Former Petroleum Minister, Diezani Alison-Madueke and NNPC cabal went against Total Upstream’s advice to award $3.9billion FPSO Project to Samsung Heavy Industries, SHI, instead of Hyundai Heavy Industries, HHI, the original bid winner

The award of Egina Field contract to Samsung Heavy Industries, SHI, located offshore within the oil mining lease, OML, 130, above 200 kilometres from Port Harcourt, a stand alone sub-sea development as well as a Reservior Pressure maintenance by water injection project originally won by Hyundai Heavy Industries, HHI, but awarded to Samsung Heavy Industries, SHI, made many foreign investors and international bidders to refirm their resolve not to come to Nigeria as long as impunity is allowed, whereas due process is the name of the game globally with respect to international tender process. One of the foreigners, a journalist who witnessed both the technical bid in October 2010 and the commercial bid opening on December 15, 2011 called this magazine reporter recently to commend the new regime when he heard that the Nigerian government under Muhammadu Buhari would reverse many contracts that did not follow due process awarded by NNPC cabal. He had written about the corruption in the oil industry and was more particular about arbitrary award of contract without following international laid down rules but the more he wrote the more cases of impunity.

Recent discoveries have shown that much as even the previous government wanted foreign investors and equally pursued local content development some actions of the principal actors reneged on government’s promise on the rule of law/due process.

For instance, the former petroleum minister was aware that OML – 130 Egina field development project, FPSO Hull and Tipsides contract No. EG11C115 was advertised for, in September 2009 with a call for tender and with pre-qualified bidders list approved by NAPIMS and NCDMP in March 2010. The technical bid was opened in October 2010 while the commercial bids opening was done in December 15, 2011 with NAPIMS.

By April 2012 joint recommendation to award was made for all EPC issued to NAPIMS but Hyundai and Samsung were called for a commercial clarification meeting in Lagos in February 2012. Samsung was told of non-complete bid because of tax and levies excluded in addition to some non-quoted items and design dossier that were not endorsed. Hyundai on its part was asked to clarify the scope of local content and other necessary clarification.

Those with inside knowledge say Samsung non-complete bid owing to non inclusive of tax and levies was enough reason to disqualify the company but both Samsung and Hyundai were requested by Total Upstream Nigeria Limited, TUPNI, to revised their commercial proposal following the earlier meeting with the two companies in February, 2012.

Hyundai not only offered the lowest valid commercial bid, the foreign firm met Nigerian content plan as well as certified by Total (TUPNI) as having the best execution plan for the project and based on this report, NNPC GED, E & P approved NAPIMS and Total Joint recommendation to award the project to HHI, (Hyundai Heavy Industries). This was as at May 15, 2012.

However, when the letter for the award of the contract was long in coming, the representative of Hyundai in Nigeria sensing long delay amidst the high cost of things, sent a letter of complaint to former President Goodluck Jonathan. That became the many sins of the company and its representative. Rather than follow due process and award the contract to Hyundai, the former petroleum minister, Diezani Alison-Madueke took offence at the boldness of Hyundai and its representative to write Mr. President and she called NAPIMS Group Executive Director, E & P requesting him to write Total Upstream to invite Samsung for negotiations.

In November 22, 2012, TUPNI, in a reply to NAPIMS insisted that there are no new elements which could lead to the modification of the recommendation to award.

Hyundai got the FPSO package. This was contained in a memo recommending for consideration and endorsement by the General Executive committee, GEC, to NNPC’s board for approval (See A- 8103). The memo was signed by Engr. O.O Omotola, manager, PSC facilties; (Vetting officer, Mrs. A Isaiah-Iworinma, M.A. Fiddi, GGM NAPIMS and Engr A. L. Yakubu, then GED, E & P. But the former petroleum minister Diezani-Madueke whose image is believed to be larger than life in the eyes of members of cabinet under the former regime, truncated the contract award to Hyundai. In another memo signed by Andrew Yakubu, Abiye Members and NNPC secretary and legal adviser, Tony Madichie, the contract was unilaterally awarded to Samsung even when Total protested and insisted in a memo to the, GEC that the award of the contract to Samsung branches due process of international tender. Furthermore, Total insisted in the memo that there was no grounds for Samsung’s 5 percent discount proposal as it was never recommended by TUPNI/NAPIMS. Even then, only two GEDs signed the documents meaning that no quorum was formed yet the decision was taken to re-award the contract.

Insiders told the magazine that Samsung was invited for negotiation with the former petroleum minister where the deal for a 5 percent discount was negotiated. But Hyundai (HHI) was left out and was not given any opportunity to offer any discount officially because of its officials temerity to go to former president to complain of delay in awarding the contract that they have already won the bid/tender. Those with inside knowledge of the contract say that even with the 5 percent discount given by Samsung their cost for the project was higher yet the project was awarded to them.

When the magazine asked those who should know why only one of the two companies was asked to give a discount, no one in NNPC or NPIMS was ready to comment.

Besides, a contract of this magnitude can not be complete without Total Upstream (TUPNI) signing as one of the joint operators but in this case TUPNI refused to sign, rather Total Upstream argued that the approval by NNPC board to award the job to SHI breaches Nigerian content Act and the tender requirement. According to Total (TUPNI), SHI has no presence in Nigeria and no experience. Consequently, Total requested for a bid validity extension to April 2013. This was acceptable to HHI. Even then, the NNPC board went ahead to award the contract to SHI.

International observers who spoke to the magazine say the contracts do not only violate the Nigerian procurement Act, it equally violated the regulations enshrined in the United Nations policy. Beside, the job was expected to provide almost 1000 skilled jobs for Nigerians youths. Also, the contract states that 10,000 tonnes of topside fabrication is expected to be manufactured in Nigeria, in line with the local content Act. The magazine gathered from reliable sources that since Samsung got the contract awarded to it under strange circumstances last year, there are no official records of employment offered to Nigerian youths as enshrined on the project. More worrisome is the speculation making the round that Samsung has started building the EPSO abroad and would complete the entire project there before bringing the completed work.

There are unconfirmed reports that one of the reasons Mr.Ernest Nwakpa, former executive secretary of the Nigeria Local Content Commission was removed was because he was seen as a stumbling block to the preferred company from getting the FSPO contract owing to his insistence on due process and adheres to Nigeria Local Content Act.

The manner in which HHI who was the original bid winner was edged out of the project and the contract was awarded to a company which TUPNI argued has no experience and no presence in Nigeria put more question mark on the FPSO project. It also calls to question the trotted commitment of the present administration to right the wrongs of the past administration in the oil industry.

Thus when the magazine approached those who should know something about the $3.9billion EPSO contract, no one was ready to comment. Even Hyundai believed to have been short-changed and its representative, Contraco Nigeria Limited, could not be reached for comments, despite consistent trips to Hyundai representative office in Victoria Island, Lagos.

Even then, stakeholders in the oil industry who spoke to the magazine noted that the former group Managing Director of NNPC, Engr. Andrew Yakubu who signed the contract award both as GED, E & P and GMD to Hyundai and Samsung respectively Owe Nigerians and indeed the Buhari’s Administration a lot of explanations regarding how the contract between 2012 and 2014. Yakubu equally needs to account for why the advice of the joint Partner – Total Upstream Nigeria Limited was completely ignored, to the extend that the FPSO project was awarded in breach of Nigerian Local Content Act and tender requirement. Besides, an official of the Nigerian National Petroleum Corporation confided in the magazine’s reporter at the head office that officials of the petroleum ministry, who were board members connived with the former petroleum minister to sign the contract to SHI without due process as stipulated in the government’s procurement laws and policy.

Just as the magazine was investigating the impunity on the part of NNPC Board members, there were reports in the media that Nigeria lost $2billions in oil deals.

In the case of the Total Egina Field contract, awarded to SHI. Instead of the original winner of the international bid, only the parties to the deal can explain what actually happened. But one of the documents exclusively obtained by the magazine reads as follows:

‘In view of the foregoing, NAPIMS recommends for GEC’s consideration and endorsement to NNPC board for approval as follows:

To award contract for engineering, procurement, construction and commission of a floating production, storage and off loading, FPSO, unite for Egina project (6-in-country Topsides Modules Option) to Hyundai Heavy Industries Nigeria Limited at a total contract ceiling of US $ 3.965, 972, 265;00US Dollars only which is broken down as follows

A firm lump sum element amounting to US $ 2,918,000,000.000

A provisional sum amounting to US $823, 483,269 only to be administered by TUPNI only after due approvals have seen obtained from NAPIMS before spending

A total sum of US $187,074, 163,000 only as 5% VAT

A total sum of US & 37, 414, 833;00 only as 1% NCDMB Levy.

Armed with these documents, the magazine wrote the permanent secretary ministry of petroleum for response to the impunity that took place under the nose of his predecessor with respect to the Egina EPSO project but as at the time of going to press mum was the word.’

A text message was equally sent to Engineer Andrew Yakuba but he failed to respond.

Meanwhile for failing to train 700 youths from the host communities as well as provide job for the people as is expected for a contract of this magnitude, Bayelsa youths, known for their restiveness, have began to question the rationale behind unwittingly putting the nail in the coffin of the economy of the state as upsurge in violence will take a heavy toll on the state.

This is because any violence on the region by the youth will have negative impact on the nation’s economy with the bursting of petroleum pipelines and the drops in the price of oil in the international market. It means the country is losing so much. When these are added to the $2billion lost in oil deals amongst others, experts say the Buhari administration will need to work hard to overcome the already bad revenue profile of the country.

Thus, experts argued that the developmental programme of government is predicated on oil, meaning that the capacity to fully implement government programme may be jeopardised if the oil industry comes under threat.

Fillers from the creeks suggest that there might be upsurge in violence in the Niger Delta particularly in Bayelsa State where there is no presence of Samsung Heavy Industries after the company had been awarded a $3.9billion contract since last year.

While conceding that any crisis in the Bayelsa region over the FPSO field project would seriously affect the oil sector, an official of the petroleum ministry who does not want his name in print argues that the challenge facing the ministry is how to get rid of corrupt personnel working in NNPC and all its subsidiaries.

Indeed, for the oil and gas industry that depends on investors for survival any upsurge in violence will make the country to lose heavy investments.

Meanwhile efforts by the magazine to reach SHI to get update on the Egina project did not yield any result. The magazine however learnt that having negotiated a fair deal, SHI is not bothered whether the Niger Delta boils or not. What is on their card according to a source is to manufacture abroad and bring it to Nigeria. Whether it is against the Nigerian content Act is certainly not a source of worry to the SHI so long as those who make the deal to scale through the handles have had their bread well buttered.

There were however speculations that President Buhari would cancel some of the contracts awarded by NNPC. Now that so many revelations are coming up in the oil and gas industry and with President Buhari stance on corruption, insiders told the magazine that those who got kick-backs on the Egina field project are already praying not to be remembered.

But now that this magazine has stumbled on the documents and the issue is in the public domain, certainly there is no hiding place for the actors in the melodrama regarding the $3.9billion contract.

Only time will tell how President Buhari will handle this even as international observers continue to watch whether the contract will be re-awarded to the original winner, HHI, meanwhile, the NNPC board has been dissolved and Buhari is expected to embark on a complete restructuring of the corporation.

– Courtesy: South-South International