The Nigerian state oil company, NNPC is in the news again, and not surprisingly it is not for good reasons. NNPC is being accused of rigging the tender process for the award of pipeline management contract for a huge section of the nation’s pipeline and depot lots totaling about five thousand kilometeres.
The major beneficiaries for the farce are familiar entities, MRS and AA Rano, two companies that featured prominently in NNPC’s opaque Direct Sale of Crude Oil and Direct Purchase of Petroleum Product contracts commonly called DSDP.
Companies in the downstream and midstream sector of Nigeria’s petroleum sector have condemned the pipeline contract award but in its usual manner, NNPC issued a statement on Sunday night in which it sought to dismiss the weighty accusations against the process without providing information about what transpired.
NNPC claimed that it involved the ministry of justice, the bureau of procurement, ICRC as well as NEITI in the process but what it failed to say was that these entities were a mere smokescreen dragged in to legitimize the awards. BusinessDay investigations has shown that these entities were sidelined when it came to evaluating the bids and determining who the preferred bidder was. In fact some of the entities heard that preferred bidders has emerged after they began to receive representations from firms who complained that they were rigged out.
NNPC also failed to address the issue of why it went ahead to invite bids from companies that already have large retail footprint to manage products and crude pipelines and depots for the whole industry, a process which will now transfer the monopoly held by the government to favoured companies. NNPC also did not address the accusation that one of the companies to which it awarded the controversial contract.
The bid process went on for about two years and it was only in the last days of the Buhari administration that NNPC pushed for the contract award and BusinessDay has learnt that the choice of the winners and the timing was determined by the disgraced Sabiu Tunde Yusuf, Buhari’s nephew who served as his personal assistant before being sent on a foreign posting with the intelligence agency.
According to a senior government official who spoke to our reporter on the condition that he will not be named, “Tunde was the one driving the process and it is on record that he made huge fortunes pushing the case of a number of oil companies over the years. In time, Nigerians will find out how some persons used their closeness to the former president to corner the wealth of the country.”
Tunde’s involvement meant that while some companies were fighting on their own to win deals, others were getting a smooth ride by reason of ties with Buhari’s nephew.
The procurement process was that of a DFRBOT (Design, Finance, Rehabilitate, Build, Operate and Transfer) model which started as a PPP model. Contrary to established procurement evaluation procedures and the involvement of key stakeholders like the Infrastructure Concession and Regulatory Commission (ICRC), Ministry of Justice, Bureau for Public Procurement and other project delivery team members (PDT) NNPC reportedly deviated from the standard evaluation protocol.
This has led to allegations that the process may not have been conducted with the required level of accountability.
Similarly, bidders were asked to bid for specific LOTS up to a maximum of 2 lots. OIlserve bided for and were allotted LOT 1, LOT 2 was awarded to A.A RANO Nigeria Limited, despite reports that the company did not participate in the bid process for this specific lot and AA Rano only sent bid for LOT 3. MRS Oil and Gas on the other hand bided for LOT 4 and they did not make it to the financial bid tender but they were allotted LOT 4. Such deviations from standard practices have raised concerns about the integrity of the contract allocation process and the potential for favoritism.
The pipeline network rehabilitation project, which aims to facilitate crude supply to refineries and product evacuation from them, is of paramount importance to Nigeria’s energy sector. A secure and reliable pipeline system is crucial for the country’s efforts to address supply shortfalls and enhance the operational efficiency of its refineries seamlessly.
As Nigeria seeks to transition from a state monopoly to a more diversified and competitive energy landscape, it is essential that transparency and accountability remain at the forefront of all operations. The allegations surrounding the pipeline contracts underscore the need for a thorough review of the contract allocation process to ensure that it adheres to established industry standards and best practices
According to BusinessDay’s findings, four preferred bidders including Oilserv Limited, A.A RANO Nigeria Limited, Macready Oil & Gas Service Company Limited, and MRS Oil Nigeria Plc competed for the concession to manage the pipeline assets totaling over 5,000 kilometres in length, through the build, operate, and transfer financing model to facilitate crude supply to the refineries and products evacuation.
Industry experts who spoke to BusinessDay said the development will give retailers with pipeline contracts undue competitive advantage over others with access to a reliable and secure supply, a development that is contrary to global standards.
“It’s an anomaly for downstream retailers to win pipeline contracts; In the US market, pipeline operators are separated from retailers,” a business leader in Nigeria’s energy sector said.
He added, “Whether by accident or deliberate regulatory constraint, no single company should be allowed to sit astride the entire value chain.”
BusinessDay’s findings showed some of the biggest United States pipeline companies such as Kinder Morgan, Williams Company, and Colonial Pipeline among others are midstream pipeline companies with no retail outlets.
“Retail companies with no antecedents of handling pipeline contracts should not be winning contracts for million-dollar pipeline projects in Nigeria. It gives room for exploitation,” the source said.
Another senior oil executive who spoke to BusinessDay said new pipeline deals will enthrone the transition from state monopoly under NNPC to private monopoly as some retailers and some parts of the country may be underserved compared to others.
“The market has a concern that in the event of any supply shortfall, these retail operators with pipeline contracts may have preferences for their own retail outlet which is not good for the market,” another senior source told BusinessDay.
Further findings showed Oilserv Limited was the preferred bidder for LOT 1 which includes the Bonny – Port Harcourt Crude Oil pipeline (54.8KM), Port Harcourt- Aba – Enugu Products Pipeline (210KM) Port Harcourt depot, Aba Depot and Enugu Depot. Port Harcourt Refinery – Bonny Export Terminal Products Pipeline (35KM) Bonny Export Terminal – Loading Jetty Products Pipeline (32KM), Bonny Export Terminal facilities.
A.A Rano won the bid for LOT 2 which includes Escravos – Warri Crude oil Pipeline (60KM), Warri-Benin Products Pipeline (90KM), Benin-Ore Products Pipeline (110KM), Warri Depot, Benin Depot and Ore Depot.
Macready Oil & Gas Service Company Limited was the preferred bidder for LOT 3 which includes Warri-Kaduna Crude Oil Pipeline (604KM), Kaduna- Kano Products Pipeline (224.3KM), Kaduna – Jos Products Pipeline (166.4KM), Kaduna- Suleja Products Pipeline (170.8KM), Kaduna Depot, Kano Depot, Jos Depot and Suleja Depot.
MRS Oil Nigeria Plc was the preferred bidder for LOT4 which services Atlas Cove – Mosimi/Satellite Products Pipeline (72.8KM), Mosimi – Ore Products Pipeline (151.3KM), Mosimi – Ibadan Products Pipeline (79.1km), Ibadan-Ilorin Products Pipeline (168.9KM), Atlas Cove Depot, Mosimi Depot, Satellite Depot, Ibadan Depot, and llorin Depot.
“LOT 4 is a fairly well-developed market with NNPC already incurring the capital cost for infrastructure rehabilitation before transferring to the preferred winner. From a competitive point of view, it gives the winner a huge advantage compared to others,” Kelvin Atafiri, the CEO of Cavazanni Human Capital Limited said.
“I would have expected core engineering and procurement construction companies would be selected, not retailers,” he added.