NLNG, Seplat to bag 2021 AfriSAFE awards

….Walks out Daewoo deputy MD

By Sola Isola

THE Senate Committee on Local Content, yesterday, threatened to sanction Saipem SPA over failure to provide evidence for several petitions it had received against the firm, on alleged breach of Local Content Law in the execution of the Train-7 Project.

The committee also walked out the Deputy Managing Director of Daewoo Engineering and Construction Limited, Mr. Yeon Seop Jung, who appeared in place of the company’s Managing Director.

Daewoo and Saipem’s Managing Director had been invited by the Senate’s committee to give evidence, following several petitions it had received on allegations of breach of Local Content Law.

The Train-7 project is Nigeria’s largest gas project and it is valued at around $10 billion, and owned by the Nigerian Liquefied and Natural Gas, NLNG, Company, and involves the construction of a liquefaction facility that would boost the company’s gas output from 22MTPA (million tonnes per annum) to 30MTPA.

The project is sited in the Bonny area of Rivers State and started in May 2020, with the award of the contract to a Consortium of three companies—Saipem (Italian), Daewoo (Korean) and Chiyoda (Japanese).

The Chairman, Senate Committee on Local Content, Senator Teslim Folarin (Oyo Central), berated the MD for failing to appear in person but choose to send his deputy.

He also indicated that the nationality of the deputy MD, being the same as the MD (both Koreans), was a breach of the law (section 31 of the Nigerian Oil and Gas Industry Content Development Act (2010), which required a Nigerian to understudy any position held by an expatriate working in the Oil and Gas company.

The Managing Director of Saipem Construction Nigeria Limited, SCNL, Mr. Walter Peviani, was grilled for over three hours by the lawmakers on several areas of breaches of the law by the company.

The committee queried the importation of Steel from South Korea and Italy, deliberately ignoring Nigerian manufacturers in gross violation of Act, which states that first consideration, full and fair opportunities should be given to Nigerians in the bidding process for acquiring goods and services, further referring to the approved Nigerian Content Plan, where SAIPEM assured the country that it would source 100 per cent steel required for the project locally, but ignored the approved plan by sourcing steel from abroad, using foreign contractors for the purchases.

While responding to this allegation, the Managing Director of Saipem, Mr Walter Peviani admitted the deviation from contract terms and breach of these provisions of the law but stated that his company only acted upon the instructions of the Project owner (NLNG) and the industry regulator, the Nigerian Content Development and Monitoring Board, NCDMB.

Peviani said: “Anytime we need to start a bid for any service or material or goods for the project, we send the technical description of the bid we are going to launch to NLNG.”

But reacting angrily to this defense, the Vice Chairman of the Committee, Senator Aliyu Sabi (Niger North) said: “What you were expected to do is to comply with the provision of our law and according to section 15 of our act, it gives you a guide on what you are supposed to do.”

The Committee further questioned the appointment of Dover Engineering and KOA Oil and Gas companies as sole vendors for engineering services worth millions of dollars quarterly, without offering other qualified Nigerian Companies the opportunity for fair consideration in clear breach of the law.

Peviani explained that both companies were involved at the earlier/engineering stage of the project and were therefore entitled to such privilege, though it may have breached provisions of the Law.

The lawmakers informed Peviani that all records at their disposal showed that only one of the two companies mentioned was involved in the Engineering stage and demanded Peviani to provide evidence to the contrary.

They also queried the lopsided award of contracts to Italian and Korean Companies and the sending of tender invitations to only foreign companies while excluding suitably qualified Nigerian Companies.

A member of the Committee and Deputy Majority Leader of the Senate, Sen Ajayi Borofice (Ondo) specifically cited the award of the following contracts to foreign companies: supply of steel for £4 million to TK Corporation (a Korean Company), £4.27 million for the supply of pipes to another Korean company and £3.86 million and £5.5 million to Italian Companies when the Act provides for the award for the procurement of these items, must go to Nigerian Companies.

Responding to Borofice, Peviani explained that the funding for the projects was obtained from Italian and Korean financial institutions who stipulated within the fund agreement that certain contracts must go to Italian and Korean Companies.

The committee then demanded evidence of stipulations along with a breakdown of what aspects of the project has been ceded to Italian and Korean contractors.

They also demanded to visit SAIPEM’s steel fabrication yard in Port Harcourt to ensure SAIPEM’s compliance with the minimum requirement of 10,000 metric tonnes per annum as contracted and ascertain Saipem’s MD claim that its yard had a capacity of 26,000 tonnes, which was more than its obligations on the Train-7 project.

Asked how over how 71 per cent of the project staff were expatriates, Peviani denied such.

However, the Chairman of the Committee, Sen. Folarin presented Peviani with a copy of the Project Report that Saipem had submitted to NCDMB, to back up the claim of 71 per cent  expatriate employees.

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