28 December 2009

Nigeria: U.S$43 Million Contract - House Report Indicts Total Nigeria

Abuja — House of Representatives Committee on Public Procurement has indicted Total Upstream Nigeria Limited (TUPNI) over the award of contracts worth $43million in its Akpo Oil Field Development Project, to a foreign firm, Oceaneering International, instead of Tilone Nigeria Limited, an indigenous firm.

The report of an investigation now before the House indicates that the contract bid was originally won by the local firm, but was awarded to Oceaneering, in contravention of the Public Procurement Act and local content policy in the oil and gas industry in Nigeria .

Consequently, the House Committee has demanded immediate demobilisation of Oceaneering International from the project and has directed Total Upstream Nigeria to comply immediately with the directive of the board of the Nigeria National Petroleum Corporation (NNPC), by awarding the contract to Tilone Nigeria Limited at the current commercial rates and pay compensation to it for undue financial exposure during the period it was denied the contract.

These decisions were recommendations of report of the investigations into a petition by Tilone Nigeria Limited, against Total Upstream Nigeria Limited on the Remotely Operated Vehicles (ROVs) Services Contract on the Akpo Field Development Project.

Chairman, House Committee on Public Procurement, Hon. Yusuf Tuggar, submitted the report to the House in plenary shortly before the yuletide recess.

The report, among other things, also recommended that the position of the NNPC and its subsidiary, National Petroleum Investments and Management Services (NAPIMS) , in the supervision of activities of the multinational oil firms be strengthened to enable them play their assigned roles and ensure strict compliance to due process, rule of law and the local content initiative of the Federal Government by all operators in the oil sector in Nigeria.

According to the report, the Committee found evidence to show that management of Total Nigeria Upstream (TUPNI) deliberately and willfully and against best business practices, disregarded the rules and regulations governing the award of contractî for the project.

The Akpo Field Development Project on the Oil Mining Lease No. 130 (OML130) is a Production Sharing Contract(PSC) venture between the Federal Government of Nigeria (as represented by the NNPC) and Total Upstream Nigeria Limited (TUPNI).

The investigation revealed that TUPNI organised the call for tender marked: APO/CO4/05 for provision of Remotely Operated Vehicles (ROVs) services to the Akpo Field Development Project out of which Tilone Nigeria Limited, Oceaneering International AG and SUB-SEA 7 indicated interest and were subsequently pre-qualified.

SUB-SEA later opted out of the commercial bidding process and on June 13, 2006, a competitive bid exercise was conducted between Oceaneering International and Tilone Nigeria Limited, with the latter emerging the winner.

However, based on a controversial process of ìnormalisingî the bid process, TUPNI recommended to the NNPC to award the contract to Oceaneering International as the ìlowest bidderî. Tilone alleged that before the completion of the tendering process, TUPNI in the course of its own independent evaluation ìfraudulently addedî or ìnormalisedî the bid of Tilone by adding hereto various sums totalling $10.975million in order to make its (Tiloneís) submission appear higher than its competitor in the bid.

Also, without waiting for the response from the NNPC, TUPNI allegedly went ahead and awarded the contract to Oceaneering International and in the process allegedly pre-empted the NNPC Board decision of April 25, 2007 instructing them to award the said contract to Tilone.

This prompted a protest by Tilone and resulted in series of letters to the NNPC, urging it as the regulatory agency monitoring the activities of the oil firms to ensure compliance with the rules and regulations guiding the industry.

Despite these protests and the subsequent intervention of the NNPC, the report said, Total Upstream refused to adhere to the regulations. Tilone also petitioned the House Committee on Public Procurement when it became rather clear that TUPNI was not prepared to comply with the directives of the industry regulators.

However, in response to the allegations, TUPNI admitted that it conducted the bid and recommended to the NNPC that the contract be awarded to Oceaneering international, the lowest bidder by its judgment.

In a letter tendered before the investigating panel, Total Upstream stated that prior to the arrival of the first drilling rig on the Akpo Field in August 2006 and pending the approval of the contract award recommendation by the NNPC Board, it awarded a temporary contract to Oceaneering on the basis that such contract could be called off any time upon giving four months notice.

It however said that NNPCís letter of April 25, 2007 informing TUPNI that the contract should be awarded to Tilone Nigeria Limited for an amount of $43m ìcame as a total surprise to TUPNI as Tilone was not the lowest bidderî.

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