Ripples over $1bn Escravos Domestic Gas Contract. Keep business in Nigeria! DO NOT OUTSOURCE ANYTHING!

By Chika Amanze-Nwachuku,
The decision of the Ministry of Petroleum Resources to award a $1 billion contract for execution of the Escravos Domestic Gas (EGP) supply projects to a Korean company, Hyundai Heavy Industries (HHI), is generating lots of ripples in the industry.
Besides, industry sources alleged that due process might not have been followed in the deal, which specifies that all engineering works be done outside the country, thereby denying Nigeria over 2,500 jobs.
It was learnt that the deal may have been rushed through a “subverted procedure” so as to seal it before the Nigerian Content Bill is signed into law.

The Nigerian National Petroleum Corporation (NNPC) had last December warned that it would no longer accept a situation whereby oil companies that operate in Nigeria and derive enormous revenue from the country will hide under convenient excuses to export Rig Shipyard/Shut-down Repairs & Maintenance to other countries, thereby depriving Nigeria of huge revenue, employment and exposure to critical technology.
Group Executive Director (GED), Exploration & Production at the NNPC, Mr. Philip Chukwu, who read the riot acts through the General Manager, Local Content division, Mr. Ernest Nwapa, noted that oil companies operating in Nigeria, in defiant to the Nigerian Content guidelines, move their drilling rigs to countries that have facilities that are even inferior to those in Nigeria for maintenance. He warned that such companies may be sanctioned.

He pointed out that of the over 300 vessels working in the Nigerian Oil and Gas theatre, most of them are currently being maintained outside Nigeria.
But industry stakeholders who spoke on the issue last night said the decision to award the N149 billion contract to a foreign company amounts to capital flight , which is contrary to the Nigerian Government Local content policy.
The local content policy, which is a brainchild of former President Olusegun Obasanjo seeks to increase indigenous participation in the oil and gas industry.

The soon to be-passed local content bill has the following provisions: first consideration for Nigerian operators and Nigerian service companies in the award of contracts; the provision for Research & Development (R&D) to be domiciled in country for most projects and training opportunities for Nigerians; establishment of the Nigerian content monitoring board to make procedure guide, monitor, coordinate and implement the provisions of the Bill. The bill also recognises the Job Qualification Standard (JQS) where contractors will be jointly qualified.

The federal government was said to have decided to fast-track the gas supply project as part of its strategy to ensure availability of adequate gas for the power stations, but sources argue that the strategy adopted by the ministry of petroleum resources runs contrary to the principles upon, which the Nigerian Content policy was formulated.
Investigations also revealed that only a few fabrication jobs worth about $100 million is expected to be performed in Nigeria as the engineering, procurement and installation works are earmarked to be carried out outside the country by companies that have no Nigerian ownership or input.

“Not only have HHI failed to follow normal guidelines, partnered or sub-contracted scope locally for engineering, fabrication, procurement or installation, this Korean company has tried to obtain ministerial approval prior to Nigerian Content Bill being signed all in a bid to avoid compliance”, an official of the ministry of petroleum who craved anonymity alleged.

“Although the original plan was to use existing contracts and contractors to the greatest extent possible, the whole process has been subverted.

“From what I am able to discern, the plan is to maintain same level of Nigerian Content as in the EGP 3A Offshore and Onshore contracts and for the current pipeline contractors, which is basically low. Given the current development, Nigerian Content has been compromised again. From what I gather, HHI has no in country facilities to execute scope and will perform this project abroad”, the source added.