TheCable

A house of representatives’ ad hoc committee has queried the implementation of the Escravos gas-to-liquids (EGTL) project.

The committee said the project, which should cost $2.9 billion, was quoted as $10.7 billion, amounting to a cost increase of $7.8 billion.

The committee, investigating joint venture operations between the Nigeria National Petroleum Corporation (NNPC) Limited and its partners, raised concerns when the management of Chevron Nigeria Limited appeared before the lawmakers in Abuja on Tuesday.

The Escravos project, executed by Chevron in partnership with NNPC, is expected to boost the domestic gas market with 400 million standard cubic feet per day gas supply, equivalent to 26 percent of the total domestic gas supply in the country.

Speaking at the meeting, Hassan Fulata, chairman of the committee, demanded the reasons behind the review of the cost of the project from $2.9 billion to $10.7 billion.

Fulata said that a similar project was executed in Qatar for less than $2.5 billion within a very short period.

He said that NNPC limited should have protested the cost review and demanded a value-for-money audit.

In his response, Monday Ovuede, Chevron’s director of joint venture, said several factors caused the upward review of the cost of the project from the initial $2.9 billion to $10.7 billion.

Ovuede explained that immediately after the project was signed, prices of commodities like oil and steel went up.

He added that Chevron agreed to a value-for-money audit despite not having it in the contract for the project.

“This is a very complex technology to be executed in this part of the world. When project construction started in 2005 — coincidentally, if you check the record, commodity prices, including oil and steel, started rising in the international market,” NAN quoted Ovuede as saying.

“The project was given as engineering, procurement and logistics, which means the sum was fixed. In the course of executing the contract, the contractors came back.”

On the Qatar project, Ovuede explained that the project was built in an industrial complex with a seaport and access to an international air base.

According to him, there was access to skilled labourers compared to Nigeria, where such skills were hard to come by.

“The plant in Qatar is built in an industrial complex close to a seaport and there is an international air base there,” he said.

“It has access to skilled labour from Europe. When you come to our side, we try to build — for some of the technology, we have to develop the local labour to the level required to implement the project.

Despite the explanations, the legislators remained dissatisfied and requested documents to back up the claims.

Ibrahim Isiaka, a member of the committee, moved a motion for Chevron to submit a written response justifying the increment.

In his ruling, Fulata alleged that Chevron was claiming capital allowance for the project without capital importation or a certificate to make such a claim.

He ruled that Chevron should appear before the committee on Tuesday, October 11, with relevant documents to defend its claims.