Senate grills Chevron Nigeria for $7.4bn Gas-to-Liquid contract inflation
The Senate has commenced investigation into the inflation of the contract sum of the Escravos Gas-To Liquid Project (EGTL) from $2.9 billion to $10.3 billion, an increment of $7.4 billion.
The Senate Committee on Gas at a public hearing on Monday, queried Chevron Nigeria Limited (CNL) for increasing the contract sum without recourse to its partner – the Nigerian National Petroleum Corporation (NNPC).
Chairman of the Committee Bassey Akpan (PDP, Akwa-Ibom North East) criticised the company for increasing the contract sum at such magnitude, stressing that it violated the terms of the Joint Venture Agreement.
He wondered why the project with 33,000 barrels per day capacity would cost $10.3 billion while a similar project in Qatar with 34,000 barrels per day was constructed for $1.2 billion.
Akpan who said investigations into the EGTL project was also done by the 6th and 7th Senate, pledged that the 8th Senate would conclude the investigation within the shortest time.
“Between 2008 and now the project cost had risen by an additional $5 billion and this is quite worrisome. We need to sit down and look at the cost, it is quite astronomical for you to have the cost that was approved at $2.99 billion with a completion cost of about $10.3 billion”, he said.
The Senate panel also queried why the share ratio on the EGTL project was 75 per cent to Chevron and 25 per cent to NNPC when all other similar ventures between the two were 60 to 40 per cent.
Responding, the Director, NNPC/Chevron Joint Venture, Monday Ovuede pointed out that the company did not violate the Joint venture Agreement as it had invited the NNPC on several occasions to meet.
He said that as at the time when it was evident that the contract had to be reviewed, notified NNPC and called for meetings of several occasions which the NNPC shunned.
He said the company was left with two choices: forget the over $2 billion investment and abandon the project or go ahead with the project.
Ovuede stated: “If we didn’t do what we did, the value being released today from EGTL wouldn’t have been realised”.
He added that with the plant, gas flaring had reduced to just 10 percent.
However, the Senate committee was still unsatisfied with the explanations of Chevron, insisting to see more documentation showing the level of involvement of both Chevron and NNPC.
Although the committee chairman commended the company for completing the project, it insisted that a lot of questioned still needed to be answered.
“For you to change a project model from a lump sum of $2.9 billion without the consent of NNPC is a breach of the venture agreement.
“For you to prove that you did not breach this agreement, we need to see an evidence that you followed through with the venture agreement.
“Whether you had written 2,000 letters to NNPC or not, in this case you have violated because the agreement didn’t say that silence is consent,” he said.
The Senate therefore asked CNL to provide more documents relating to the contract including evidence of shareholding, copy of letter signed by NNPC GMD indicting Chevron and the reply of CNL, details of the Joint Operating Account of EGTL since inception in 2009 and evidence of tax remittances to the Federal Inland Revenue Service (FIRS), details of sales proceeds as well as evidences of all income accrued to NNPC since inception.
The Senate Committee on Gas at a public hearing on Monday, queried Chevron Nigeria Limited (CNL) for increasing the contract sum without recourse to its partner – the Nigerian National Petroleum Corporation (NNPC).
Chairman of the Committee Bassey Akpan (PDP, Akwa-Ibom North East) criticised the company for increasing the contract sum at such magnitude, stressing that it violated the terms of the Joint Venture Agreement.
He wondered why the project with 33,000 barrels per day capacity would cost $10.3 billion while a similar project in Qatar with 34,000 barrels per day was constructed for $1.2 billion.
Akpan who said investigations into the EGTL project was also done by the 6th and 7th Senate, pledged that the 8th Senate would conclude the investigation within the shortest time.
“Between 2008 and now the project cost had risen by an additional $5 billion and this is quite worrisome. We need to sit down and look at the cost, it is quite astronomical for you to have the cost that was approved at $2.99 billion with a completion cost of about $10.3 billion”, he said.
The Senate panel also queried why the share ratio on the EGTL project was 75 per cent to Chevron and 25 per cent to NNPC when all other similar ventures between the two were 60 to 40 per cent.
Responding, the Director, NNPC/Chevron Joint Venture, Monday Ovuede pointed out that the company did not violate the Joint venture Agreement as it had invited the NNPC on several occasions to meet.
He said that as at the time when it was evident that the contract had to be reviewed, notified NNPC and called for meetings of several occasions which the NNPC shunned.
He said the company was left with two choices: forget the over $2 billion investment and abandon the project or go ahead with the project.
Ovuede stated: “If we didn’t do what we did, the value being released today from EGTL wouldn’t have been realised”.
He added that with the plant, gas flaring had reduced to just 10 percent.
However, the Senate committee was still unsatisfied with the explanations of Chevron, insisting to see more documentation showing the level of involvement of both Chevron and NNPC.
Although the committee chairman commended the company for completing the project, it insisted that a lot of questioned still needed to be answered.
“For you to change a project model from a lump sum of $2.9 billion without the consent of NNPC is a breach of the venture agreement.
“For you to prove that you did not breach this agreement, we need to see an evidence that you followed through with the venture agreement.
“Whether you had written 2,000 letters to NNPC or not, in this case you have violated because the agreement didn’t say that silence is consent,” he said.
The Senate therefore asked CNL to provide more documents relating to the contract including evidence of shareholding, copy of letter signed by NNPC GMD indicting Chevron and the reply of CNL, details of the Joint Operating Account of EGTL since inception in 2009 and evidence of tax remittances to the Federal Inland Revenue Service (FIRS), details of sales proceeds as well as evidences of all income accrued to NNPC since inception.