CEM REPORT, OIL AND GAS
- NNPC Shuts Down 395 Refineries
The House of Representatives 8s set to commerce a probe on the cost of the Escravos gas-to-liquids (EGTL) project.
This is as the cost of the project has risen by $7.8 billion, from $2.9 billion to $10.7 billion.
The project which is a partnership between NNPC and Chevron Nigeria Limited (CNL), is expected to increase gas supply by 400 million standard cubic feet per day (MMScfp/d). This is projected to be 26% of Nigeria’s domestic gas supply, and to generate $2 billion annually Nairametrics report.
The chairman of the committee on the Joint Venture of the NNPC Limited, Hassan Fulata, decried the sharp increase in less than 3 years.
He noted that a similar project which cost less than $2.5 billion was executed in Qatar within a very short period.
He also noted that NNPC Limited should have protested the cost review and demanded a value-for-money audit.
Defending the increase Chevron’s Director of Joint Venture, Monday Ovuede, explained that several factors caused the upward review of the cost of the project from the initial $2.9 billion to $10.7 billion,
He cited increased prices of steel needed for the project.
“This is a very complex technology to be executed in this part of the world. When the construction of the project started in 2005, commodity prices, including that of oil and steel were not as high as they are on the international market today.
“The project was given as engineering, procurement, and logistics, which means the sum was fixed. In the course of executing the contract, the contractors came back.”
Responding to the comparison to the Qatar project, he noted that the Qatar project was built on an already existing industrial complex with a seaport and access to an international airbase, with access to skilled labour, compared to Nigeria.
“The plant in Qatar is built in an industrial complex close to a seaport and there is an international airbase there.
“It has access to skilled labour from Europe. When you come to our side, we try to build—for some of the technology, we had to develop the local labour to the level required to implement the project.”
Ovuede also noted that Chevron agreed to a value-for-money audit despite not having it in the contract for the project.
Fulata claimed that Chevron was claiming capital allowance for the project without capital importation or a certificate to make such a claim, and ordered them to reappear Tuesday, Oct. 11 with relevant documents to defend its claims.
Meanwhile the Nigerian National Petroleum Company Limited (NNPC) in a briefing with the Senate ad hoc committee on oil theft in the country disclosed that it had clamped down on the operations of 395 illegal refineries.
The NNPC Ltd MD, Mele Kyari stated that partnership with private security partners, led to the discovery of an illegal connection of four kilometres route into the sea running from its major Forcados line, adding that the illegal route does not reach the terminal.
He added that the illegal line probably operated for the last nine years.
“We have deactivated 395 illegal refineries; we have taken down 273 wooden boats, we have destroyed 374 illegal reservoirs, we destroyed 1,561 metal tanks.
“We have seized over 49 trucks and burnt them down; we have discovered illegal oil pits of 898 so far, and 1,219 cooking sites have been taken down.”
Furthermore Kyari regrettably noted that the operator of illegal refineries and crude theft by vandals has cost the country reduced oil production to around 1.2 million barrels per day from 1.8 million.
“To be very precise, we have never seen this level of escalations in our operations.
“The scale of oil theft and vandals that we are seeing today is unprecedented, prices of crude oil are so high in the market today, for oil thieves to operate.
“But we have put a structure of security hovering around our partners, all the government security agencies, we have set up private contractor security.
“The Brass, Forcados, and the Bonny terminals, are all practically doing zero production today; the combined effect is that you have lost 600,000 barrels per day when you do a reality test.
“But we hope to restore production to the Forcados terminal, this is as a result of the security intervention that is ongoing.”
The Chairman of the joint committee, Sen. Mohammed Nakudu (APC -Jigawa) urged Kyari to install trackers on trucks lifting crude from terminals, stating that the technology is to monitor ships loaded with crude.