The $15 billion Egina oil development programme being carried out on behalf of Total Upstream Nigeria by Samsung Industries is facing some challenges that border on alleged attempt by the contractor to circumvent the Local Content Act.
This development may lead to cost overrun and delay in the completion of the project, said industry watchers. According to them, Nigerian Content Development Monitoring Board (NCMDB) had spotted some anomalies in the execution of some aspects of the project especially as it affects the work scope for the fabrication and integration package in the Egina field development which is alleged not to be in compliance with the Nigerian Content Act
Consequently, the NCMDB had decided to write to the management of Total Upstream to make known its observation which borders on the ability of LADOL, a Lagos-based company partnering with Samsung, to meet its own aspect of the job, which is fabrication and integration, because it lacks the workforce that would be able to carry out the job.
The letter was said to have expressed fears that Samsung Heavy Industries' (SHI) proposal to use LADOL yard (with no existing fabrication workforce) for fabrication of 10,000 metric tonnes would lead to flooding the yard with expatriates.
"The Board cannot rely on assumptions and projections made by SHI (which has no Nigerian experienced and local partners with any fabrication or integration track record)."
The Board also noted that two years after it highlighted the risk of NPA not granting approval and six months after SHI was selected as successful bidder for the EPC contract, NPA approval has still not been obtained for use of LADOL yard for fabrication purposes.
The NCDMB also pointed out that the recommendation to award (RTA) for SHI cannot meet the man-hour target for fabrication and integration set by the Board to meet the employment provisions in the Act While noting the preference of SHI and Total's proposal for awarding the Egina FPSO contract package, the Board said it was unable to support the Total proposal which it considers unrealistic, "after noting that three critical statutory approvals have not been obtained from NPA'!
"We cannot rely on projections of parties that have little knowledge of the Nigerian operating environment. Neither Total nor SHI is in control of these approvals and therefore this proposal is fraught with risks that will lead us to the same outcome from previous exercises," the Board further noted.
Responding on this issue, LADOL in a statement signed by Alex Akao, its media persons said that LADOL and Samsung's development plans have passed TOTAL and NNPC technical assese-ments.
He said LADOL and Samsung gave a full presentation of their technical plans to the NCDMB on June 13, 2011 at which die board praised the plans and this is on record. According to him. the NCDMB board is very much aware of the findings and submissions made by Coastal and Reclamation Engineering Services Nigeria (CARES) after a three year technical analysis and detailed appraisal of LADOL following which our organization was selected as the optimal location for the Egina project onshore integration and a portion of the local fabrication.
He said Samsung chose to expand LADOL's existing facilities because studies have revealed that adding that there is no existing facility in Nigeria, or in the whole of Africa that can integrate an FPSO, which is why onshore FPSO have never been done in Nigeria
Nigeria's current fobrica-tion capacity he said is not sufficient to achieve the level required in Egina, hence additional capacity is being built by the expansion of LADOL ." We have been doing this since 2011"
In a memo from Samsung detailing the way forward in the execution of the Egina project, the company claims that there is the risk of cumulative project delay time of approximately 10 months which will impact on the FPSC« delivery, adding that there is the need to re-evaluate the in-country integration strategy and explore offshore integration.
The company submitted that exploring offshore integration will entail a reduced Nigerian Content requirement from 7 modules to a maximum of 3 modules for in-country fabrication, while the remainlngwill be fabricated at Samsungyaid in Korea Samsung also submitted that reducing the present in-country fabrication and integration scope in favour of offshore integration will provide huge financial gain of about $500 million and delivery of the FPSO on schedule.
It will be recalled that the NNPC approval of the Samsung bid for the Egina EPSO contract was based on 10,000 metric tonnes work scope to be carried out at LADOL yard in Nigeria and even this was not compliant with the Nigerian Content Act which stipulated 13,000 metric tonnes.
Currendy, Total and SHI are proposing that the work scope be cannibalised with only 1,500 metric tonnes to be carried out at LADOL yard, with some fabrication work given to Ascot and Niger Dock, while me rest is carried out offshore in Korea
Attempt by BusinessDay to get Tola! Upstream to comment proved abortive as an inside source claimed he was riot authorised to comment on the matter, and that Total Upstream would have to contact die company's Local Content unit before it comes out with official position on the matter.
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