- NNPC maintains project adhered to budget, senators demand audit
The 200,000 barrels per day Egina oil project which encompasses a 330 metre long Floating Production Storage and Offloading (FPSO) platform designed to process oil from the field from December 2018, would be completed with about $603 million below its original budget of $16.354 billion, the Managing Director of Total Exploration and Production Nigeria Ltd. (TEPNG), Mr. Nicolas Terraz, has disclosed.
Terraz, who spoke during a public hearing of the Senate Ad-hoc Committee investigating the local content elements of Egina oil field project on Tuesday in Abuja, explained that the initial budget established in 2013 for the Egina project was $16.354 billion, but that after extensive cost optimisation by Total and its partners, this figure was revised downwards to $15.751 billion in May 2013.
He stated that a Final Investment Decision (FID) on the project located in Oil Mining Lease (OML) 130 in the Niger Delta region was then made on the basis of this reduced budget figure.
Terraz’s disclosure was however contrary to allusions by the Senate Ad-hoc Committee led by Senator Olamilekan Adeola, and with members like Senators Godswill Akpabio, Stella Odua, Kabiru Morafa and Tanimu Aduda among others, that the procurement processes for the project were unclear and needed to be audited to ensure that Nigeria was not shortchanged by the parties in it.
Going through the investigative drills of the committee, Terraz disclosed that being the first major deep-water development project launched after the enactment of the Nigeria Oil and Gas Industry Content Development (NOGICD) Act otherwise known as the Local Content Law, the Egina project has recorded the highest level of local content of any such project so far.
He said there was no time the project cost was revised upwards since the FID was made in 2013, adding that what had happened instead was that parties had made concerted efforts to bring down the cost.
“Regarding the project cost, there has been no upward review of the budgeted costs for the Egina project since the Final Investment Decision was made in 2013, rather, there were concerted efforts to deliver the project within the budget and even below it.
“Specifically, as we have earlier stated that the initial budget established in 2013 for the Egina project was $16,354 million and after extensive cost optimisation by TUPNI and the project partners, this figure was revised downwards to $15,751 million in May 2013 and the Final Investment Decision was made on the basis of this reduced budget figure,” Terraz said.
He further stated: “In this respect, please be assured that it is the highest priority for TUPNI as operator to control the cost of the project during the execution phase and to deliver the project within budget.”
Listing the operational milestones recorded by the project, Terraz, said a workforce of 3,000 persons had worked on the project in the five years of its execution, while 60,000 tons of equipment used on the FPSO have been fabricated in Nigeria.
According to him, several large-scale industrial facilities were developed in Nigeria for the project, and over 560,000 man-hours of human capacity development training recorded so far.
“I am pleased to inform the ad-hoc Committee that the Egina FPSO will be arriving at SHl-MCI yard in Lagos on January 24, 2018. This is a key milestone for the project, and will be the first time ever that an FPSO is berthed at quay side in Nigeria for the lifting and integration of locally fabricated modules.
“With the arrival of the Egina FPSO within the week, the Egina project is very much on course. TUPNl and her partners are committed to the delivery of the project on schedule with first oil expected by December this year. In doing so, we will be adding 200,000 barrels of oil to Nigeria’s oil production,” he added.
His claims were however buttressed by the Chief Operating Officer Upstream of the Nigerian National Petroleum Corporation (NNPC), Mr. Rabiu Bello, who told the senators that Egina would be completed at its budgeted cost.
Bello, who had a tough time clarifying the procurement processes and nature of the agreement the NNPC signed with Total for the Egina project, noted that so far, the total budget the corporation has approved for the project was $10.674 billion out of its original cost.
He said the project operator has never requested for an approval of a cost variation since it began the project, adding that the expenditure made so far were documented.
Not satisfied with the explanations made by the NNPC and Total, the committee directed the NNPC to conduct a technical and financial audit on the project expenditure so far, and submit same to it.
Its Chairman, Adeola, said if the NNPC fails to conduct the audit using an independent auditor, the committee will advise the Senate not to engage it on request for approval of future deep-water projects like the Zabazaba and Bonga South West projects.
“We in the Senate will give you a directive to conduct a value for money audit on the Egina project, and we expect to have this soon unless you want to be a clog in the wheel.
“Unless you bring the value for money audit on this project – the $16.3 Egina FPSO, until this is done, no other project of this nature will be going ahead until a value for money audit on this particular project is done,” Adeola declared.