Senate yesterday commenced investigation into the inflation of the contract sum of the Escravos Gas-To-Liquid Project, EGTL, from $2.9 billion to $10.3 billion, an increment of $7.4 billion.
The Senate Committee on Gas at a public hearing queried Chevron Nigeria Limited, CNL, for increasing the contract sum without recourse to its partner, the Nigerian National Petroleum Corporation, NNPC.
Chairman of the committee, Sen. Bassey Akpan (PDP Akwa Ibom Northeast) berated CNL for increasing the contract sum at such magnitude, stressing that the company had violated the terms of the Joint Venture Agreement.
He wondered why the Nigerian project with 33,000 barrels per day capacity would cost $10.3 billion while a similar project in Qatar with 34,000 barrels per day was constructed at $1.2 billion.
Sen. Bassey, who said that investigation into the EGTL project was also done by the sixth and seventh Senate, pledged that the eighth Senate would conclude the investigation within the shortest time.
“So between 2008 and now the project cost had risen by an additional $5 billion and this is quite worrisome.
“We need to sit down and look at the cost; it is quite astronomical for you to have the cost that was approved at $2.99 billion with a completion cost of about 10.3 billion.
“We are going to guide our decision by the venture agreement and every other related Act of the National Assembly: we would frown at anybody who breaches the law.
“I am not satisfied with the explanation they have given. How can I be satisfied? As a Nigerian I am not satisfied, but we need to listen to NNPC.
“I want to assure Nigerians that we would get to the bottom of this,” he said.
The committee also queried why the share ratio on the EGTL project was 75 percent to Chevron and 25 percent to NNPC when all other similar ventures between the two were 60 to 40 percent.”
In his response, the director, NNPC/Chevron Joint Venture, Mr Monday Ovuede said that CNL did not violate the Joint Venture Agreement as it had invited the NNPC on several occasions to meet.
He said that as at the time when it was evident that the contract had to be reviewed, he notified NNPC and called for meetings for several occasions which the NNPC shunned.
He said that the company was left with two choices – either to forget the over $2 billion investment and abandon the project or go ahead with the project.
“We decided to act in good faith considering the importance of the project.
“We feel that we acted in a reasonable and prudent manner because we called for several meetings and NNPC did not attend; we sent request for approval they did not respond.
“Today that plant is running; we have people employed there; would it have been good to have allowed all the materials that were purchased to rot away because one partner refused to come to meetings?
“If we didn’t do what we did, the value being released today from EGTL wouldn’t have been realised,” he said.
He added that with the plant, gas flaring had reduced to just 10 percent.
However, the Senate committee was still unsatisfied with the excuses of Chevron and insisted to see more documentation showing the level of involvement of both Chevron and NNP.
The chairman of the committee insisted that NNPC’s non-response was not synonymous with a go ahead order to CNL to increase the contract sum.
Although the committee commended the company for completing the project and commencing operation, it insisted that a lot of questions still needed to be answered.
“For you to change a project model from a lump sum of $2.9 billion to a reimbursable arbitrarily without the consent of NNPC is a breach of the venture agreement.
“For you to prove that you did not breach this agreement, we need to see an evidence that you had followed through with the venture agreement.
“Whether you had written 2000 letters to NNPC or not, in this case you have violated because the agreement didn’t say that silence is consent,” he said.
He stressed that even with all the excuses given and the challenges that might be faced, the amount of increment was still not justifiable.
The Senate therefore asked CNL to provide more documents relating to the contract, such as evidence of shareholding, copy of letter signed by NNPC GMD indicting Chevron and the reply of CNL.
CNL is also to provide details of the Joint Operating Account of EGTL since inception in 2009 and evidence of tax remittances to the Federal Inland Revenue Service.
The committee also requested details of sales proceed since it commenced operation on EGTL project as well as evidences of all income accrued to NNPC.

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