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IOCs Threaten to Reject Talks with NNPC on Project Extension

11 Dec 2012

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NNPC Headquarters

Chika Amanze-Nwachuku

The delay by the Nigerian National Petroleum Corporation (NNPC) to approve some outstanding multi-billion dollars oil and gas industry projects is causing concern in the industry, THISDAY has learnt.

It was gathered that the NNPC’s inability to decide on the projects stemmed from the repeated failure to hold its periodic Group Executive Committee (GEC) meetings, where projects of this magnitude are usually reviewed and moved to the board, for endorsement and award.

The projects that would be affected if the NNPC fails to act include the Mobil’s Erha North phase two; the Satellite fields development project, phase two; and Total’s Egina project.

Owing to the delays, some international oil companies (IOCs) have rejected further extension on the negotiations beyond the end of this calendar year with NNPC on the affected projects.

French oil major, Total, operator of the $15 billion offshore Egina oil field, was said to have informed NNPC’s management that if the request for award of Egina contracts set by the National Petroleum Investment Management Services (NAPIMS) to the NNPC are not granted, it would be forced to shelve the planned investment.

The bid validity for the Egina oil field project had expired in November, but was extended to December 31 with production billed to begin from 2015.

A company source told THISDAY last night that the failure by NNPC to award the contract for the project might spark an investigation by the United States Securities and Exchange Commission (SEC), in line with the Foreign Corrupt Practices Act (FCPA).
“Nobody here in Total is prepared to go to jail over this project. We are the only company that is prepared to invest as much as $12.5 billion on one project alone.

Nowhere else in Africa do you have any single project attracting such huge capital. Think of the multiplier effect, the number of jobs that would be created, the improvement in skill and general value addition to Nigerian content. As a Nigerian, it is painful to see us waste such an opportunity,” said one Total official who craved anonymity.

It was also gathered that Mobil Producing Nigeria Unlimited (MPNU), operator of Erha North, phase two and the Satellite fields development project, phase two, is concerned about the likely cost overrun on the projects.

The company stated that it will rather have the projects go through another tender “because the cost element cannot remain fixed” since there are dynamics that are constantly shifting.

“If the projects have to go through another tender, that will mean another four to five years, well beyond the life of the current administration. In view of the current reality, some of the contractors have begun to demobilise,” a Mobil official told THISDAY.

Meanwhile, sources at the Ministry of Petroleum said while NNPC’s Group Executive Director (GED) in charge of Exploration and Production, Mr. Abiye Membere, has continued to press for the splitting of the contracts, the Group General Manager in charge of NAPIMS, NNPC’s investment arm, is insisting that Membere’s action will subvert the entire process.

“The packages for a contract of this magnitude have never been split before, and it will be foolish for Total to agree to have this done for a project as massive as Egina. The project started in 2008 and the tender has since been concluded.
“This was what scuttled the Bonga South-west project about six years ago when Membere was the general manager in charge of Production Sharing Contracts at NAPIMS.

“Bonga was supposed to have three FPSOs operating but that has not happened. Indeed, the management of the NNPC at the time was so frustrated with Membere’s conduct that he was posted out of NAPIMS.
“Now the same thing that happened to Bonga South-west is about to happen to Egina, Erha North phase two and the Satellite fields development project phase two,” an NNPC staff said last night.     

THISDAY had reported last week that multibillion dollar oil and gas projects expected to increase Nigeria’s oil production and create thousands of jobs, were being delayed by NNPC.

The corporation had blamed lack of funding to implement the projects.
Other projects affected by NNPC indecision include Shell’s Bonga South-west and North-west fields, the multibillion dollar Nsiko project and the Funiwa gas project. Most of the projects have been in the pipeline for more than five years.

Tags: Business, Nigeria, Featured, IOCs, NNPC, Project Extension

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