AN unsavoury mix of intrigues and power-play may have been hampering the execution of the $400 million (N60 billion) gas treatment processing scheme at Utorogu and Oben in Delta State.

The project, scripted to end gas flaring and provide dry gas for improved power generation in the country, has been bogged down by alleged continued officialdom, since July, 2009, when a company, Southfield Petroleum Limited (SPL), secured the Federal Government’s mandate to build supplementary treatment facility at Utorogu and Oben gas plants.

Already, accusing fingers are being pointed at the Nigerian National Petroleum Corporation (NNPC) and Shell Petroleum Development Company (SPDC), with allegations that they are deliberately thwarting the contractor’s efforts to kick-start the projects. Indeed, the latest accusation is that NNPC is planning to use a yet to be created consortium to do the same project while the subsisting agreement with another firm remains on hold.

The Guardian had earlier reported an initial worry over the award of a $250 million (N37.5 billion, at the exchange rate of N150 to $1) contract to a Korean firm – Daewoo Engineering Construction Company Limited, through NNPC and SPDC– to execute a similar project, for which the country had secured a Build, Own and Operate (BOO) pact with the said Southfield Petroleum.

The dispute had also stemmed out of NNPC’s alleged reluctance to enforce government’s directive on the project and SPDC’s refusal to supply gas for the dewatering scheme. Besides, it is now being said that the NNPC is planning to use an amalgamation of some other contractors to do the same project for which an agreement had earlier been signed. Southfield Petroleum has since filed a petition with the Federal Government on the issue.

In the petition, the company said failure by NNPC to sign the BOO in line with the minister of petroleum’s directive has stalled the project.

According to Southfield Petroleum, the company won the contract to install supplementary gas treatment plants in Utorogu and Oben vide the Ministry of Petroleum Resources letter of award reference No. MPS/2115/S.36/T of July 9, 2009, having been approved by the Federal Executive Council (FEC).

The company stated in the petition that “following this award, we immediately mobilised to site in order to meet the deadline stipulated by the FEC. We are proud to say that to date, we have achieved significant progress.  However, we wish to bring to your attention our constraint in moving the project forward as a result of the failure of NNPC to sign the BOO agreement, in line with the Minister of Petroleum’s directive.

“The BOO agreement guarantees the supply of gas by the operators/owners to our processing plants and ensures that no new processing plants/technology are applied upstream of SPL plants.

“The Federal Government entered into a binding contract with Messrs Southfield Petroleum (agreement dated November 10, 2009). The parties further agree that time shall be of the essence in the implementation of this agreement and the preparation and execution of the BOO agreement.

“In order to give effect to the actualization of this agreement, we wrote to the Minister of Petroleum in respect of the same.”

It continued: “The essence of the forgoing is to fully notify your good selves and the Federal Government of Nigeria that time is of the essence with regard to the subject matter of the agreement and that the BOO agreement as contemplated by the parties has, up until time of this notification, not been signed by the NNPC (BOO agreement was prepared by Department of Petroleum Resources and has been submitted to NNPC).

“It is important to stress that the BOO agreement was supposed to have been in place in April 2010 in accordance with our main agreement.  As of the time of this notification, it is now 13 months overdue.

“The nation cannot continue to flare liquid hydrocarbons with severe impact on the host communities, whilst, a solution has been approved by the Federal Government.”

The contractor therefore urged that “the agreement be signed immediately.”

SPDC declined to comment on the issue.

Also, NNPC spokesman, Dr. Levi Ajuonuma, was non-committal in his response.  Rather, he said the aggrieved contractor could go to court if it wasn’t satisfied with the situation about the project.

Currently, a lot of wet gas is being pumped into the pipelines and this has reduced the capacity of the generating plants, which more often than not, suffer from frequent breakdown because of the wet components of the gas.

Recently, Managing Director of Power Holding Company of Nigeria (PHCN), Hussein Labo, attributed the low power generation across the country to the ongoing maintenance works at SPDC Utorogu gas plant.

Labo said this had led to further drop in power generation and had affected electricity supply. “We have not received gas supply from the Nigeria Gas Company (NGC) and the water level is low,” he said.

The Utorogu gas plant was initiated in 1989 with the aim of processing 27 million metres of standard cubic feet of dry gas per day (mmscfd) of dry gas for supply to domestic markets around Lagos industrial areas via the Escravos-Lagos pipeline system.  It also serves as a back-up gas supply to some industries around Warri, including the PHCN’s Delta I-IV Power Stations.

According to the Federal Government, the quality of gas emanating from the Utorogu and Oben gas plants into the Escravos-Lagos gas pipeline system had been a source of concern due to its unacceptably high wet content, which causes blockages along the pipelines and adversely affects the optimum performance of the power plants.

Buoyed by the need to further treat the gas from the Utorogu and Oben gas plants owned by the NNPC and SPDC Joint Venture before delivery to the domestic transmission line, the Federal Ministry of Power had in 2008 invited proposals for the management of rich/wet gas at Utorogu and Oben gas processing facilities.

In order to remedy the situation, the government set up a committee to investigate and advise on how to supply bone-dry gas to the power stations.

-Guardian

Posted by admin on Jun 22 2011. Filed under Headlines, Oil Politics. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry