Senate queries $7 increase in GTL contract by Chevron Nigeria

*Chevron Escravos facility.

*Chevron Escravos facility.

Oscarline Onwuemenyi

08 June 2016, Sweetcrude, Abuja – The Senate said it has commenced an investigation into the alleged inflation of the contract sum of the Escravos Gas-To-Liquid, EGTL, Project from $2.9 billion to $10.3 billion.

The Senate Committee on Gas at a public hearing queried Chevron Nigeria Limited, CNL, for increasing the contract sum without recourse to its partner, the Nigerian National Petroleum Corporation, NNPC.

The Chairman of the Committee, Senator Bassey Akpan, berated CNL for increasing the contract sum, stressing that the company had violated the terms of the Joint Venture Agreement.

Akpan wondered why the Nigerian project with 33,000 barrels per day capacity would cost $10.3 billion while a similar project in Qatar with 34,000 barrels per day was constructed for $1.2 billion.

Bassey, who said investigations into the EGTL project were also done by the 6th Senate and 7th Senate, pledged that the 8th Senate would conclude the investigation within the shortest time.

He noted that “So between 2008 and now, the project cost has risen by an addition of more than $5 billion and this is quite worrisome. We need to sit down and look at the cost. It is quite astronomical for you to have the cost that was approved at $2.99 billion with a completion cost of about $10.3 billion.

“We are going to guide our decision by the venture agreement and every other related Act of the National Assembly. We would frown at anybody who breaches the law. I am not satisfied with the explanation they have given. How can I be satisfied? As a Nigerian, I am not satisfied, but we need to listen to NNPC. I want to assure Nigerians that we would get to the bottom of this.”

The committee also asked why the share ratio on the EGTL project was 75 per cent to Chevron and 25 per cent to NNPC when all other similar ventures between the two were 60 to 40 percent.

In his response, the Director, NNPC/Chevron Joint Venture, Monday Ovuede said CNL did not violate the Joint venture Agreement as it had invited the NNPC on several occasions to meetings on the matter.

Ovuede said at the time when it was evident that the contract had to be reviewed, it called for meetings on several occasions, which the NNPC shunned.

He said the company was left with two choices: either to forget the over $2 billion investment and abandon the project or go ahead with the project.

He said: “We decided to act in good faith considering the importance of the project. We feel that we acted in a reasonable and prudent manner because we called for several meetings and NNPC did not attend. We sent a request for approval, they did not respond.

He added that “Today, that plant is running; we have people employed there. Would it have been good faith to have allowed all the materials that were purchased to rot away because one partner refused to come to meetings?

“If we did not do what we did, the value being realised today from EGTL would not have been realised.”

Ovuede added that with the plant, gas flaring had reduced to 10 per cent.

However, the Senate committee was still unsatisfied with the excuses of Chevron, insisting on seeing more documentation showing the level of involvement of both Chevron and NNPC.

The chairman of the committee insisted that NNPC’s non response was not approval for CNL to increase the contract sum.

Although the committee commended the company for completing the project and commencing operation, it insisted that a lot of questioned still needed to be answered.

The Committee said: “For you to change a project model from a lump sum of $2.9 billion to a reimbursable arbitrarily without the consent of NNPC is a breach of the venture agreement. For you to prove that you did not breach this agreement, we need to see an evidence that you had followed through with the venture agreement from lump sum to reimbursable.

“Whether you had written 2,000 letters to NNPC or not, in this case you have violated because the agreement didn’t say that silence is consent.”

The Senate, therefore, asked the CNL to provide more documents relating to the contract such as evidence of shareholding, copy of the letter signed by the NNPC GMD indicting Chevron and the reply of CNL.

The CNL is also to provide details of the Joint Operating Account of EGTL since inception in 2009 and evidence of tax remittances to the Federal Inland Revenue Service.

The committee also requested details of sales since it commenced operation on the EGTL project as well as evidence of all income accrued to NNPC since inception.

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