21-07-03 These are troubled times for Mr Jackson Gaius-Obaseki, group managing director of the Nigerian National Petroleum Corporation, NNPC. Only about five weeks ago, President Olusegun Obasanjo expressed dissatisfaction, in the run-up to the increase in the prices of petroleum products, with the management of the NNPC.
Now, the president has had to intervene on behalf of a foreign company, the Malaysia Shipyard Engineering, MSE, which is accusing the NNPC of falsification of bid prices of some oil and gas contracts.

MSE and eight other companies -- Daewoo Engineering and Construction, DSND Subsea Nigeria, Global Offshore International, JGC of Japan, Horizon Offshore, Saibos of France, Stolt Offshore Services and Transcoastal Marine Nigeria -- had passed a pre-qualification screening and were invited to submit technical bids for ExxonMobil contract No C-51740 Yoho Initial Wellhead platform project valued at over $ 30 mm (about N-4 bn).
The scope of work included engineering, procurement, construction, transportation, installation hook-up and pre-commissioning of the platform wellhead topsides, jacket subsea pre-drilling templates and submarine pipelines.

After a winnowing process, MSE, Saibos, Stolt and Global eventually passed the technical evaluation and were asked to submit commercial bids. All the tenderers submitted proposals for fabrication of all the structures overseas, while Global, Saibos and Stolt submitted alternative compliant bids for fabrication of jackets in Nigeria. In the lump bid for local fabrication of major platform structures (decks/jacket structures), Global presented a bid of $ 37.9 mm, Saibos $ 40.5 and Stolt $ 41.6 mm. For the foreign fabrication of major platform structures, MSE quoted $ 31.6 mm, Global $ 33.7 mm, Saibos $ 33.9 mm and Stolt $ 42.6 mm.
In the technical evaluation report on the bids prepared by Mobil Producing Nigeria Unlimited, MPNU, NNPC's joint venture partners, JVP, three tenderers were deemed to have met certain standards. MSE was the exception as it was said not to be non-compliant because it did not nominate an installation vessel and a sub-contractor. For these reasons, its tender was labelled non-competitive. MPNU favoured the option of fabricating the major platform structures abroad.

Consequently, it recommended that Saibos be awarded the contract at a lump sum of $ 33.9 mm at the expense of Global, the assumed lowest bidder, which quoted $ 33.7 mm. According to MPNU, the difference between the lowest bidder and second lowest bidder, which stood at $ 200,000 was insignificant as the lowest bidder might cost more considering its longer work schedule.
But Mr Chris Osa Ogiemwonyi, group general manager, National Petroleum Investments Management Services, NAPIMS, and Dr C. Uzoigwe, group executive director, exploration and production, representing NNPC, awarded the contract to Global, the third lowest bidder, at the price of MSE, the authentic lowest bidder. This ran contrary to JVP's recommendation. MSE and some critics have since been fuming that by that decision, NNPC has breached the industry tradition of awarding contracts to the lowest bidder with technical competence.

In a six-page petition addressed to Obasanjo on 23 August 2001, MSE berated NNPC's parastatals for what it considered their questionable conduct in the award of the Yoho project. The company raised three substantive points for consideration. First, it claimed it proposed two options as did Global and Stolt, while Saibos proposed four options.
Its second option, valued at $ 31.7 mm, it argued, was the lowest of all the quoted prices, but was dropped in "strange circumstances." It said there were apparent discrepancies in MPNU's letter ref. DN/0132.10.16/109 of 15 August 2001 to NAPIMS where MSE was not mentioned, while Global was brought up as the second lowest bidder.

The petitioner asserted that Saibos was recommended purely on their unevaluated price of $ 33.9 mm, adding that if evaluation was irrelevant, it (MSE) ought to be awarded the contract on its unevaluated figure of $ 31.7 mm, which was the lowest. Specifically, it said, there was a difference of $ 2.2 mm between its bid price and Saibos'.
Second, it pointed out, its schedule for executing the project was four months shorter than that of other tenderers who intended to spend 12 months. A shorter gestation period has obvious advantages which include no loss in production.
Third, it frowned at the tag of "non-compliant" put on its bid as uncharitable because "during technical evaluation, the company had proposed to do all the fabrication in Nigeria, including pre-drilling templates, hook up and commissioning, hiring of barges and ancillary services as training of Nigerians." If this option was sustained, the local contents/input would have exceeded the recommended 10 %.

The company also attached a letter written by some of its sub-contractors like Global Offshore International, one of the tenderers; Nigerdock Nigeria and Jason Oilfield Ventures, indicating their readiness to work with MSE in actualising the Yoho project. In its conclusion, MSE sought the dispassionate intervention of Mr President in correcting the "anomalies" highlighted and award the contract to it.
Convinced there was merit in MSE's case, Obasanjo faulted Obaseki's judgement, noting that based on the analysis done by his office, the country stood to gain $ 2.2 mm or N 293 mm from the company's second option. He also vouched for MSE's technical competence. The president consequently demanded an explanation: "Please let me know why this should be at this time in the life of this administration."

As the controversy dragged, MSE and the NNPC/NAPIMS sought a way out. MSE was persuaded to discontinue its interest in the contract with a promise of another juicy contract overseas. The contract was later awarded to Global at MSE's price.
NAPIMS, the investment arm of NNPC, which is responsible for the management and supervision of government equity interest in the exploration and production activities in the oil and gas industry is also being questioned on the award of contract tender nos FAC-2001-2415 and FAC 2001-2416. The project's scope of work included transportation of various sizes of pipelines from Chevron warehouses and installation at offshore Escravos and transportation of various types and sizes of jackets from Chevron warehouses and installation at offshore Escravos.

According to the bid summary, nine companies ranked in the order of their commercial bids were shortlisted for the contract. These were Horizon Offshore, which quoted $ 94.1 mm; Global Offshore, $ 102.5 mm and Willbros West Africa, $ 106.2 mm. Others included Gramen Petroserve, $ 237.3 mm; Jason, $ 243.2 mm and 0IS, $ 296 mm. The commercial bids of six bidders that met the technical evaluation were opened for consideration. If equity were to be followed, Horizon Offshore, the lowest bidder, ought to clinch the contract. But the evaluation teams recommended split award of the contract between the lowest bidder and the second lowest.
NAPIMS, however, opted to split the contract into three to accommodate Sirpi-Alusteel, the fourth lowest bidder, thereby bypassing the third lowest bidder, Willbros West Africa. Willbros dispatched a petition to NAPIMS, alleging deliberate falsification of its commercial bid. It accused the NNPC agency of giving a dog a bad name in order to hang it. It prayed that a thorough check be carried out on its documents. NAPIMS said it investigated Willbros' claim but found it to be incorrect.

A senior technical manager at Amalgamated Oil Company, Lagos, Mr Gbenga Adebowale, said it was not a novel idea to split a contract to accommodate interest groups, especially indigenous companies. He, however, said it was another thing entirely if commercial bids are altered or falsified to favour unqualified interests, as alleged by Willbros.
Willbros also lost out on a princely contract worth $ 50 mm. The company was one of the bidders in the Nigerian Agip Oil Company NAOC/N-LNG gas supply phase 3, otherwise calledPipeline Project tender No 210263/0. The project's scope of work spanned the construction and installation of pipeline through which LNG will pass.

Managing director of Willbros, Ken Tillery, in a petition dated 26 October 2001 and addressed to Andrew Uzorgwe, alleged that it heard a rumour that its price for the gas supply project exceeded the price tendered. The company debunked the claim that it quoted $ 69 mm. Tillery said it quoted a lump sum of $ 41.7 plus N 731.6 for the project which totalled $ 48.3 mm.
The managing director had earlier received a letter dated 3 February 2002 with reference no NAP/GD/GM/NLG/04/04 written by one Mr A. Gini, a staff of NNPC, claiming again that the company did not quote the prices of certain items like consumables, vehicles and special tools and spares. Replying, Willbros said it submitted a complete tender with a realistic lump sum price for the economical completion of the project.

A senior manager at the Nigerian Agip Oil Company, NAOC, Victoria Island, Mr James Ighodalo, said he would not know why Willbros was disqualified. He, however, admitted that tremendous influence is always applied in the oil and gas industry on contract awards, saying that "whom you know" often determines who gets what.
He revealed that it is a practice in the industry to invite a contractor to the negotiating table and ask him to accept a certain price, even if he is not the lowest bidder. He confessed it would require a presidential cleansing to remove the rot in government's oil parastatals.

In another falsification allegation, NNPC/ NAPIMS was accused of altering the commercial bids of five companies that tendered for associated gas gathering system which was a joint venture agreement between NNPC and Shell Petroleum Development Company, SPDC.
The companies are Mott Maconald with an offer of $ 18.8 mm; ILF Consulting Engineering, $ 5.5 mm; Worley/Royston, $ 11.3 mm; Petroface /B.A. Soyade, $ 14.7 mm and Foster Wheeler/Terra Energy, $ 13.5 mm. The lot fell on a committee headed by Mr S.O. Olawore to evaluate the bids on behalf of SPDC. The committee was said to have, unilaterally increased and reduced bidders submissions. For instance, Wosley/Royston's bid rose to $ 17.5 mm, while Mott Macdonald's bid went for $ 26.1 mm. Foster Wheeler/Terra Energy's went for $ 23.2 mm, ILF Consulting Engineering's to $ 12 mm and Petroface/B.A.'s to $ 22.3 mm.

Justifying its act, NAPIMS, in a memo dated 25 July 2003 and sent by the evaluation committee to the project venture manager, attributed the additional costs to reimbursable and optional costs. These costs, the memo asserted, included cost of providing services such as telephone and courier services while optional costs included office accommodation, computers and man-hours of operational activities.
Olawore recommended that ILF be awarded the contract. But the decision was faulted by other bidders as unprofessional and unethical. They argued that with the SPDC estimation of the total cost of $ 18.9 mm, Forster Wheeler or Petroface should have clinched the contract due to their bidding offers, and not ILF whose lump sum price was about 53 % of Shell's estimate.

Critics say NNPC and NAPIMS have also been playing hide and seek with the Escravos Gas-To-Liquid, EGTL, project. The project entails the conversion of natural gas into synthetic crude oil with a plant capacity of 34,000 bpd, bpd, but which can be expanded to 120,000 bpd within 10 years. When the project was advertised in two national dailies on 27 August 2001, it gave prospective contractors two months within which to submit bid packages.
Prospective contractors, were however, jolted by another hasty advertisement which reduced submission date by three weeks. Most of the big players like Bouygues/Chiyoda, JGC, Kellogg Brown and Root Snamprogetti sniffed intrigues in the NNPC/NAPIMS conduct and declined to bid. They suspected the parastatals' inconsistency meant they had a particular contractor in mind and it would be pointless to bid in a pre-determined contest. However, in order to beat both parastatals in its own game, they connived by asking for $ 10 mm as reimbursable cost.

NNPC/NAPIMS beat a hasty retreat. But the EGTL project is being resurrected through selective tendering. This fact was contained in a memo EP/GED/002 of 28 March 2003 from Dr E.O. Ayoola of NNPC. Ayoola's letter gave tacit approval to NAPIMS' recommendation to adopt the engineering, production and construction, EPC, contractors that tendered for the Qatar-Gas-To- Liquid, QGTL, project.
Consequently, JKS, Technip, Chiyoda/Mitsubishi and Uhde that had no African experience are being invited to bid, and in the process, neglecting other technically competent contractors. Ayoola said his preference for selective tendering was "because this strategy would allow NNPC/ Chevron Nigeria Ltd, CNL, joint venture to leverage on their bidding experience and use the lump sum price of $ 675 mm for the QGTL project as a reference point."

Curiously, this benchmark of $ 675 mm was at variance with $ 900 mm spent on the Qatar project. The plot thickened after CNL reviewed the project cost twice, from $ 1.3 bn to $ 1.9 bn, to the annoyance of NAPIMS, which is insisting that the project cost should not exceed $ 1 bn.
Managing director and CEO of J&D Oil and Gas, Lagos, Mr Jerry Idahosa, said the oil and gas industry needs a fearless, full-fledged minister of petroleum resources who can cleanse the parastatals of bad eggs.