AKK Gas Pipeline Project: Consortium battles NNPC over attempt to hijack contract

NNPC TOWERS
NNPC TOWERS

Two members of the consortium awarded part of the multi-billion dollar Trans-Nigeria Gas Pipeline (TNGP) project have threatened legal actions over alleged attempt by the Nigerian National Petroleum Corporation (NNPC) to sideline them from the execution of the contract.

Miles Energy Services Limited and Macready Oil Services Company Limited were co-sponsors of CSOIL consortium awarded Lot 2 of the engineering, procurement and construction (EPC) contract for the construction of the 614 kilometres long, 40 inches diameter pipeline from Ajaokuta through Kaduna to Kano.

Other members of the consortium include China Shipbuilding & Offshore International Limited, as lead sponsor; Morpol Engineering Services Limited, CNPC Huayu Petro-Chemical Engineering Company Limited, CNPC Julong Steep Pipe Company Limited, Crestech Engineering Limited and CNPC Chuanqing Drilling Engineering Company Limited.

Lot 2 of the contract involves construction of the 193 kilometres long Abuja to Kaduna section of the pipeline, with a 15 kilometres long 24 inches diameters spurline to Abuja. The contract was valued at $834 million.

Counsel to the two firms, Fidelis Oditah, a senior advocate of Nigeria (SAN), in a statement sent to PREMIUM TIMES on Tuesday accused the NNPC of attempting to unlawfully re-award the contract to a third party that did not participate in the bid held in April 2016.

Mr Oditah accused the NNPC of moves to get the Executive Council of the Federation (FEC) to approve its decision to breach its contract with the Consortium, despite a subsisting court case on the matter.

Also, he accused the NNPC of being behind the harassment of his clients’ top officials, including the managing director of Miles Energy, Kamoru Oladimeji.

On May 21, 2018, Mr Olademeji was arrested at the Murtala Muhammed International Airport, Lagos, and prevented from travelling abroad.

He was later taken to Abuja and detained by the State Security Service (SSS).

“By seeking FEC’s approval to cancel the CSOIL Consortium contract NNPC is showing its disdain for the rule of law and due process,” Mr Oditah said.

“The FEC is not a court of law and cannot resolve commercial disputes between NNPC and its contractors. The FEC should not entertain NNPC’s request.

“To do otherwise would give the wrong impression that the Federal Government is above the law and its own courts, which will further damage investor confidence in Nigeria and its adherence to the rule of law,” he said.

Urging FEC to ask the NNPC to await the resolution of the court case it instituted, Mr Oditah warned that any third party who bids for or accepts from NNPC the AKK Lot 2 EPCC contract prior to the resolution of the suit risks contempt proceedings against it.

NNPC case against consortium

On August 2, 2018, the NNPC, along with its subsidiary, the Nigerian Gas Processing & Transportation Company Limited, filed suit No FHC/ABJ/CS/826/2018 at the Federal High Court, Abuja against the consortium.

The corporation, through its counsel, Kehinde Ogunwunmiju of Afe Babalola & Co, claimed the consortium had “no valid or subsisting or enforceable contract” in respect of Lot 2 of the gas pipeline project.

Consequently, the NNPC sought the declaration of court that failure of the consortium to finalize the award and consequent execution of the contract was its fault.

Besides, the NNPC asked the court to declare that any contractual agreement between it and the consortium in respect of the project should be deemed validly terminated due to the alleged breach.

Also, the NNPC asked the court to declare its decision to re-award the Lot 2 contract to other companies/consortia as valid and lawful.

Similarly, the NNPC called for an order of perpetual injunction restraining the consortium or their representatives from attempting to “interfere, tamper with and delay the bidding process for the award, performance and execution of the AKK pipeline project by other companies.”

To cover the cost for its loss of time and resources, delay and frustration allegedly suffered as a result of alleged breach of contract by the consortium, the NNPC demanded N1billion as general damages.

In addition, the corporation asked for special damages equivalent to the cost it would likely incur in financing compound interest costs in respect of the delay in the completion of the entire project due to the consortium’s breach.

Consortium’s response

In its response to NNPC’s accusation of breach, the consortium accused the NNPC’s Project Execution Team of actively conniving with one Dapo Oguntayo and China Shipbuilding to frustrate the execution of the contract.

Mr Oditah said the AKK Lot 2 EPCC contract has not been executed as a result of a series of breaches by the duo.

“Any difficulties and delay allegedly experienced by NNPC in the execution of the AKK Lot 2 EPCC contract with the CSOIL Consortium are entirely self-induced and self-inflicted,” he said.

He expressed dismay that the NNPC continued to deal with Mr Oguntayo long after the consortium had formally terminated its relationship with him.

Mr Oguntayo and China Shipbuilding could not be reached for comment at the time of this report.

Mr Oguntayo was given a power of attorney by the consortium in line with contract tender process requiring designation and appointment of a representative to act as “a single point of contact” during the tender stage.

The AKK Pipeline Project

The AKK Pipeline Project was the first phase of the gas transmission system conceived under the TNGP initiative to evacuate natural gas from Qua Iboe Terminal in Akwa Ibom State and Cawthorne Channel in the Niger Delta region.

The evacuated gas is to be transported to Obigbo to Umuahia to Enugu to Ajaokuta to Abuja to Kaduna and finally to Kano through a gas network for the benefit of all Nigerians.

In August 2013, following the invitation of expression of interest for the EPC contract, NNPC said it received 64 responses from companies and consortia, including CSOIL Consortium.

The NNPC said each member of the consortium issued individual powers of attorney to Mr Oguntayo to represent them on all documentations for the contract tender.

On April 27, 2017, the NNPC presented a letter of commitment to CSOIL Consortium as the preferred bidder, subject to negotiations and final execution of the EPC contract.

On December 13, 2017, the FEC gave the NNPC approval to award the contract for the construction of the pipeline.

The pipeline has a 15 kilometres long 24 inches diameters spurline to Abuja and another one with the same length and size in Kano.

The contract was, however, divided into three, consisting Lot 1(from Ajaokuta to Abuja, about 200 kilometres) was awarded to OilServ/Oando Consortium for $854million; Lot 2 (from Abuja to Kaduna, with spurline, about 193 kilometres) was awarded to CSOIL Consortium for $834million.

Lot 3 (from Kaduna to Kano, about 221 kilometres) was awarded to Brentx-CPP Consortium for $1.2billion.

The contracts were to be executed within 24 months through 100 per cent contractor financing under a build and transfer model.

On February 14, 2018, the NNPC issued the letter of award for Lot 2 contract to CSOIL Consortium.

Roots of crisis

Shortly after the contract award, NNPC said it received several letters from some members of the consortium accusing Mr Oguntayo of turning around to claim he was representing only the interest of China Shipbuilding & Offshore International Limited in the project and not the entire consortium.

Consequently, Miles Energy and Macready Oil accused Mr Oguntayo of breach of agreement and abuse of trust and revoked the power of attorney issued to him.

The duo criticized the NNPC of excluding them from the project execution based on Mr Oguntayo’s claim, describing the decision as wrong and detrimental to their interests.

On March 27, 2018, they wrote to corporation, through their legal counsel, Mr Oditah, threatening legal actions over the matter.

However, on April 4, 2018, Mr Oguntayo, apparently responding to the threat, wrote to the NNPC on behalf of China Shipbuilding, claiming the two companies were not part of the consortium awarded the pipeline contract.

On May 2, 2018, the Chinese Shipbuilding firm forwarded to NNPC terms of reconciliation proposed by Miles Energy over the disagreement, which it said was not acceptable.

In rejecting the proposal, the Chinese firm introduced Radiatt International Engineering, which was originally not part of the consortium, as a partner with whom it would want to proceed with the EPC contract.

Although the NNPC said it made several attempts to help resolve the dispute, it claimed there was no consensus among members of the consortium on amicable resolution of their differences.

The dispute, the NNPC said, has not only delayed the execution of the final EPC contract documents, but also frustrated the commencement of work on Lot 2 of the contract.

When our reporter contacted NNPC for comment, the spokesperson, Ndu Ughamadu, requested that our inquiry should be sent to him via text message. He did not respond to the text message sent to him.

Subsequently, calls to his telephone were not answered.


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