Oil & Gas Top Story

TFP: NNPC and triumph of national interest

Per Second NewsDecember 27, 2018356

By Sufuyan Ojeifo

The Nigerian National Petroleum Corporation (NNPC) announced its recent award of the 87-kilometre Trans Forcados Pipeline (TFP) surveillance contract to Ocean Marine Solutions (OMS) Limited, in a celebratory fashion, with good reason.

The Corporation’s Group General Manager, Group Public Affairs, Mr. Ndu Nghamadu, adduced reasons, in a press statement, for awarding the contract to OMS.It was clear that the verdict was underpinned by the summative value of national interest and prudent management of public resources. Those were the overarching considerations in the consummation of the deal with OMS – certainly not lousy personal interests.

It was also instructive that the NNPC was not going to compromise on competence, capacity and track-record in reaching the critical decision because of the high stakes involved.The place of crude oil as the mainstay of the national economy clearly ranks very high. Crude oil has been a prolific source of huge revenue earnings on which the nation survives.

Although very challenging, yet the task of providing security for pipeline infrastructure for crude oil evacuation to the nation’s refineries is imperative and inevitable.In recent years, the annual federal budgets have been premised on crude oil production, oscillating between 1.9 million and 2.3 million barrels per day. At a particular intersection in the crude oil production trajectory, militancy and concomitant bombings of pipelines as well as force majeure declared by multinational oil companies in the Niger Delta had forced crude oil production down to about 900,000 barrels per day, thus affecting national revenue earnings.

As expected, the NNPC and its stakeholders have been, in the circumstance, obligated to do everything legally possible to protect their pipelines, cut losses, reduce downtime, improve crude production and, by extension, increase inflow of revenue to all the tiers of the Federation in line with their mandate.

The Corporation, apparently conscious and cautious of its supervisory role, ensured that good conscience did not allow extraneous considerations to sway sound judgments on what it considers “a straightforward commercial undertaking like the TFP surveillance project.”The background supra is important in order to appreciate the context within which the NNPC recently contracted the TFP surveillance to OMS and, more particularly, against the backdrop of the umbrage by Eraskorp Nigeria Limited, the former contractor. Remarkably, the Corporation acted to avert further glitches in the value chain and eliminate or largely reduce revenue hemorrhage that is detrimental to the economic wellbeing of the nation.The Corporation’s reaction to the loss of 60 days of production in 2018 caused by incessant breaches on the TFP despite having a security contract in place with Eraskorp was precipitated by the necessity to preserve national interest by curbing revenue losses.

The loss, in terms of production numbers, according to the Corporation, translated to over 11 million barrels of crude oil (about $800 million in revenue) to all the stakeholders in the environment, including the NNPC, its Joint Venture partners and the Nigerian Federation. That was unacceptable. Conscionably, the NNPC did not shy away from pointing a finger at Eraskorp for failure to deal with the incessant breaches on the TFP, a facility which is said to account for daily throughput of over 250,000 barrels of crude oil. With an alternative that could provide uncommon values and absorb the risks, the NNPC looked in the direction of OMS because of its evident comparative advantage over other service providers.Validation: OMS’ track-record under the proof of concept arrangement which, according to the Corporation, “is yielding great results in the Bonny-Port Harcourt and Escravos-Warri crude evacuation lines” placed it at an advantage. OMS has pragmatically made a success of the crude evacuation lines.

The Corporation thus decided to have the company replicate that success story on the TFP. Besides, there is a new clause that distinguishes the new contract from the former one where the contractor, according to the NNPC, got paid for surveillance duties and was totally exempted from repair cost or any form of responsibility in the event of any breach to the pipeline. Radically, the new clause requires the contractor to pay for any damage to any inch of pipeline under its watch.

This circumspect footing is good for the nation.This clause is reportedly exciting to the NNPC because it offers it, its Joint Venture partners, the host communities and the entire Federation immeasurable benefits. All the stakeholders are said to be in agreement with the TFP contract to OMS. But then, the new clause places a huge burden on the contractor and it is only an audacious risk taker in such a difficult terrain and dicey business that would accept the terms of the contract whose cost is even said to be insignificant when placed sided by side and in terms of value for money with the old arrangement. There is no doubt that the NNPC had struck a good deal in the national interest.

That OMS decided to accept the terms of the new contract is a measure of its patriotic commitment to the preservation of national interest. It is also a clear indication of its capacity to deliver and accommodate losses. If it was under the OMS contract with the new indemnification clause that the NNPC and stakeholders lost over 60 days of production, it would have been responsible for paying the $32 million spent by the Corporation and its stakeholders on repairs, clean up and protection of the TFP. But they spent that whopping sum without liability by Eraskorp as contractor under the old order.The NNPC is certainly interested in contractors with capacity to deliver in accordance with specified mandates. It ensures that due process is followed in engaging them.

The TFP contract satisfied the preconditions. The Corporation said, “All Federal Government-approved procurement processes and procedures in the award of highly sensitive national security contract were followed to the letter.”The same steps and procedures that were followed in the award of all pipeline security contracts, including the award of the TFP surveillance contract to the old contractor, were adhered to, according to the Corporation. It is also significant that host community youths on the pipeline’s right of way who are currently rendering services to the old service provider and perhaps many more, are accommodated by the OMS in obligatory execution of its mandate as it did with the community participation model on the Escravos-Warri and Bonny-Port Harcourt pipelines.Consequently, the December 10, 2018, newspaper advertorial by Eraskorp, insinuating the NNPC was into fraudulent practices in the award of the TFP surveillance contract to OMS, detracted from decency and self-restraint expected as standard behaviour from operators in this sensitive hydro-carbon sector.

Whereas, Eraskorp has the right to complain, it does not enjoy the latitude to characterize other entities, especially the NNPC, as dubious or fraudulent. Such a quirky position can only be promotional of personal interest.Calling on the Presidency and the National Assembly to wade into how the TFP contract was re-awarded is within the remit of Eraskorp, but declaring magisterially that the process of re-awarding the contract was corrupt amounts to making itself a judge in its own matter. But the OMS had shown its apparent reluctance to join issues with Eraskorp in the media. In its restrained media response on December 21, 2018, OMS was very concerned about its reputation that Eraskorp incalculably injured via its publication.Indeed, resort to defamation and injurious falsehood by Eraskorp can only be promotional of personal interest.

But then OMS appears ready to deny Eraskorp that indulgence by seeking to pursue legal remedies, with the overall aim of preserving its reputation and, by extension, NNPC’s, in the national interest. The right things must be done.