Senate queries Chevron over $7.4b contract inflation

The Senate yesterday began 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 increase of $7.4 billion, by Chevron Nigeria.

The Senate Committee on Gas at a public hearing queried Chevron Nigeria Limited (CNL) for increasing the contract sum without recourse to its partner, the Nigerian National Petroleum Corporation (NNPC).

The Chairman of the committee, Bassey Akpan (PDP, Akwa Ibom North-East), blamed CNL for increasing the contract sum at such magnitude, stressing that the company had violated the terms of the Joint Venture Agreement (JVA).

He wondered why the Nigerian project with 33,000 barrels per day capacity would cost $10.3 billion while a similar one in Qatar with 34,000 barrels per day was constructed for $1.2 billion.

According to him, investigation into the EGTL project was also done by the Sixth and Seventh Senate, saying that the Eighth Senate would conclude the investigation within the shortest time.

Akpan said: “So, 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.

“We are going to guide our decision by the venture agreement and every other related Act of the National Assembly. We would frown at anybody who breaches the law.

“I am not satisfied with the explanation they have given. How can I be satisfied as a Nigerian? I am not satisfied, but we need to listen to NNPC.

“I want to assure Nigerians that we would get to the bottom of this.”

The committee also queried why the share ratio on the EGTL project was 75 per cent to Chevron and 25 per cent to NNPC.

In his response, Director, NNPC/Chevron Joint Venture, Mr. Monday Ovuede, said that CNL did not violate the joint venture agreement as it had invited the NNPC on several occasions for meetings, adding that as at the time when it was evident that the contract had to be reviewed, notified the NNPC and called for meetings on several occasions which the Corporation shunned.

He said that the company was left with two choices, either to forget the over $2 billion investment and abandon the project or go ahead with the project.

“We decided to act in good faith considering the importance of the project.

“We feel that we acted in a reasonable and prudent manner because we called for several meetings and NNPC officials did not attend. We sent request for approval, they did not respond.

“Today, that plant is running, we have people employed there. Would it have been good faith to have allowed all the materials that were purchased to rot away because one partner refused to come to meetings? If we didn’t do what we did, the value being realised today from EGTL wouldn’t have been realised,” he said.

He added that with the plant, gas flaring had reduced to just 10 per cent.

However, the Senate committee was still unsatisfied with the excuses of Chevron and insisted on seeing more documentation showing the level of involvement of both Chevron and NNPC.

The chairman of the committee said that NNPC’s non-response was not synonymous with a go-ahead order to CNL to increase the contract sum.

Although the committee commended the company for completing the project and commencing operation, it insisted that a lot of questions are still needed to be answered.