For over one year, Arco Group Plc, an indigenous company with interests in oil and gas maintenance services, has been at war with the Nigerian Agip Oil Company (NAOC) over the award of the contract for the maintenance of its gas plants. Assistant Editor SEUN AKIOYE examines the intrigues of the oily deal
The business deal looked good– on paper. Alfred Okoigun, the Group Managing Director and Chief Executive Officer (GMD/CEO) of Arco Group Plc, also thought so and appended his signature.
No one could accuse Okoigun of naivety in oil and gas; his pedigree comes in leaps and bounds. He is a former pioneer student of the Petroleum Training Institute (PTI), Warri, Delta State and also a member of the pioneer staff of Warri refinery.
In 1980, he took a big risk, resigning from the refinery to set up his business specialising in the maintenance of heavy machines in the oil and gas sector. He partnered with an Italian company, Nuovo Pignone Spa, and began to develop capacity for Nigerians in the boisterous oil and gas sector.
His company acquired a reputation as an efficient service provider in the area of maintenance and operations support to upstream and downstream sectors in the industry winning contractors from reputable companies.
In 1999, General Electric Company of the United States of America (USA) acquired Nuovo Pignone Spa and the emerging company became known as General Electric Oil and Gas. The Nigerian subsidiary also became known as General Electric International Operations Nigeria Limited (GEION).
Business was good as the partnership despite the change in status was able to bid and win a major contract in a Joint Venture between the Nigerian National Petroleum Corporation (NNPC) and another Italian company, the Nigerian Agip Oil Company Limited (NAOC) to maintain the latter’s rotating equipment, gas turbines and machines at NAOC’s OB/OB, Kwale and Ebocha gas plants in Delta and Rivers states. That was in 2006.
This may have been one of the biggest contracts for Arco, but it also would turn out to be its biggest nightmare.
In the beginning was trouble
Trouble began almost immediately the contract was signed. Although Arco was a partner in the project, as stated in the contract approval letter from the National Petroleum Investment Management Services (NAPIMS) on June 6, 2006, its status was however reduced to the position of a sub-contractor by NAOC. Arco felt this was a deliberate ploy to degrade it in clear violation of NNPC approval.
Perhaps the best indicator that Arco was a capable partner occurred in 2006 after an escalated crisis in the Niger Delta led to the massive exodus of foreign nationals working in the oil and gas sector.
GEION also withdrew all its 18 expatriates leaving Arco to carry on with the operations and maintenance of the operations for six months. According to Denis Ayisire, Arco’s company secretary, the company performed so well in the absence of the foreign partners ensuring the smooth, uninterrupted and efficient operations of the gas plants.
This position was reinforced by a letter dated January 14, 2007 from NAOC to Arco requesting for two staff of Arco who were on vacation to report to OB/OB gas plant. This, according to the letter, was to make up for the absence of expatriate staff that fled the country during the unrest. The letter was signed by the Land Area Manager, G.N.T Okai.
The letter reads: “We sincerely hope that these dedicated and highly professional personnel of yours will be adequately compensated in the future and particularly during this trying period of our collective effort and responsibility of having to maintain uninterrupted operations.”
But when GEION came back after the forced exit, it rewarded Arco allegedly by snatching 19 of its staff and further reduced the scope of Arco’s job by introducing third-party company to perform Arco’s scope of work in the contract. Also, GEION acting with NAOC allegedly wrote a letter to NNPC to drop Arco from the contract.
At the expiration of the initial contract and its extensions in 2011, Joint Venture partners decided to advertise a tender for the replacement contract. However, there was need to award a stop-gap contract for the maintenance of the plants to either of GEION or Arco.
But before this could take place, NAOC allegedly issued a Purchasing Order every two days to GEION at a cost of $87million per annum, which has been active since 2012.
In order to plug this drain in the nation’s treasury, NNPC conveyed a meeting in Abuja on July 17, 2013 with GEION, NAOC and Arco.
GEION and Arco were asked to prepare separate quotations for the work scope. Arco quoted $37million for the entire work per annum. GEION reportedly stuck with the $87million cost.
An Italian Mafia?
A source close to the NNPC said: “They defy regulators and do what they like, I am not sure many communities have benefited from their Corporate Social Responsibility.”
This statement perhaps may contain more truth than intended as documents shown to The Nation revealed that NAOC acting in concert with GEION made a deliberate plan to remove Arco from the contract it jointly won with Nuovo Pignone Spa.
Between April 29 and May 10, 2013, NAPIMS, a subsidiary of the NNPC and NAOC conducted a Joint Technical Evaluation of companies wishing to bid for the maintenance service of the rotating equipments at OB/OB, Ebocha and Kwale gas plants. Forty three companies were evaluated for capacity to carry out maintenance services on the gas plants.
In the technical evaluation result, a copy made available to The Nation, Arco Petrochemical was scored 8.01 by NAPIMS and 8.68 by NAOC with Sudelettra Nigeria Limited coming a distant second with a score of 6.38. Also in the result, Plantgeria Nigeria Limited scored 6.05.
However, it was curious that about one year after the conduct of the technical evaluation, NAOC refused to engage the services of the highest scorer in the examination. This situation prompted series of interventions between NAOC, NNPC and NAPIMS, with the government agencies insisting that Arco should be allowed to take over the maintenance contract.
A letter from NAPIMS to the Managing Director of NAOC on March 4, last year reveals the position of the NNPC. In the letter signed by Fidel I. Pepple, the Group General Manager, NAPIMS informed NAOC that its decision in favour of Arco was based on the following: Non support for the current high cost, excessive manpower regime, Arco is part of the contracting entity that is handling the maintenance work; Arco was able to handle the full scope during an earlier security crisis when GEION abandoned site; and Arco agreed with the manpower loading necessary to deliver the scope as proposed by the NAOC JV even though GEIONE rejected it.
Pepple concluded: “ Please be advised that NAPIMS cannot support an interim contract award to an entity based on a tender process that is yet to be concluded. We therefore reiterate that the interim contract be negotiated with Arco Petrochemical Company Ltd based on the manpower loading that was earlier agreed. Please convene a meeting urgently to negotiate the contract for a six (6) month extension while we are trying to resolve the issue of the substantive replacement contract.”
NAOC, in a March 18, last year letter, requested to engage the services of Plantgeria Nig. Ltd for the maintenance services in place of Arco examination. On April 14, last year, a reply came from NAPIMS affirming their earlier stand that Arco be given the contract being the most competent company.
“We write to reiterate NAPIMS Management’s position for the JV to negotiate with Arco Petroleum Ltd………Please be reminded that NAPIMS will not continue to support the huge cost of maintaining the facilities under the current maintenance regime beyond May, 2014,” NAPIMS said.
That meeting never held forcing NAPIMS to write another letter on June 13, last year rejecting the nomination of Plantgeria.
“NAOC proposal to execute an interim contract with Plantgeria for a replacement tender of which award recommendation has not been presented for NNPC Board consideration and approval is declined and not approved.
“NAPIMS will not support any cost expended on NAOC maintenance services contract for gas turbines and related equipment for OB/OB, Ebocha and Kwale Gas Plants arising from NAOC execution of such services with Plantgeria.”
Plantgeria Company Ltd, according to several sources knowledgeable in the oil and gas sector, was brought into the picture by NAOC and GEION because it is an Italian company.
“It is very easy to see the link between Plantgeria, NAOC and GEION. They simply want to promote a fellow Italian company to the detriment of a wholly Nigerian company and in flagrant disregard for the Local Content Act, which stipulates that Nigerian companies should be given priority in the oil and gas sector if they can demonstrate competence,” Ayisire said.
According to the information gathered on its website www.plantgeria.com, Plantgeria was incorporated in 1981 and primarily specialised in auto mechanic, vehicle and equipment sales and leasing, generator repairs, provision and maintenance of central, split and window air conditioners. Over the years, the company has also been involved in oil and gas facility maintenance and modifications and wellhead/Xmas tree valve maintenance.
At least three members of the company’s management are Italians. The Managing Director is Mr. P.L Carrodano. The General Manager, Marco Purgatorio, graduated from the Academy of Art in Rome and had a Higher National Diploma in Mechanic Hyperbaric Diving with 20 years experience working in diving and marine sector. The Coordinating Manager, Waldemar Josef Grabowskia, has over 30 years of working in commercial trading, shipbuilding and ship repairs.
Collateral Damage
The stalemate in awarding the contract of the maintenance of the gas plants is also a major test case for the Local Content Act, which is to ensure that indigenous companies in the oil and gas sector are not muscled out by multinational companies.
In order to give more opportunities to Nigerians who have demonstrated competence and keep with the best practice in the global oil and gas sector , the Nigerian Oil and Gas Industry Content Development Act was in place in April 2010. This is at the center of the suit filed by Arco.
Section 3 (2) and (3) provides the following: “ There shall be exclusive consideration to Nigerian indigenous service companies which demonstrate ownership of equipment, Nigerian personnel and capacity to execute such works to bid on land and swamp operating areas of the Nigerian oil and gas industry.
“Compliance with this Act and promotion of Nigerian content development shall be a major criterion for award of licenses, permits and any other interest in bidding for oil exploration, production, transportation and development or any other operations in Nigerian oil and gas industry.”
Arco sees the action of NAOC in refusing to award the contract to it as a major slap on Nigerian laws and statues by foreign companies.
But, according to a senior official of the Nigerian Content Development and Monitoring Board (NCDMB), the dispute between Arco and NAOC is not about local content but commercial in nature.
“We have intervened in the dispute between the companies and we found out that it is not about local content law but it is simply commercial, that is why we cannot come in between them. If it is about local content, the law gives us the power to intervene but I assure you this is commercial,” he said.
But Arco insisted it is an abuse of the law. It said the action apart from running contrary to Nigerian laws, will also affect the employment of over 400 highly skilled Nigerian technicians and engineers.
The gas plant OB/OB has an average monthly gas production of 40,000,000 Metric Standard Cubic Feet (MSCF) while the average monthly gas supply to Nigeria Liquefied Natural Gas Company (NLNG) Bonny is 28,000,000 MSCF.
Some experts also believe that the stalemate can endanger gas supply to the various power generating stations. Last week, the Transmission Company of Nigeria (TCN) announced that Nigeria has recorded another peak of power generation at 4,662 megawatts, a situation which has seen improved power delivery to many Nigerian homes.
“This impunity if allowed to continue any further may hamper this progress and the attendant change mantra of President Muhammadu Buhari,” Ayisire said.
Arco believes that the intention of NAOC is to edge it out from the maintenance contract and replace it with a “ company that would only repatriate its profit outside Nigeria.” The company said the loss of jobs for 400 employees may have a ripple effect on the economy and greatly hamper the efforts of the present administration from reviving Nigerian economy as well as putting an end to impunity in the oil and gas sector.
To enforce NNPC’s orders, Arco instituted a court action at the Federal High Court sitting in Port Harcourt on January27 against NAOC and joined the NNPC, NAPIMS and Conoco Philips Petroleum Nigeria Ltd as co-defendants. In suit, the plaintiff is seeking several declarative and injunctive reliefs against the defendants jointly and severally restraining the parties from “awarding or taking any step or steps to award to any person, company or firm except to the Plaintiff company, any contract whether designated as interim, stop-gap, 4+1 years or whatsoever described….for the maintenance of Gas Turbines and Rotating Equipment.”
However, NAOC initially declined to enter an appearance but filed a notice of preliminary objection. On February 3, the court granted an interim injunction restraining NAOC from awarding the contract to any other company.
The order, according to the counsel to Arco, B.E.I Nwofor (SAN), was simply disregarded by NAOC and GEION.
On March 13, NAOC allegedly facilitated the entry of Plantgeria employees into the plant “ with a view of taking over the plant,” says Atoyebi. He also alleged that NAOC instructed its security personnel not to allow Arco employees into the plant from April 30.
This action prompted the court to issue a notice of consequences of disobedience to order of court under Order 1X, Rule 13, Judgment Enforcement Rules to Plantgeria. After months of legal tussle, the presiding judge, Lambo Akanbi on June 30 ordered that “the parties maintain status quo” and subsequently adjourned the case to October 26.
According to Ayisire, this order has again been disobeyed by GEION, NAOC and Plantgeria, with NAOC using its security personnel to prevent Arco engineers from gaining access to the plants. According to an affidavit filed by Pius Onodjohwo, a staff of Arco, NAOC facilitated the entry of Plantgeria to the premises of the gas plants “for the purposes of taking inventory and familiarisation.”
Onodjohwo, who took pictures of the visitors, said the group was led by NAOC employees, made up of four expatriates and seven Nigerians. The group allegedly repeated this visit on March 17 and 18.
No end in sight
There appears to be no end in sight to the stand-off between the companies, despite a court order and advice from NNPC and NAPIMS.
When The Nation contacted Taju Adigun, the Manager, Government and Institutional Relations at NAOC, he declined to give any official statement.
“Why do you want to write about it? Are you aware the case is in court? The ethics of journalism, as I know it, stipulates you can’t write about a case already in court and I think you should know that,” he said.
Subsequent calls and text messages to him went unanswered. Also when Chidozie Okafor, Head, legal department at NAOC was contacted, on hearing the subject of enquiry merely responded “ this is the wrong person” several times even though he had earlier acknowledged his identity.
On July 24, there was a slight upsurge in activities at the offices of Arco, the cause of this action was a letter written by GEION instructing Arco and its employees to compulsorily vacate the plants on or before July 31.
This situation has thrown the issues wide open and may serve as a test case for the oil and gas sector. With an oil giant pitted against a small indigenous company, stakeholders await the pronouncements of the court and the Presidency.
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