legal claims from other companies that participated in then bid process.

Insulla also argued that awarding the stop-gap contract to Arco, which is a subcontractor to GEION that is the original contract owner, might result in litigation between GEION and Arco in which the JV partners could be joined as parties.

He also reminded NAPIMS that acceding to its request will make the JV partners to incur higher costs.


– This Day

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