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HHI sets to grab $1bn gas contract

…negates principles of Nigerian content policy

By Hector Igbikiowubo

IN a deal that will see all engineering work done outside the country, denying Nigeria over 2,500 jobs, indications are that Hyundai Heavy Industries, HHI, may clinch a $1 billion (about N149 billion) contract for execution of the Escravos Domestic Gas Supply projects.

Checks also revealed that the pending contract award to HHI did not follow due process and may have been rushed through a subverted procedure to beat the signing of the Nigerian Content bill into law.

It was gathered that the Federal Government decided to fast track the project as part of its strategy to improve gas supply to the power stations, however, the execution strategy adopted by the Ministry of Petroleum Resources appears to negate the principles upon which the Nigerian Content policy is hinged.

Only a few fabrication work valued at about $100 million is expected to be performed in-country.
Investigations revealed that the engineering, procurement and installation are earmarked to be performed outside the country by companies with zero per cent Nigerian ownership or input.

Not only have HHI failed to follow normal guidelines, partnered or sub-contracted scope locally for engineering, fabrication, procurement or installation, a Ministry of Petroleum official disclosed that the Korean company has tried to obtain ministerial approval prior to Nigerian Content Bill being signed all in a bid to avoid compliance.

While speaking further on the development, the ministry official who didn’t want his name in print disclosed that although the original plan was to use existing contracts and contractors to the greatest extent possible, the whole process has been subverted.

“From what I am able to discern, the plan is to maintain same level of Nigerian Content as in the EGP 3A Offshore and Onshore contracts and for the current pipeline contractors, which is basically low. Given the current development, Nigerian Content has been compromised again.

Efforts to reach representatives of the Ministry of Petroleum and the Nigerian National Petroleum Corporation, NNPC, proved abortive at the time of filing this report.

Further checks revealed that the NCD, NAPIMS, and NNPC may be confusing the situation because of orders from the ministry to bypass and fast-track the project.

It would be recalled that the Nigerian government had introduced the Gas Master Plan for natural gas. The plan calls for increased gas use throughout Nigeria and provides fiscal incentives for oil producing operators to maximize gas output and stop the flaring of associated gas.

Aspects of the master plan include facilitating greater use of liquefied petroleum gas, LPG, otherwise known as cooking gas, ensuring the availability of gas to fuel the various power generating plants as well as promoting the West African gas pipeline project which entails the construction of a 600 km pipeline to supply Nigerian associated gas to neighbouring Benin, Togo and Ghana.

The gas master plan places emphasis on domestic market as opposed to exports and to ensure the success of the initiative, the Federal Government gave the oil companies directive to make available to the domestic market, at least 50 per cent of their total gas production. This is what constitutes the domestic gas obligation.

The thrust of the master plan makes the availability of gas central to its success. If the oil companies do not fulfill their obligations to provide the needed gas, the gas master plan will run into difficulties. Part of what may go wrong is the non-realization of the 6000 Mw of electricity promised by the Federal Government by the end of last year.

Due to some uncertainty regarding the commitment shown so far by the IOCs, a technical committee was set up to fast track the delivery of gas for power supply.


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