Shutdown of Egina FPSO’s Fabrication Yard Threatens First Oil in 200,000bpd Field

Eromosele Abiodun

The Managing Director of Samsung Heavy Industries Nigeria (SHIN) Limited, the parent company of SHI MCI FZE, Mr. Yong-ho Jo has stated that the denial of SHIN workers access to the company’s $300 million fabrication and integration yard in LADOL Free Zone by the management of the free zone might delay the December 2018 first oil for the 200,000 barrels per day per day Egina deepwater field.

Jo who disclosed this in Lagos yesterday to journalists, said if not for the speed with which his company fabricated some modules weeks ahead of schedule, the Egina deepwater project would have been stalled.

He however, assured that Samsung would do everything humanly possible to ensure that Total achieves its December target for first crude oil from the field.

According to him, “The delay did not allow us move some materials offshore because it had an impact on our schedule. We had a time frame within which we were to install mooring chains. What saved us was that we were ahead of our schedule by six days without that we would not be sitting here talking about the project. This shutdown of our yard has impacted our effort of moving some needed materials to the vessel earlier than we should. Definitely, it will have an impact on the December date,” he explained.

He added that the delay will also increase cost as his company would have to employ more hands and equipment to enable it get back some of the time the two weeks shutdown has set it back.

He also stated that even if it is able to drill the first crude oil from the vessel, a lot of work still needed to be done hence the need for the yard manager to exercise restraint in its actions.

He called on the relevant authorities to ensure that his company’s dispute with LADOL is resolved in the best interest of Nigeria as investors all over the world are aware of the matter and are watching.

LADOL had also claimed that the fabrication yard does not belong to SHI because Total brought the money used in building the yard.

LADOL made the claim relying on a letter dated February 14, 2018, by the Managing Director of Total, but the Samsung MD faulted LADOL’s position, saying “It is totally untrue that Total paid Samsung any amount for the upgrade of any facilities. LADOL keeps misleading the public based on its own allegations about engineering procurement contract (EPC) terms and conditions of Egina FPSO project, where LADOL has no authority to access the details. Total did not make any investment in the yard. Total’s MD did indeed make the referenced statement in the said letter of February 14, 2018.

“SHIN, conscious of the fact that LADOL may deliberately misapply/misinterpret this statement, consequently issued a letter to Total on the same date of February N14, 2018, requesting Total to clarify the purpose of the payment towards providing clarity to the Senate and other relevant parties.

“During second Senate hearing, Total issued a letter clarifying that Total did not make any investment in the development of fabrication yard, by a letter dated February 21, 2018, wherein it stated as follows:

“In this regards, company hereby confirms that the amount assigned for the above work unit in the contract, has been apportioned from the contract lump sum for the sole purpose of progress measurement for effective project management. Further to the above, this amount shall not be construed as an investment by the company in the development of SHI-MCI worksite,

given that this development was to be undertaken by a joint venture and “the entire investment in new fabrication yard will be financed in the ratio of equity of equity and loan from local or international bank to 50 percent and 50 per cent respectively as contained in the

contract’s Nigerian content Plan,” Jo explained.

“It is indicative of the bad faith of Ladol to cite the letter of February 14, 2018 and deliberately refrain from citing the letter of February 21, 2018, wherein Total provided clarity on the payment. As earlier mentioned, there was no monetary contribution from Total for the development of the facility. Consequently, there was no fraud or misrepresentation by SHI. This matter has been clarified by Total in writing and resolved before the Senate. It is also noteworthy that at conclusion of the hearings, the Senate, in writing, also commended SHIN’s adherence to its content’s commitments,” Jo added.

It was all over the news that LADOL terminated its partnership with SHIN and denied workers of SHI MCI FZE access to the $300 million yard in the free zone, saying that the annual operating licence expired and terminated by effluxion of time on July 29, 2018.

But Samsung disputed this claim stressing that it made advance payment of $45 million to GRML for five years sublease in 2014, which would expire in 2019.

The Chief Operating Officer of SHI MCI, Mr. Frank Ejizu denied this stressing that SHI MCI operating licence was effective from July 2017.

“We approached GRMFZC to renew our license but it insisted that except we pay free on board (FOB) charge of $33 million, it will not renew our license. Even though the FOB charge was acknowledged not to be SHI MCI’s obligation at stakeholders’ meeting of July 2018, GRMFZC still refused to renew SHI MCI licence, “he said.

Ejizu however, said LADOL had granted the company access to the yard based on the intervention of Total.