Representatives to Probe Oil and Gas Joint Venture Contracts

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The House of Representatives has decided to create an ad hoc committee to investigate all joint venture (JV) operations and production sharing contracts (PSC) in the oil and gas sector since 1990.

The survey aims to determine whether capital expenditure, operations, finance and related frameworks are within the law or not.

This resolution follows the adoption in plenary on Thursday of a motion sponsored by the deputies of the Chamber; Sergius Ogun, Benjamin Kalu, Sada Soli, Ado Kiri, Isiaka Oyekunle and Mark Gbillah.

Moving the motion, Ogun said the Escravos Gas-to-Liquid (EGTL) project is a JV venture by the Nigerian National Oil Company (NNPC) and Chevron Nigeria Limited for the construction of a 34,000 barrel per day (BPD) gas-to-liquids (GTL) plant in Escravos, Delta State.

He said a total of $1.294 billion was allocated to the EGTL project in 2001 and by the time the contract was awarded in 2005, the final approved cost had risen to $2.941 billion, which was further increased. at $8.6 billion as of December 31, 2011, and upon completion in 2014, the total cost of the project was over $10 billion.

The lawmaker said the House is concerned that: “ETGL and its JV projects are being executed at such huge costs while similar projects in other jurisdictions like Qatar, which have the same capacity, same technology, same engineering, procurement and construction (EPC) contractors and same operators costs less than $1.5 billion.

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“Also concerned that although EGTL projects are primarily governed by Heads of Agreement (HOA), Carrying Agreement (CA) and Risk Agreement (VA) under various legal regimes such that the Companies and Related Affairs Act (CAMA), Petroleum Profit Tax Act (PPTA), Companies Income Tax Act (CITA) in principle, there is violation of the principles involved.

Ogun expressed concern that the Bonga field (OML 118), which is owned by NNPC but under contract with SNEPCO (55%), ExxonMobil (20%), Agip exploration (12.5%) and Total (12.5%) under production sharing

The (PSC) contract now appears to be far from being a PSC arrangement as it goes against the relevant financial operational laws.

He said the Chamber was also concerned that: “the Offshore Gas Gathering System (OGGS) which has been designed to collect gas from various upstream projects in the Niger Delta region as part of the A PSC and JV agreement with companies such as SNEPCO, SPDC, NLNG has now become bogged down in operational misunderstandings.

“Disturbed that in the brewing misunderstanding, SPDC and SNEPCO may have entered into certain gas sale and sharing agreements without the prior knowledge and/or consent of the Federal Government through the NNPC, resulting in certain shortfalls in the accounts of the federation.

When passing the motion, the House said the ad hoc committee was to report back to it within eight weeks for further legislation.

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