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Chevron may face a $400 million fine from Nigerian government

INDICATIONS are that the Korean firm handling Chevron Nigeria Limited’s, CNL, implementation of the Domestic Gas Supply Obligation, DSO, as well as the company’s Gas Supply Expansion Project modularisation, GSEP, may have deliberately sabotaged the Nigerian Content Act to ensure most, if not all the scope of work to be done is carried out in Korea.

 

 

INDICATIONS are that the Korean firm handling Chevron Nigeria Limited’s, CNL, implementation of the Domestic Gas Supply Obligation, DSO, as well as the company’s Gas Supply Expansion Project modularisation, GSEP, may have deliberately sabotaged the Nigerian Content Act to ensure most, if not all the scope of work to be done is carried out in Korea. Following the delay, with each passing day, Chevron Nigeria Limited risks payment of upwards of $400 million to the Federal Government owing to its inability to execute its domestic gas supply obligation. Vanguard reliably gathered from an official of the National Petroleum Investment Management Services, NAPIMS, a subsidiary of the Nigerian National Petroleum Corporation, NNPC, that this was not the first time the Korean firm would be deploying the tactics of indefinite delay for good effect.

An official of NAPIMS, who pleaded anonymity said: “They push the delay of the project until it compromises the schedule and delivery for Nigeria. In the last nine months, nothing has happened regarding this project. The next thing you would witness is that Chevron would start asking for waivers to avoid being held liable for the penalty and Nigerian Content would suffer because scope of work to be done in-country would be drastically reduced.” It was gathered that the original scope of work to be executed under the domestic gas supply obligation as at 2006 would have involved 6,900 metric tonnes of fabrication. However, owing to concerns about in-country capacity, the scope of work was reduced to 4,000 metric tonnes. “But, it would appear everybody has forgotten about this because right now chances are that only 400 metric tonnes or thereabout may be done in-country as a result of the intrigues and delays orchestrated by the Korean firm,” the NAPIMS official disclosed. He lamented the Korean firm’s approach to doing business in Nigeria, noting that the proposition of the firm would see less than five per cent of the entire fabrication work carried out in Nigeria.

The NAPIMS official added: “The way the Korean firm has handled this matter, chances are that thousands of jobs would be created in Korea to the detriment of the Nigerian Content Act, while many Nigerian fabrication yards will become redundant and workers forced to leave. ”Although on paper, the firm had proposed 10 per cent local content for engineering under EPCI, 15 per cent for production, 25 per cent for procurement and 40 per cent for installation. What they really want to do is push the delay until a sense of urgency sets in, then they can demand that for the purpose of timeliness, most, if not all of the fabrication work be done in Korea.”

It would be recalled that last year, the Federal Government introduced the Gas Master Plan for natural gas utilisation and this placed emphasis on the domestic gas market as opposed to exports. To ensure the success of the initiative, government directed multinational oil companies to make available to the domestic market, 50 per cent of their total gas production towards the realisation of the 6,000 Megawatts electricity target of the government, among others. Chevron took advantage of this provision for single-source award of the GSEP, Domestic Supply Obligation, DSO, and the Escravos Export System Project, EESP, and contracted the Korean firm. Investigations revealed that within Chevron’s contracting system, the only other company that could deliver within this category was Ascot Engineering, but they didn’t have the pedigree for the scope of work required. The firm had in its bid identified and partnered Nigerdock Nigeria, an indigenous fabrication yard as part of efforts to fulfill the statutory Nigerian Content requirements and this provided Chevron the basis of award of the projects.

It was gathered that, having used Nigerdock to meet the Nigerian Content requirements, the Korean firm had in the last nine months failed to advance a memorandum of understanding and had refused to execute the necessary work scope in-country. The DSO and GSEP valued at $2 billion includes engineering, procurement, fabrication /construction and installation works and these include major works to be executed by Nigerdock in-country, while the firm had certain scope expected to be done in-country and the rest in Korea. 

Author: Hector Igbikiowubo

Source : Vanguard