$7bn Project: FG Warns NLNG against Violating Local Content Law

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By Ejiofor Alike and Goddy Egene

The federal government through the Nigerian Content Development and Monitoring Board (NCDMB) has warned the promoters of the new Train 7 plant being implemented by NLNG Limited against any attempt to circumvent the provisions of the Nigerian Oil and Gas Industry Content Development (NOGCD) Act of 2010 in the $7 billion project.

The Shell-run company is shopping for $7 billion from the global financial markets to build Train 7, which will expand its operations and increase its production capacity from 22 million tonnes per annum (MTPA) to 30 MTPA.

It had awarded the contracts for the Front End Engineering Design (FEED) of its proposed Train 7 to two consortia – B7 JV Consortium and SCD JV Consortium.

The B7 JV Consortium comprises American company KBR Incorporated, Technip of France and Japan Gas Corporation (JGC); while the SCDJV Consortium, consists of Saipem of Italy, Japan’s Chiyoda and Daewoo of South Korea.

By the terms of the contracts, the consortia would participate in the Dual FEED Process and produce a Basic Design Engineering Package (BDEP) that would determine their EPC pricing, and eventually their bids to construct the train.

A completed FEED process would pave way for Engineering, Procurement, and Construction (EPC) pricing and bidding processes which are preconditions for Final Investment Decision (FID).

The company is owned by four shareholders – Nigerian National Petroleum Corporation (49 per cent); Shell (25.6 per cent); Total Gaz Electricite Holdings France (15 per cent) and Eni (10.4 per cent).

Following concerns that some of the foreign promoters of the project will flout the NOGICD Act of 2010, which provides that certain scopes of the contracts shall be executed by Nigerian companies, the federal government has warned the company against flouting Nigerian laws.

The warning was given in a letter dated November 6, 2018, which was addressed   to the Managing Director, Nigerian Liquefied Natural Gas Nigeria Limited (NLNG) and titled: ‘Nigerian Content Compliance on NLNG Train-7 Project.’

In the letter which was obtained exclusively by THISDAY and signed by the NCDMB’s Director in charge of Monitoring and Evaluation, Mr. Tunde Adelana, the agency said information reaching it suggested that some of the foreign shareholders of NLNG have indicated their unwillingness to comply with the Nigerian Content laws and guidelines in the execution of the NLNG Train-7 Project.

“For the avoidance of doubt, we wish to caution at this moment that the Board will not entertain any attempt to circumvent the provisions of the NOGCD Act, 2010 by any company operating in the Nigerian oil and gas industry,” it said.

The agency added that it would continue to periodically carry out review of the NLNG Train-7 project to ensure that all Nigerian content plans, requirements and commitments are strictly adhered to.

“NLNG is also informed that it shall be required to provide detailed progress update on the performance of the Train-7 project relative to the Nigerian content commitments. NLNG is also reminded of the Board’s publication in the Nigerian oil and gas industry dated March 22, 2018 on the consequences of non-compliance,” NCDMB added.

The execution of FEED contract takes about nine to 12 months but the Managing Director of NLNG, Mr. Tony Attah, had revealed that the company had adopted the Dual FEED Process by awarding this crucial part of the Train 7 project to two prospective engineering consortia, instead of one contractor.

“What this does for us is give us a degree of freedom to start FEED and sometime after, EPC Bidding, with both activities overlapping. We remain committed to taking FID as soon as these processes are complete,” he reportedly said.