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Oil firm refutes allegations of illegality in NNPC contracts

By BusinessNews Staff on September 19, 2015

An oil servicing company, PPP Fluid Mechanics Limited (PPPFM), has denied any engagement in illegality in the process of obtaining and executing its contracts awarded by the Nigerian National Petroleum Corporation (NNPC).

The Managing Director and Chief Executive Officer of the company, Mr. Kunle Oyelakun, in response to a publication by an online newspaper, accusing his company of under-hand dealings in the transportation of crude oil to the Warri and Port Harcourt refineries, as well as providing security services, stressed that all the allegations were wrong and backed up by no facts what so ever.

Oyelakun said contrary to the publication, contracts awarded to his company by the NNPC followed due process and complied with the relevant extant provisions of the Public Procurement Act.

He added unequivocally, that there was nothing illegal in respect of the security contract awarded to OMS and the movement of crude oil by marine vessels contract awarded to PPPFM from inception to date.

According to him, before the award of the contracts, following a detailed study and analysis by the NNPC management, a report indicated that it became uneconomical to transport crude oil from Escravos to Warri refinery through the pipeline in view of government’s huge expenditure of about $121 million for the maintenance and repairs of the Escravos-Warri broken crude oil pipeline.

Furthermore, he said the report also indicated an estimated 40 per cent loss of crude oil pumped through the Escravos-Warri pipelines due to persistent pipeline vandalism and oil theft.

“Besides the specific losses stated above, it is public knowledge that the Warri and Kaduna refineries before the engagement of PPPFM had been shut down for about 48 months due to lack of supply of crude oil feedstock to make the refineries functional. For the avoidance of doubt, these facts are also verifiable in the records of NNPC.

“The above circumstances made the sourcing of alternative means of transportation of crude oil other than through the pipeline inevitable, according to the report, in order to minimise the negative impact. This fact is also verifiable.
“PPPFM was originally owned by some Israelis who incorporated the company in 2008. NNPC records will confirm that they were the first to secure the contract for the transportation of crude oil by marine vessels from Escravos terminal to Warri refinery from the NNPC in December 2010 through an international competitive bidding with 13 other companies for the transportation of crude oil by marine vessels from Escravos to Warri refinery.

“It is therefore totally untrue to claim as the online newspaper did that the contract was awarded without due process. PPPFM insists that due process was followed in the award of the contract,” he said.

He stressed that in June 2011, the present owners acquired the company (PPPFM) from the original owners through share purchase agreement and inherited the contract, contrary to the newspaper’s allegation of hostile acquisition of the company.

“The publication contained largely in all material facts false assertions, misinformation and outright misrepresentation of facts regarding the said contracts. The writer of the publication obviously to make it attractive to the readers linked some of our promoters including Captain Idahosa Okunbo and Dr Olatunde Ayeni with the immediate past president, Dr. Goodluck Jonathan and the immediate past Minister for Petroleum, Mrs. Diezani Alison-Madueke.

“We wish to state categorically that contrary to the assertion in the publication under reference also to the effect that the contract was awarded at the cost of $15.4 per barrel, the contract for the transportation of crude oil using marine vessels was indeed awarded at the cost of $2.79 per barrel, which was later negotiated and reviewed to $3.87 per barrel. The review was undertaken by NNPC special team from five different departments of the corporation. Consequently, the review was a product of mutual negotiation.

“At this time, the dedicated security surveillance for the provision of six security boats awarded to OMS was running at an average cost of $1.5 per barrel.

“Further to satisfactory performance of our companies with Warri experience, NNPC invited our companies to consider rendering similar services to Port Harcourt refinery, which understandably has suffered a greater fate in the hands of pirates than Warri refinery before our companies’ intervention under a similar arrangement. Indeed, NNPC added issues of statutory NPA port and cargo charges, ship dues, NIMASA cabotage fee, offshore sea protection levy, offshore compulsory terminal pilotage dues and dedicated security surveillance. All these led to another negotiation painstakingly carried out by officials of NNPC with our company.

“As at the time of the malicious publication, the contract between our company and NNPC, which now includes the provision of dedicated security patrol boats, was at a total cost of $5.68 per barrel contrary to the $15.4 per barrel alleged in the publication.

“In the course of our operations during the pendency of these contracts, PPPFM has had cause to incur operational losses of US$ 5,790,482.74 and NGN 207,230,168.10 in 2011 and another loss of about $32 million in 2012. In spite of these losses, the company has soldiered on because of the positive impacts of the company’s initiatives and services to the nation. From 2011 till date, a total of 65,597,698 barrels of crude oil have been delivered to the refineries by our company under the contract without any loss.”

[ThisDay]

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