The Nigerian National Petroleum Corporation (NNPC) on Tuesday exonerated Total Upstream Nigeria Limited (TUPNL) from inflating the cost of the Egina project, stating that from inception the project had been agreed at $16.35 billion.
Speaking at the Senate Ad-hoc committee’s investigative hearing on local content elements and cost variations relating to Egina oilfield and other related projects in Abuja, Chief Operating Officer, Upstream of the NNPC, Bello Rabiu, also stated that out of the $16 billion budgeted for the Egina project which started in 2013, $10.7 billion had been disbursed so far.
Bello stated that at the initial phase it was agreed that the project would cost $16.35 billion, adding that the cost element of the contract had not changed and still remained $16 billion now that the project is almost completed.
Giving a breakdown of the project, Rabiu declared that the Floating, Production, Storage and Offloading, FPSO, vessel, which would sail in Wednesday, cost $3.5 billion, compressors cost $240 million; flowlines and risers was to gulp $3.6 billion; while the subsea production system was to gulp $1.5 billion.
In addition, he disclosed that drilling would cost $3.8 billion, while other miscellaneous costs, comprising salaries, and insurance among others, was to cost $3 billion.
Rabiu said the project, which started in 1993 when the oil block was awarded and in 2013 when FPSO project contract was awarded, would hit first oil by December 2018, while he noted that Total, by the terms of the agreement, was expected to undertake the project, provide the finance, recover its cost and later share profit with the NNPC.
Speaking in the same vein, Executive Secretary of the Nigerian Content Development Monitoring Board (NCDMB), Simbi Wabote, commended Total for the milestones achieved in the project, especially for its strict compliance to the local content initiatives.
Wabote declared that Egina is the first FPSO project agreement to be signed and undertaken after the Nigerian Oil and Gas Industry Content Development, NOGICD, Act was instituted in 2010.
In his own submission to the committee, Managing Director of Total Upstream Nigeria, Nicolas Terraz, maintained that there had been no upward review of the budgeted costs for the Egina Project since the Final Investment Decision was made in 2013, adding that rather, concerted efforts were made to deliver the project within the budget and even below it.
He said, “Specifically, as we have earlier stated, the initial budget established in 2013 for the Egina Project was $16,354 million and after extensive cost optimization by TUPNI and the project partners, this figure was revised downwards to $15.75 billion in May 2013 and the Final Investment Decision was made on the basis of this reduced budget figure.
“In this respect, please be assured that it is the highest priority for TUPNI as operator to control the cost of the project during the execution phase and to deliver the project within budget.”
Terraz noted that with the arrival of the Egina FPSO this week, the Egina project was very much on course, as TUPNl and her partners are committed to the delivery of the project on schedule with first oil expected by December this year, adding that in doing so, we will be adding 200,000 barrels of oil to Nigeria’s oil production.
The Total boss declared that the unprecedented record level of Nigerian Content on all the packages of the Egina project translated into increased work scopes for several fabrication yards at various locations in Nigeria, in some cases calling for significant facility development and capacity expansion investments by the project.
He disclosed that the FPSO unit of Egina, a 330-meter long vessel designed to process oil and gas from the Egina field, would be berthed at the quayside in Nigeria for integration of locally fabricated modules a first for Nigeria.
According to him, Egina has six FPSO topside modules, the highest number ever, to be fully fabricated and integrated in Nigeria; while he noted that the assembly of the Integrated Control and Safety System of the FPSO was fully performed in Nigeria.
He said the project includes the fabrication of the largest subsea equipment, such as manifolds and risers, ever completed in Nigeria.
He said, “In terms of employment, the project represents a workload of 24 million man-hours worked in Nigeria, or 77 per cent of total project workload, equivalent to a workforce of 3,000 persons on average during five years.”
However, the Senate Ad-hoc Committee called for a value-for-money audit of the $16 billion Egina FPSO vessel contract, stating that unless the audit is conducted, it would no longer support other projects of such nature, such as the Bonga South-West and Zabazaba FPSO projects.
Chairman of the Committee Solomon Adeola, said the audit becomes necessary to establish the actual cost of the projects and look at the implications of the project to the company, adding that the audit would focus on technical and financial aspects of the project.
He said, “We are hereby directing the NNPC to conduct a value for money audit of the Egina project. We are aware such would last for about 16 weeks. Until that audit is done, no other contracts of this nature would be supported by this Senate, either Bonga South-west or Zabazaba among others.
“We do not want the audit to be conducted by auditors of Total, but independent auditors to give us a clearer and true view of things.
He further stated that the essence of its investigations was to guide the country in making decisions on similar projects in the future.
According to Adeola, this was because two similar projects scheduled to come up soon, Bonga South-West and Zabazaba, with a production capacity of 150,000 barrels per day, were budgeted at about $6 billion and $9 bilion, respectively, he also wondered why Egina would be valued at $16 billion going by the little difference in capacity of the vessels.
Copyright Ships & Ports Ltd. Permission to use quotations from this article is granted subject to appropriate credit given to www.shipsandports.com.ng as the source.