NNPC: $800m Loss Forced Termination of Oil Pipeline Security Deal

Chineme Okafor in Abuja

The Nigerian National Petroleum Corporation (NNPC) yesterday stated the reasons for its decision to cancel and re-award the contract for security of 87-kilometre Trans Forcados Pipeline (TFP) to a new firm.

The corporation stated that so far in 2018, it has lost crude oil worth $800 million from the line despite the former security contract.

In a statement signed by the corporation’s Group General Manager, Public Affairs, Mr. Ndu Ughamadu, in Abuja, it explained that the decision to assign the TFP surveillance package to indigenous firm, Ocean Marine Solutions, was reached after consideration of the huge losses on the line.

NNPC said it appraised the new company’s record of performance on the Bonny-Port Harcourt and Warri-Escravos crude evacuation lines, and found it impressive, adding that its contract with it would entail Ocean Marine paying for any damage to any inch of pipeline under its watch.
According to it, the new contract offered it and its Joint Venture (JV) partners, host communities and the Nigerian Federation, immeasurable benefits.

It said, faced with massive losses in projected revenue, stakeholders in the TFP which reportedly 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, hence, the termination of its previous security deal.

Providing a context, NNPC said in the statement: “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 $800 million in lost revenue to all the stakeholders in the matrix which includes NNPC, its Joint Venture partners and the Nigerian Federation.”

It noted that no responsible business entity or government would allow such level of loss to go on without taking swift actions to stop the losses.
Based on this, NNPC said Ocean Marine Solution was assigned to handle the TFP under a proof of concept arrangement which it said was 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,” the statement added.

It further explained that the cost of the new deal was insignificant when compared on the basis of value-for-money with the old arrangement.
According to it, “In 2018, after we lost over 60 days of production, under the old contract, the NNPC and its stakeholders spent over $32 million 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.”

It also dismissed insinuations that the new contract would spell doom for youths of communities on the pipeline’s right-of-way currently rendering sundry services to the old service provider, arguing that the issue of TFP security was purely a matter of criminality which the host communities along the pipeline corridor are totally against.

NNPC said that long before now, it had evolved a host community participation model which naturally incorporates youths within the vicinity of its assets and areas of operations as veritable stakeholders and 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,” it explained.

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

On allegation that the new contract did not go through due process as mandated by law, NNPC said the government-approved procurement processes and procedures in the award of highly sensitive national security contracts were followed to the letter.