Italian engineering, construction and drilling contractor, Saipem has won $5.42 billion contract for chartering, operations and maintenance for a Floating Production Storage Offloading (FPSO) tanker facility for the Zabazaba and Etan development project in Oil Prospecting License (OPL) 245, THISDAY has learnt.

THISDAY, however, gathered that the $2.96 billion of the contract price, which is expected to be spent in Nigeria in line with the provisions of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act of 2010, is under threat.

This followed concern that the contractor is allegedly planning to use sister or affiliated companies to execute the local content scope of the project in violation of the NOGICD Act and the recommendations of the Nigerian Content Development and Monitoring Board (NCDMB).

Nigerian Agip Exploration (NAE) Limited and Shell Nigeria Exploration and Production Company (SNEPCo) signed the production sharing agreement at the ratio of 50:50 for the development of Zabazaba and Etan, where NAE is the operator.

NAE is developing Zabazaba field which has proven reserves of 560 million barrels of oil, as a standalone development, while Etan field, which is also in OPL 245, will be developed as a tie-back to Zabazaba.

The Zabazaba Deepwater field is a Greenfield offshore licence block in the eastern portion of the Niger Delta with water depths ranging from 1,200 to 2,400 metres.

Shell and Agip acquired the controversial OPL 245 from Malabu Oil and Gas in 2012 for $1.3 billion.

The acquisition has been the subject of a corruption probe and prosecutions in Italy and Nigeria but has not deterred Shell and Agip, which have both maintained their innocence, from going ahead with the field’s development.

Agip plans to achieve first oil in 2020 and is determined to start execution of the project in the first quarter of 2018.

THISDAY gathered that following the completion of the technical and commercial evaluation of the bids for the main packages in the development of the $13.5 billion Zabazaba deepwater oil field by the NCDMB and NAE, Saipem/Bluewater emerged as the winner of the $5.42 billion contract for chartering, operations and maintenance for a FPSO tanker facility for the Zabazaba and Etan development project.

The bid documents obtained exclusively by THISDAY at the weekend showed that of the three companies that submitted bids for the OPL 245 project, Saipem/Bluewater submitted the lowest bid of total lump sum of $5,426,500,714.00 out of which the bidder pledged to execute $2,966,993,161.91 of the work scope in Nigeria, in line with the provisions of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act of 2010.

The bid documents also showed that Malaysia-based international offshore energy facilities and services provider, Bumi Armada submitted bid of a total lump sum of $7,622,412,019, out of which $2,740,108,326.84 is the price of work to be executed in Nigeria in line with the NOGICD Act.

The third bidder, Norway-listed BW Offshore, reputed as a leading global provider of floating production services to the oil and gas industry and the world’s second largest contractor with a fleet of 15 FPSOs, submitted a bid with total lump sum of $7,630,575,309, out of which $3,434,801,972.83 is the price of work to be domiciled in-country in accordance with the Nigerian content.

Though the NCDMB has only recommended the three contractors to Agip to select the winner of the contract, a source at Agip told THISDAY at the weekend that Bluewater/Saipem has emerged the winner as their $5.426 billion bid was even $244 million lower than the $5.670 billion, which Agip had estimated in-house, as the cost of the project.

THISDAY,  however, gathered that the $2.96 billion, which is expected to be domiciled in Nigeria in line with the provisions of the NOGICD Act, is under threat as the winner is allegedly planning to award the local content scope of the project that is worth $2.96 billion to sister or affiliated companies.

“Saipem may be heading for another collision with the NCDMB because they are contemplating awarding the local content scope to firms affiliated to them so that all the money will go back to their country. The ES (Executive Secretary) has put his foot down that the contractor must adhere to the recommendations of NCDMB on Nigerian content requirements,” said a top official of NCDMB, who spoke off the record.

It was gathered that Saipem was the first foreign contractor to be sanctioned by the NCDMB for violating the NOGICD Act.

In letter dated February 28, 2014, the NCDMB had suspended Saipem from participation in Nigerian oil and gas projects for “abuse of expatriate quota and procurement processes” after the agency had issued several caution notices to the Italian company in a bid to steer it into compliance to the NOGICD Act but the notices were ignored.

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