EXCLUSIVE: NNPC at War with Agip over sidelining of indigenous oil firm

FILE PHOTO: NNPC fuel station used to illustrate the story

The Nigeria National Petroleum Corporation, NNPC, in a bold move to enforce the country’s local content law, has slammed the Nigeria Agip Oil Company, NAOC for attempting to sideline an indigenous oil firm, Arco Petrochemical Engineering Company.

Despite repeated advice, PREMIUM TIMES learnt that NAOC has consistently flouted NNPC’s directive to engage Arco for the maintenance of major gas facilities located in the Niger Delta region.

With registration number RC46, 805, Arco is a wholly-owned Nigerian firm incorporated in 1980 to provide services to the upstream and downstream sectors of the nation’s oil and gas industry.

The company secured its first major contract in 1982 when it facilitated the entry of Nuovo Pignone SpA, into the Nigerian oil and gas industry.

Nuovo Pignone SpA is an Italian multinational oil and gas company which had carried out joint venture projects for over 31 years in Nigeria.

Currently, Arco employs 292 Nigerian engineers and technicians and has during the past 33 years provided quality services in the oil and gas sector.

Its business relationship with Agip started in 2006 when it jointly won JV maintenance contract with General Electric International Operations Nigeria to service Agip’s OB/OB, Eboche and Kwale Gas Plants.

The two companies executed the contract based on terms mutually agreed to by the JV partners.

At the expiration of the contract in 2011, negotiations were opened for a short-term or stop-gap maintenance service contract prior to the award of a new 4+1 year contract.

But two years after the expiration of the JV contract, Agip has failed to engage Arco for the stop-gap maintenance of the gas plants despite repeated advice by the NNPC.

Pressed by the national oil firm to adhere to the country’s local content law which makes it mandatory to cede a number of dedicated units of the gas plants for exclusive maintenance by the indigenous firm, GEION signed a Memorandum of Agreement, MoA with Arco in July 2013.

In the MoA, GEION agreed to abide by the nation’s local content policy of ceding dedicated facilities to the indigenous firm.

Years after signing the agreement, the company is yet to allocate a single unit of the facilities to Arco for maintenance.
Instead of adhering to its agreement with the local firm, this newspaper found that NAOC and GEION exploited a lacuna in the JV agreement which enabled them to offer the maintenance of the facilities to Plantgeria Company Limited through Purchase Order arrangement.

Plantgeria Company Limited is said to be partly owned by a former top military brass from Taraba State and some Italian investors.

It was incorporated in 1981 as logistics/technical support and mechanical services provider in the Nigerian oil and gas industry

Under the superfluous Purchase Order arrangement, PREMIUM TIMES learnt Agip has already paid a whooping $182 million (N29.5 billion) to GEION in a deal that is not backed by any law in Nigeria.

It was also found that NAOC and GEION have consistently rebuffed NNPC’s directive to operate within the laws of the land.

In two separate letters addressed to Agip, one of the JV partners, the NNPC, through the National Petroleum Investment Maintenance Services, NAPIMS, strongly frowned at the deliberate attempts to sideline Arco in the maintenance deal.

In a letter dated January 5 and referenced NAP/GD/GM/84, the NNPC firmly insisted that NAOC should urgently enter into negotiations with Arco.

In another letter dated March 4, the NNPC drew the attention of one Guglielmo Orecchi to its directive on the six-months contract extension on the Global Maintenance of Rotating Equipment for OB/OB and Kwale Gas Plants.

While making reference to an earlier letter from Agip dated February 14, the NNPC disagreed with the decision of the Italian firm to offer interim maintenance contract to its proposed bid winner for the substantive contract.
In that letter, the NNPC gave reasons for supporting Arco’s involvement in the deal to include high cost and excessive manpower required under the PO for the maintenance of the gas facilities.

Part of the letter reads, “Please be advised that NAPIMS cannot support an interim contract award to an entity based on a tender process that is yet to be concluded.

“We, therefore, reiterate that the interim contract be negotiated with Arco Petrochemical Company Limited based on the manpower loading that was earlier agreed.

“Please convene a meeting urgently to negotiate the contract for a six month extension while we are trying to resolve the issue of the substantive replacement contract,” concluded the letter signed by Fidel Pepple on behalf of GGM, NAPIMS.

Similar letters were sent to NAOC on April 14 and 24 respectively.

When the directives were roundly rebuffed, the NNPC on June 13 again wrote to Agip to reaffirm its position on the matter.

The letter, which was signed by Jonathan Okehs was titled, TENDER NO.1000000/0 (NipeX No. AGIP.OPP.3100088) NAOC MAINTENANCE SERVICE CONTRACT FOR GAS TURBINES AND RELATED EQUIPMENT FOR OB/OB, EBOCHA AND KWALE GAS PLANTS.

In it, the NNPC drew the attention Agip’s attention to its earlier directive on the maintenance of the quoted gas facilities and called for urgent compliance.

While it referred the Italian oil firm to five earlier correspondences on the matter, the NNPC expressed disappointment that Agip failed to negotiate the maintenance contract with Arco as advised on a letter dated April 29.

It, therefore, upheld NAPIMS’ decision to decline Agip’s proposal to execute an interim contract with Plantgeria for a replacement tender on grounds that the document was not approved by the NNPC board.

The NNPC, in strong terms reiterated its unwillingness to support any cost expended on Agip’s maintenance services of the OB/OB, Ebocha and Kwale Gas Plants arising from services provided by Plantgeria.

It again urged the firm to urgently commence negotiation with Arco with a view to awarding a six-month Stop-Gap contract using manpower loading approved for the 2003 contract.

The letter reads, “NAPIMS will not support any cost expended on NAOC Maintenance services contract for Gas Turbines and related equipment for OB/OB, Ebocha and Kwale Gas Plangts arising from NAOC execution of such services with Plantgeria.

“NAOC to immediately commence negotiation with Arco Petrochemical Ltd, with a view to awarding a six-month Stop-Gap contract using manpower loading that was approved for the 2013 Stop-Gap contract.

“Thereafter, NAOC to execute a bridge framework agreement with Arco for the provision of maintenance services for gas turbines and related equipment for OB/OB, Ebocha and Kwale Gas Plants for six-month Stop-Gap contract. This will enable the JV maintain the facilities pending the award of the ongoing replacement contract.”

“You are, therefore, guided to abstain from any award of a stop gap contract to Plantgeria for NAOC maintenance services contract for gas turbines and related equipment for OB/OB, Ebocha and Kwale Gas Plants because this will constitute an illegal contraption.”

With these, the national oil firm insisted that negotiation with Arco should be held on June 24 and nominated Messrs P. Origho and O. Ichakpa as its representatives.

However, when contacted, Arco’s Managing Director, Alfred Okoigun, told PREMIUM TIMES that NAOC and GEION are yet to heed the NNPC’s advice on the stop-gap maintenance deal.
Mr. Okoigun lamented that the failure of NAOC and GEION to seal the short-term maintenance deal has greatly hurt the operations of Arco which currently hires over 292 highly-skilled Nigerian engineers and technicians.

He insisted that Arco is eminently qualified to handle the maintenance contract having done so when GEION withdrew all it expatriate staff in 2007 at the peak of the Niger Delta militancy.

Investigations by PREMIUM TIMES showed that in 2007 when GEION withdrew its expatriate staff at the peak of insecurity occasioned by the Niger Delta militancy, Arco single-handedly serviced the gas plants.

In appreciation of the quality of services rendered by the indigenous firm, NAOC was said to have issued special letters of commendation to Arco’s engineers and technicians for keeping the plants working in the absence of GEION’s expatriate personnel.

However, when GEION returned after peace was restored to the region; it initiated moves aimed at clipping Arco’s operations, including the poaching of 19 staff of the company.

In a desperate move to cause disaffection between staff of the two firms, GEION was said to have offered the poached staff huge perks and posted them back to work on the JV contract.

GEION not only withdrew some statutory allowances due to staff of the indigenous firm against the provisions of extant agreement, it also unilaterally reduced Arco’s scope of work thereby fueling industrial unrest in the company.

When contacted, the NNPC’s spokesperson, Ohi Elegbe, referred us to Obinna Ezeobi, the spokesperson of the Nigerian Content Development Monitoring Board, NCDMB.

Mr. Ezeobi, however, told PREMIUM TIMES that the board is yet to receive a formal complaint from Arco on the matter, adding that NCDMB cannot comment or handle an issue for which it has not been officially notified of.

“If Arco has a case like the one you are talking about, it should have written to us and we could have been in a position to check whether there is an infringement of the Nigerian law.”

Attempts by PREMIUM TIMES to speak with Agip’s spokesperson, Tajudeen Adegun, failed as he neither replied an email sent to him or returned calls to his mobile phone.

Similar efforts to reach out to GEION also failed as the company repeatedly turned down requests to speak on the issue.

In a terse reply to an information request sent to its corporate headquarters, GE’s feedback team referred us to its office in Lagos.

The letter reads, “Thank you for your inquiry. In regards to your query, we suggest that you contact GE Nigeria directly to assist you with this request.

“They can be contacted by using the link provided. There, you will be able to contact then for further assistance.”

However, when PREMIUM TIMES contacted the phone number indicated on the link, a lady who gave her name simply as Rita said she is a front desk officer.

When asked to connect us to the relevant official to speak on the matter, Rita refused on the grounds that we could not mention the name of a specific official of the company we wished to speak with.

She, however, referred us to the Church Gate Tower where, she said the company’s branch office in Abuja is located.

When we visited the Church Gate Tower on Wednesday, a female staff named Lola insisted that media queries are handled from the Lagos office.

Ms. Lola also insisted that our information request will not be treated unless we direct it to a specific staff of the company in Lagos.

With an air of finally, she said, “Sorry, we cannot speak to you here in Abuja. You must go to our office in Lagos.”


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