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Nigeria: $10bn Train 7 Risks Suspension as Senate, Saipem Bicker

The ongoing bickering between the Senate and Saipem Nigeria Limited over alleged violation of the Nigerian Local Content Act in the award of contracts for the delivery of the Nigeria

The ongoing bickering between the Senate and Saipem Nigeria Limited over alleged violation of the Nigerian Local Content Act in the award of contracts for the delivery of the Nigeria Liquefied Natural Gas (NLNG)’s $10 billion Train 7 project by the latter, may degenerate to the suspension of the multi-billion dollar project, experts have warned.

An oil and gas services expert and Vice Chairman of the Petroleum Technology Association of Nigeria (PETAN), Mr. Ranti Omole, gave the warning, pointing out that the progress of the project delivery may be stalled if the Senate exerts its power and forces Saipem to halt further Train 7-related contract awards.

Omole told THISDAY in a phone interview that if that happens, it would have huge negative impact on the nation and NLNG itself, as it would also stall the drive to enhance LNG export and increase the federation’s revenue and other derivatives from the Train 7 project.

The Senate Committee on Local Content had last Wednesday, accused Saipem of deliberately circumventing Nigeria’s Local Content Act by sidelining Nigerian manufacturers in the bidding for the contract awards as provided for in the law.

But Saipem responded by saying that it acted on the instruction of its client –NLNG, adding that all it did was within the scope provided by NLNG which allowed it to source for highly specialised steels not available in Nigeria from outside the country.

It stated that the arrangement was within the finance export scheme between NLNG, South Korea and Italy.
Train 7 is expected to add eight million tonnes of gas supply to the existing 22 million tonnes and ramp up NLNG’s production by about 35 per cent.
Contractors for the project are SCD JV Consortium, comprising Nigerian affiliates of Saipem (Italy), Chiyoda (Japan) and Daewoo (South Korea.

Commenting on the Senate’s squabble with Saipem and the implication of that on the project and the Nigerian economy, Omole said, “Now, if the Senate is forcing a stop on future contracts award and project activities, definitely, it will stall the progress of the project and also stall the time to get the gas – NLNG’s export. It will also prolong the time the country wants to get more from LNG export.

“And nowadays, it’s not just for you to get to market, you just need to get to market at the right time because there are quite a number of LNG projects that are pushing out all over the world. So, it’s good for us to get to market early.

“Definitely, the impact will be huge if the Senate stalls the project by forcing a stop on future contract award for the continuous delivery.”
The PETAN vice chairman said the good side of the intervention was that the alarm raised by Senate on the alleged violation of Local Content Act was a warning for Saipem to ensure compliance and improve their grade level to accommodate more local participation.

He added that the Senate’s alarm was also a warning to all multinational companies in Nigeria that it was no longer business as usual, stressing that contractors may need to further look for where Nigerian companies could do more work by getting technical support from foreign companies whom they partner with in projects execution.

“So, that’s the good side of it. It’s a warning that it’s no longer business as usual – you cannot sign Local Content Plan and do whatever you like. So, the more there is competence in Nigerian companies and they get involved in projects execution, the better for the economy,” Omole stated.
He argued that the Senate has the responsibility to act if Saipem was not complying with the local content plan of the Train 7 project by not patronising local companies that have the capacities to participate in the project.

However, in its reaction, NLNG reiterated its full commitment to the delivery of the Train 7 Local Content Plan and the overall delivery of the project.

In a note sent to THISDAY, yesterday, signed by its General Manager, External Relations and Sustainable Development, Mrs. Eyono Fatayi-Williams, NLNG disclaimed “the importation of highly specialised steel equipment”, as contained in Saipem’s presentation at the Senate, saying it was based on the approved Nigerian Content Plan for the Train 7 Project.

The liquefaction company maintained that it was fully committed to its partnership with NCDMB in delivering the Nigerian Content Plan for the Project, in line with its vision to be a global LNG company, helping to build a better Nigeria.

NLNG added that it was working closely with Train 7 Engineering, Equipment and Construction (EPC) contractors and stakeholders in Bonny to ensure that the Train 7 Project’s commitments were delivered.

However, NCDMB, the country’s local content agency, declined to comment on the matter as its corporate communications personnel did not respond to an enquiry sent to him as of the time of filing in this report.

Peter Uzoho