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Total bemoans high cost of oil and gas projects in Nigeria

By on August 26, 2014

A French oil major, Total, has bemoaned the high cost of projects in Nigeria’s oil and gas industry, identifying long contracting cycle, security and community issues as factors that prompt contractors to inflate the cost of projects in the country.

The company has also called on the federal government to ensure that the Petroleum Industry Bill (PIB) reduces the duration for getting approvals for projects, saying the number of agencies involved in granting approvals for projects are also responsible for the high cost of projects due to the delay in getting approvals.

The new Managing Director and Chief Executive Officer of Total Upstream Companies in Nigeria, Mrs. Elisabeth Proust, who confirmed this development to THISDAY at the weekend, said Nigeria was the worst country on the issue of complexity of getting approvals for the execution of oil and gas projects.

“I have to say that one of the major causes of increase of costs is duration of approval phase. Of course, this involves the Nigerian National Petroleum Corporation (NNPC) and this is why we need their cooperation. If we succeed to accelerate the time for tender to be approved from two years to four months, we will save money. Today, when we launch a project, we do tender and by the time we get the approval, we have to renegotiate the contract. So, the contractor will just increase the cost. This is the first point. The second point is that there is what I call premium on Nigeria. There is premium because there are many issues such as security, flooding and we have problems with the communities sometimes and the contractor put extra money to cover these problems. Whether it happens or does not happen, does not matter but we have to pay,” she explained.

Proust, who also represents the Total Group in all Total’s subsidiaries in Nigeria, said the company was concerned with the issue of high cost of projects in the country and had started cost-reduction measures, which it intended to share with the NNPC, adding that there is need for a common programme to reduce costs.

She said her company would prefer a PIB that would reduce bureaucracy and the complexity of getting approvals for projects

According to her, Total inaugurated new projects with the conviction that the terms and conditions would remain the same and that there would be improvement in the PIB.

She further stated that since the last public hearing on the PIB, the company had not officially accessed the draft and the terms of the current reform bill that is on circulation.

“The PIB, I have to say that we don’t know exactly what the terms are now on the draft that is circulating because the last time we accessed the draft was during the public hearing. Since then, we have never officially accessed the draft and the terms. So, what we hear and what we understand could be a big worry because for Total, we have sanctioned and we have launched all these projects on the basis of the economies; on the basis of the existing terms and conditions on our contract. We took the risk. I mean, we are here to take the risk but when you take the risk, you take the reward,” she added.

Proust said Nigeria was the worst on the issue of long duration of getting approvals for projects, stressing that the complexity is due to the number of agencies involved.

“What we seek as Total is for the new PIB is to reduce bureaucracy. It is very complex to get approvals. The duration of tender – of course, Nigeria is the worst country for that.  There is long duration of tender. The complexity of getting approvals is because of the number of agencies we have to face – National Petroleum Investment Management Services (NAPIMS), NNPC, Nigerian Content Development and Monitoring Board (NCDMB) and others,” she added.

She said the PIB should also provide for fiscal terms that would encourage the development of gas fields.

 

[This Day]