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Nigeria: $5.9 Billion Contract Scam - We Acted Alone - Chevron

Cosmas Ekpunobi

14 October 2008

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Abuja — Chevron yesterday told a stunned senate committee on gas that it acted alone in the alleged $5.9billion cost inflation for the Escravos Gas-To Liquids project (EGTL) contract.

The cost is about $5.2billion higher than the $75 million spent by Qatar to build a similar 34000 Barrel Per Day capacity plant.The Chevron was alleged to have unilaterally hiked the contract cost from $2.7billion to $5.9billion.

There are fears however that project may cost the federal government over $11.5billion given the it had already provided incentives worth over $50billion to the contractor including tax waivers,

Trouble started yesterday when the Nigerian National Petroleum Corporation (NNPC), which has 25 percent equity share in the project declared that the unilateral increase in the cost of the project by Chevron was only reveled this year by an audit panel,

Two former group managing directors of NNPC Dr Gius Jackson Obasieke and Chief Funso Kokpolokun, in their respective submission that may have nailed the oil multi national, told the committee that Chevron did not secure the approval of the agency for increase or for the conversion of the original contract agreement from 'lump sum to reimbursable.

Chief Kukpolokun in his defence said that the contract was originally planned to cost the federal government $1.1billion but former president Olusegun Obasanjo awarded the contract in March 2005 at the cost of $2.9 billion following the report of a consultant he (Kukpolokun hired while in office to review the cost variation presented then be Chevron.

According to him, though the former president had insisted that the government would not go beyond $1.1billion for the job , but that Chief Obasanjo agreed on the initial increase $2.7billion after he had (kokpolokun had convinced based on the report of the consultant that the cost variation was due to the uprising in the Niger Delta and the then prevailing economic realities.

He told the committee that at no point did Chevron wrote while he was in office for the increase in the cost of the job.

But Chief Obasieke in his testimonies before the Senator Osita Izunaso-led panel said that he would not approved any thing more than the initial $1.1billion for the contract after the government had provided incentive for the project worth $50billion for the job.

He told the committee that he was not convinced while the contract woud be awarded for such amount, when a similar project in Qatar cost $750 million and another which was four time bigger than the EGTL cost $3billion 'I don't think I would have approved that project at $2.7billion and no body would agree to award the contract at a reimbursable arrangement because that would amount to open cheque to the contractor.' I know that even Chevron would not want to give any body an open cheque

Obasieke also disagreed with the NNPC boss on his claim that the agency was a ;junior partner in the project.

But the NNPC boss represented by the director, Deep Waters, Mr. Chris Ogeninewe, said that it was possible that Chevron asked for approval to but never got such approval .

"Notwithstanding the considerable effort made to accommodate the contractors commercial exposure in an environment of rapid cost escalation, pressure continued to convert the contract to reimbursable and in June 2007 , contract amendment was executed again without NNPC approval."

This was where Chevron unilaterally suspended the lump sum contract half way through the contract execution and resorted to renegotiating a reimbursable contract with the contractor at current market pricing."

As at June Chevron reported current total installed cost of the project at $5.9billion as against the $2.7BILLION NNPC approved budget Thus having achieved a value of work done at $2.2billion while a further sum of $3.6billion is required to complete the project

But the acting managing director of Chevron Mr Ezekiel Sadia, who grilled for several hours yesterday on the contract scam admitted the multinational acted alone in the increase but insisted that the hike was done in good faith.

He said that the company had written to the NAPIMS a subsidiary of NNPC, on the need for the cost variation but added that it went ahead to increase the cost of the project to $5.9billion without the finally approval of the agency,

Chairman of the committee Izinaso and other members of the panel warned that Chevron may forfeit any additional money invested in the project if it is proved at the end of the probe that it acted alone.

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