Usan Contract scam: NNPC clarifies role of subsidiary, NAPIMS

Oscarline Onwuemenyi

11 February 2016, Sweetcrude, Abuja – The Nigerian National Petroleum Corporation (NNPC) has provided clarification on the role of its subsidiary, National Petroleum Investment Services (NAPIMS) in the $260 million contract awarded by Esso Exploration and Production Nigeria Limited, a subsidiary of ExxonMobil in Usan oilfield.

NNPC-Towers-AbujaThe corporation has also blamed the ExxonMobil unit for planning to cancel a running contract, saying the NAPIMS’ position is that “if Esso unilaterally cancels this contract, Esso will solely bear all incidental costs and cost of the replacement service, and such costs will be non-recoverable.”

A local newspaper had reported the alleged violation of due process in the award of the contract, as it allegedly did not receive the approval of the NNPC board.

It was also alleged that based on the approval from NAPIMS, which nominated four companies to execute the projects under single source basis, Esso had cancelled a running contract and re-awarded it to GMT Energy Resources, without any tendering process.

Though Esso was said to have insisted that it could no longer cope with maintaining two vessels in view of the drop in oil prices, concern was also raised that the company should have re-negotiated the contracting terms with the bonafide contractor instead of opting for cancellation of the contract.

But in a response to queries by our correspondent in Abuja, the NNPC gave a detailed background of the contract and some of the controversies associated with the projects, adding however that the “referenced contract predates the current management of the NNPC as well as the Management of the National Petroleum Investment Management Services, NAPIMS, the Corporate Service Unit of the Corporation.”
According to NNPC’s clarification, the contract for Subsea Intervention Vessel single-sourced to GMT (Maersk Nomad) was not approved by the corporation.

“However, on the strength of the then NAPIMS management approval for two years firm plus one year optional extension on Maersk Nomad vessel, negotiations have been concluded with the vendor with a probable date to commence the service at the end of the OIMR contract with Tilone. However, on the strength of the letter issued by the then NAPIMS Management approving a single-sourced contract on Erha North field for a subsea intervention vessel (Maersk Nomad) operated by GMT Energy Resources Limited for a duration of two year firm and one year optional extension, a commitment contract has been issued to the contractor (GMT) by ESSO,” said NNPC.

The corporation also clarified that NAPIMS was opposed to ESSO’s insistence to cancel the contract with Tilone Nigeria Limited. Tilone is the bona fide contractor handling the provision of the Offshore Inspection Maintenance and Repair (OIMR) vessel as well as the Workclass Remotely Operated Vehicle (WROV) for the Usan project.

“In January 2016, the Group General Manager, NAPIMS called for a meeting with ESSO in his office where NAPIMS made it clear that if Esso unilaterally cancels this contract, ESSO will solely bear all incidental costs and cost of the replacement service, and such costs will be non-recoverable,” the corporation said.

According to the clarification, faced with the current economic realities, ESSO intends to streamline its operations and reduce subsea intervention vessel services to one contract to cover operations in Erha and Usan.

“Esso is therefore opting for the option of terminating Tilone’s contract with a higher day rate and maintain the contract with GMT Energy Resources which will give a cost saving of $1.2 million for over a period of two years. However, terminating the contract with Tilone Subsea Limited should follow the agreed terms as contained in Article 2 of the Ancillary Agreement to Novation Agreement No NTD00000829,” NNPC explained.

NNPC also recalled that the contract for the provision of four Remotely Operated Underwater Vehicles (WROVs) on the Akpo field in OML 140 was initiated in the year 2006 when the drilling campaign on the Akpo field was ongoing.

It noted that Total had disregarded NNPC’s directive given in a letter NAP/GGM/A-6711/02.08 dated April 25, 2007 to award the contract for provision of the ROVs on AKPO field to Messrs. Tilone, but instead awarded the contract to Oceaneering Nigeria Limited.

“Arising from Tilone’s petition to the National Assembly, Total decided to compensate Tilone with a similar contract having been directed by NNPC Board and the House of Representatives to engage Tilone. As a compensation for the initial contract, which was awarded to Oceaneering by Total, the contract for Provision of one (1) OIMR vessel and two ROVs was awarded to Tilone Nigeria Limited in 2012.
This contract commenced in January 11, 2012. The contract was novated from Total to ESSO on February 1, 2014 for duration of five years – two years firm plus 1 X 3 years optional extension in accordance with article 14.5 of the contract agreement,” the corporation added.
NNPC also stated that Tilone had earlier requested NAPIMS to restrain ESSO from terminating their contract for the Provision of OIMR Vessel and WROV Services, replacing the contract with a new contractor.

According to the corporation, NAPIMS had last December also directed ESSO to execute the third year optional duration extension of the contract as approved in the contract award letter with Tilone.

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