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Sunday, May 26, 2024

NNPC Confirms Exit Of AKK Financiers, Silent On Alleged Contract Inflation

The Nigerian National Petroleum Company Limited (NNPC Ltd) has so far spent over $1.1 billion on the Ajaokuta-Abuja-Kano pipeline after the Infrastructure and Commercial Bank of China (ICBC), Infrastructure Bank of China and China Export Credit Agency (SINOSURE), who were to bring $2.38 billion or 85 per cent of the project sum, backed out.
Confirming an earlier exclusive report on the AKK project by The Guardian on the exit of the initial financiers following the inflation of the contract to the tune of 570 per cent, the Group Chief Executive Officer of the NNPCL, Mele Kyari, said the national oil company would continue to fund the project despite the fraud allegations.
But Kyari was silent on the alleged contract inflation. The Guardian had exclusively reported that the project failed on financial prudence integrity based on international best practices.
Similar projects around the world cost far less, it was reported. The report said the 693 Kilometres Yucatan Peninsula Gas Pipeline in Mexico cost $266 million.
Also, the 460 kilometres Export La Moran Pipeline built between Argentina and Chile cost $360 million while the 3,700 Kilometres Export Pipeline between Bolivia and Sao Paolo cost $1.8 billion.
The examples suggest that Nigeria has the highest cost of such a contract, part of the reason the funding companies exited as they “cannot afford to go into cahoots with Nigerians because they could be exposed when they submit their financial reports to their countries of origin.
“Globally the cost of high-pressure transmission gas pipelines is built at $800,000 per kilometer. In Nigeria, the final investment decision (FID) for EPC was scheduled at $4,560,260 million, which is a 570 per cent margin above global standards. Procurement fraud because we neglect public procurement rules and global best practices as it relates to industry standards for EPC on project financing, the economy is practically unable to fund any CAPEX through revenue, and even when funds are borrowed, it finds itself unable to maximize cost,” the report said.
Kyari was accompanied by some top officials of the NNPC Limited and Oilserv Limited (pipelines and facilities), the contractor of the project during his visit to some of the project sites in Kogi State on Monday.
Kyari noted that the company would continue to fund the massive project, which was delivered in phases and has been active even though it did not have third-party finance for the project. He, however, failed to disclose the reason third-party financiers exited the project.
He said: “So far, NNPC Ltd has funded over $1.1 billion of the project. To date, none of the project activities is abandoned as reported and we reassure all stakeholders that we have a line of sight to project delivery on schedule. NNPC Limited remains highly committed to the delivery of strategic national infrastructure projects through responsive project delivery, active collaboration with government security agencies and communities as well as deployment of technology.
“This is one of the most massive projects of proportion value to our country for economic growth. It is a must-deliver project and we have continued to fund it despite not having third-party finance support, we will deliver this project.
“We do not owe a dollar to our contractors, there are over 30 sites that are active today in this project. We are hopeful to deliver this project.
He decried the rising insecurity, which has led to the loss of lives of some of the site workers. He hinted 70 per cent of the welding work had been completed.


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