Total’s $16b Egina First Oil UnderThreat, SHI To Lose Over $300m

The production of first oil from Total’s $16 billion Egina project has been threatened as the management of Lagos Deep Offshore Logistics, LADOL, banished Samsung Heavy Industries, SHI, from its dockyard.

Consequently, SHI may lose more than $300 million of investments, if permanently sacked from the island as it would be difficult for the Korean firm to remove the fixed assets in the yard and to evacuate the fixed assets would require dredging of the river, which will gulp millions of dollars.

Investigations by Vanguard over the weekend showed that the first oil scheduled for December, 2018 would likely be affected, especially as many equipment, including hook-up and commissioning materials, have been trapped at Ladol.

A senior official of SHI who preferred not to be named because he was not authorised to speak, disclosed in an interview with Vanguard, yesterday, that some sub-contractors who were engaged for the commissioning have not been able to work.

He said SHI had been incurring high cost of operations without having the right environment for workers to operate.

He said: “Many materials that are supposed to be put into use for the commissioning of Egina have been trapped at Ladol. Our sub-contractors cannot also work because they cannot access the dockyard.

“As expected, this development would likely affect our projection of producing Egina first oil in December, 2018.”

Already, Total has appealed to Ladol to reconsider its position on SHI, in order to ensure the successful commissioning and coming on stream of Egina.

But the response of Ladol could not be ascertained yesterday, as stakeholders contacted failed to comment on the subject.

Allegation

LADOL stated that it banished SHI, because of the company’s gross negligence and total disregard to the Nigeria local content laws and other regulatory requirements.

According to it, “As a responsible Nigerian company, Ladol has put public duty and national interest ahead of its private interests and concerns for some time, with respect to the Egina project and the actions of Samsung.

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“LADOL now has no choice but to bring to the fore issues that have arisen due to the actions of Samsung.”

Also, the company noted, “Samsung’s dealings in Nigeria in the past four years have been fraught with mischief and reckless disregard for all stakeholders: Ladol as business partners; Nigerian regulators; Nigerian workers and citizens. Samsung has brazenly and persistently flouted Nigerian laws and breached contracts it duly signed with Ladol and its affiliates.

“These breaches include but are not limited to: refusal to abide by conditions of service for Nigerian Staff and abuse of Nigerian workers, violating procedures of the Nigerian Customs Service, violation of Nigerian Immigration Procedures, breaches of Nigerian Content Development and Monitoring Board regulations, refusal to Remit Statutory Tariffs to the Federal Government despite several demands from the Nigerian Export Processing Zone Authority.

“Others are, sponsoring the publication of malicious and false information about Nigerian Government Agencies and the business climate in Nigeria, thereby denigrating the Ease of Doing Business regimen in Nigeria, persistent failure to comply with Rules and regulations of the Free Zone, concealing sums of money provided for in the Head Contract from Ladol, their local content partner.”

It explained that, “SHI has been involved in exclusion of their Nigerian content partner from operational activities, and thereby refusing to transfer technology, blatant repudiation of major contractual terms in agreements duly signed with Ladol.”

Defence

An official of SHI reportedly said: “The allegations are baseless. We have tremendous respect for local content and cannot disrespect the Act establishing it. If we have, we could have been uncovered and sanctioned by the Nigerian Content Development and Monitoring Board, NCDMB that monitors our compliance. It should be noted that we have been working to train, build capacity and transfer technology to Nigerians.

“Besides local content, we have not flouted any law in Nigeria because we don’t deal directly with authorities on the project. It is the Global Resources Management Company Limited that relates with authorities on behaves of all entities.

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“SHI did not canvass for any variation in contract sum as allegedly speculated because in Egina, we are talking about milestone payments, approved by the Nigerian National Petroleum Corporation, NNPC and Total, meaning that it is only NNPC/Total that can justify such variation, not SHI.”

Court

The two parties would likely continue to be in court as Ladol has already filed a court action (Suit No FHC/L/CS/1459/2018) against Samsung.

However, some stakeholders, especially Federal Government and its agencies would intervene in the coming weeks to rescue Egina from crisis.