NNPC, Samsung, Total in Fresh Row over $3.3bn Egina Project
Ejiofor Alike
The Nigerian National Petroleum Corporation (NNPC), Samsung Heavy Industries Nigeria Limited and Total Upstream Nigeria (TUPNI) Limited are heading for a collision over the demand by Samsung to raise the cost of the $3.3 billion Egina project, THISDAY has learnt.
After a 19-month delay, Samsung recently performed the ground-breaking
for the construction of a mega fabrication yard for the integration of
Total’s Egina Floating Production Storage Offloading (FPSO) vessel.
However, concerns have mounted that the multi-billion dollar project
located in Oil Mining Lease (OML) 130 may not be delivered on schedule.
THISDAY gathered that Samsung, the contractor building the Egina FPSO
vessel for Total, has submitted a Change Order Request (COR) on
engineering and schedule/cost impact, inflating the project cost by
about $400 million, a demand which Total has rejected.
While the National Petroleum Investment Management Services (NAPIMS),
the investment and management arm of NNPC, was said to have directed the
NAPIMS/TUPNI project team to evaluate the change order request and
present any additional cost to the NNPC board for approval, Total has
dismissed Samsung’s claims as lacking merit.
In a 98-page letter addressed to Total with reference number
EGN-10-KSMG-AEMG-LET-00671, dated September 23, 2014 and signed by the
Project Director, Mr. JR Chung, Samsung has requested the additional
payment of about $400 million, citing articles of the contract.
The letter, which was obtained by THISDAY from a source close to Samsung, also requested Total to approve the request to prevent further delays and escalation of the cost of the Egina FPSO.
The letter, which was obtained by THISDAY from a source close to Samsung, also requested Total to approve the request to prevent further delays and escalation of the cost of the Egina FPSO.
THISDAY gathered that Samsung raised the cost of the project in
detailed engineering, which it sub-contracted to the WorleyParsons
consortium, claiming that under Article 22.1, the contractor should be
compensated for engineering cost impact suffered due to Total’s
initiated change orders.
Samsung also argued that Article 15.8 also provides that the contractor
should be compensated “for additional cost incurred in trying to
mitigate the effect of adverse actions on work time schedule”.
The company also requested Total to pay $41 million for changing the engineering design of the project and other modifications.
On claims Samsung called cost expenses due to schedule impact, the
Korean firm told Total that it “brings this claim for cost of schedule
impact of $67 million pursuant to Article 15.5(a)(b)(i) as a result of
Total’s default in complying with Article 6.4 and Article 14.4.2-3,
which is the default in timely clarification by Total impacting on the
cost and work schedule on the contract, in addition to other factors
affecting the project delay as previously outlined”.
THISDAY gathered that Samsung’s justification and clarification was
based on Total’s position that Samsung had not been able to justify its
claims for additional cost.
However, a source at Total told THISDAY at the weekend that aside from
lack of justification of contractual entitlements, the claim cost
impact, schedule impact and promise of recovery of these alleged events
had not been demonstrated.
He insisted that the position of Total is that the basis for any
request for change has to be grounded and premised on the contract
signed between the parties.
According to him, Total has been inundated with claims lacking in
contractual basis, adding that claims without proper details cannot be
entertained by the French oil giant.
But the NNPC, through NAPIMS, appears to be in support of Samsung’s
request as it has directed Total to take steps to address Samsung’s
demand.
Efforts to speak with NNPC’s Group General Manager in charge of NAPIMS, Mr. Jonathan Okehs, proved abortive.
However, a top official of NAPIMS told THISDAY at the weekend that the
company had directed Total to submit the demand by Samsung to the NNPC
board for approval so as not to jeorpadise the Egina project.
He also alleged that Total, NNPC and their partners had caused the
initial delay of the project when they wasted three years before they
awarded the project on March 15, 2013, well after the Front End
Engineering Design (FEED) contract was completed in 2010 by CresTech, a
local subsidiary of French’s Technip.
Egina was first scheduled to start production in 2015 but the delay effectively pushed its start-up date to 2017.
In addition, the contractors subjected the Egina project to further
delays, as they wasted the first 10 months from March 2013 to December
2013 on clearing of the site and another nine months from January 2014
to October 2014 on litigation at a Federal High Court sitting in Lagos
at the instance of LADOL, which had accused Samsung of planning to
exclude it from the local component of the project.
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