Oil pipeline security contract: Nigeria lost $800m to breaches under previous system – NNPC

Following widespread backlash over the award of oil infrastructure surveillance contract to an indigenous firm, Ocean Marine Solutions for the protection of the strategic 87-kilometre Trans Forcados Pipeline (TFP), the management of the Nigerian National Petroleum Corporation (NNPC) said breaches from the earlier contract cost the Corporation a whopping $800 million.

Ndu Ughamadu, spokesman of the NNPC, said that the decision to award the contract to a local firm was reached “after consideration of huge losses on TFP and rigorous appraisal of the company’s impressive record of performance on the Bonny-Port Harcourt and Warri-Escravos crude evacuation lines.

Recall that the NNPC approved a contract for the surveillance of the 87-kilometre Trans-Forcados Pipeline (TFP) to Ocean Marine Solution Limited at a whopping $18.48 million on September 26.

According to the terms of reference of the contract, it is meant to last for five renewable months, coming with some other conditions spelling out penalties that may attend loss of products or breaches to parts of the length of the pipeline.

The contract has been started generating criticisms amongst stakeholders because due process was not followed as some faulted arbitrary and unexplained inflation of the contract sum.

The Corporation clarified that the new contract which requires the contractor to pay for any damage to any inch of pipeline under its watch, offers immeasurable benefits to the NNPC, its Joint Venture partners, the host communities and the entire Federation

The NNPC said it was faced with massive losses in projected revenue, adding that stakeholders in the TFP which today account for daily production throughput of over 250, 000 barrels of crude oil were unanimous in the decision to seek better ways of ensuring reliability and availability of the line.

“In 2018, we lost over 60 days of production due to incessant breaches on the TFP despite having a security contract in place. In terms of production numbers, this translates to over 11 million barrels of crude oil which on face value equates to over $800m in lost revenue to all the stakeholders in the matrix which includes:  NNPC, its Joint Venture partners and the Nigerian Federation,’’ the Corporation stated. The NNPC stated that no responsible business entity or government would allow this level of haemorrhage to subsist without acting swiftly to protect the enterprise from further bleeding.

The Corporation said based on the above scenario, Ocean Marine Solution was assigned to handle the TFP under the proof of concept arrangement which is yielding great results in the Bonny-Port Harcourt and Escravos-Warri crude evacuation lines.

Under this package, the surveillance company is obligated to protect the lines and bear the cost of repairs if and when there is any breach to the pipeline

This arrangement is totally different from the old order where the contractor gets paid for surveillance duties and totally exempted from repair cost or any form of responsibility in the event of any line break or breach to the pipeline he is paid to watch.

On the alleged huge cost of the new contract, the Corporation explained that the cost of the new deal pales into insignificance when placed side by side and value-for-money with the old arrangement

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“In 2018, after we lost over 60 days of production, under the old contract, the NNPC and its stakeholders spent over $32m on repairs, protection of the TFP and clean-up. This is a verifiable fact which makes the new deal not only better but far more rewarding to all stakeholders,’’ the Corporation said.

The NNPC also dismissed mounting insinuations that the entry of OMS into the TFP would spell doom for host community youths on the pipeline right-of-way currently rendering sundry services to the old service provider.

The Corporation argued that the issue of TFP security is purely a matter of criminality which the host communities along the pipeline corridor are totally against. It noted that long before now, the Corporation had evolved a host community participation model which naturally incorporates youths within the vicinity of its assets and areas of operations as veritable stakeholders cum participants in the running of such facility.

“We want to state for the umpteenth time that based on our community engagement model for asset protection, OMS is obligated to engage youths in the TFP right-of-way in executing its mandate thus reports of imminent loss of jobs by host community youths are totally incorrect and mischievous,” the Corporation said.

The NNPC also noted that community participation model is already in practice on Escravos-Warri and Bonny-Port Harcourt lines and these host communities have absolutely no issues with the Corporation or the pipeline surveillance service provider.

NNPC argued that the employment opportunities for youths in the area would be bolstered by the assured all-year availability of the TFP under the new proof of concept agreement.

On the allegation of non-adherence to due process in the offer of the surveillance deal, NNPC explained that all Federal Government-approved procurement processes and procedures in the award of highly sensitive national security contract were followed to the letter.

The National Oil Corporation said it was 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.

The Corporation assured that as an entity entrusted by the Government and people of Nigeria to oversee the Nation’s vast hydrocarbon resources for the good of all stakeholders, it cannot in good conscience allow extraneous considerations to sway its judgment on a straight forward commercial undertaking like the TFP surveillance project.

“The NNPC and its stakeholders will continue to do everything legally possible to recover our pipelines, cut our losses, reduce downtime, improve crude production and by extension increase inflow of revenue to all the tiers of the Federation in line with our mandate,” the Corporation said.