Reps to probe oil, gas joint venture contracts

The House of Representatives has resolved to set up an ad-hoc committee to investigate all Joint Venture (JV) operations and Production Sharing Contracts (PSCs) in the oil and gas sector since 1990.

The probe is aimed at ascertaining whether or not the capital expenditure, operations, financials and related frameworks are within the ambit of law.

This resolution followed the adoption at plenary on Thursday of a motion sponsored by House members; Sergius Ogun, Benjamin Kalu, Sada Soli, Ado Kiri, Isiaka Oyekunle and Mark Gbillah.

Moving the motion, Ogun said Escravos Gas-to-Liquid (EGTL) project is a JV undertaking by the Nigerian National Petroleum Corporation (NNPC) and Chevron Nigeria Limited for the construction of a 34,000 Barrels Per Day (BPD) of Gas-to-Liquids (GTL) Plant at Escravos, Delta State.

He said a total of $1.294 billion was earmarked for the EGTL project in 2001 and by the time the contract was awarded in 2005, the final approved cost rose to $2.941 billion, which was further increased to $8.6 billion as at 31st December 2011, and upon completion in 2014, the total project cost was over $10 billion.

The lawmaker said the House is concerned that: “the ETGL and its JV projects are executed at such huge costs when similar projects in other jurisdictions like Qatar, which have the same capacity, technology, Engineering Procurement and Construction (EPC) Contractors and even operators cost less than $1.5 billion.

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“Also concerned that although EGTL projects are basically governed by the Heads of Agreement (HOA), Carry Agreement (CA) and the Venture Agreement (VA) in line with various legal regimes such as Companies and Allied Matters Act (CAMA), Petroleum Profit Tax Act (PPTA), Companies Income Tax Act (CITA) in principle, there is a breach of the principles involved.”

Ogun expressed worry that the Bonga field (OML 118), which is owned by the NNPC but contracted to SNEPCO (55%), ExxonMobil (20%), Agip exploration (12.5%), and Total (12.5%) under the Production Sharing

Contract (PSC) now seems to be far from being a PSC arrangement as it runs foul to the relevant financial operational laws.

He said the House is also worried that: “the Offshore Gas Gathering System (OGGS) which was designed to gather gas from various upstream projects in the Niger Delta region under a PSC and JV arrangement with companies such as SNEPCO, SPDC, NLNG has now become mired in some operational misunderstandings.

“Disturbed that in the brewing misunderstanding, SPDC and SNEPCO allegedly went into certain gas sales and sharing arrangements without the prior knowledge and/or consent of the Federal Government via the NNPC, which has resulted in certain shortfalls in revenue into the federation accounts.”

While adopting the motion, the House said the ad-hoc committee is to report back to it within eight weeks for further legislative action.