LADOL, Samsung Face-off Threaten Egina  FPSO First Oil Production

ABIOLA Seun     |

There are fresh indications that the first pump of crude oil from the Egina Floating Production Storage Offloading (FPSO) may be delayed due to the face off between Lagos Deep Offshore Logistics (LADOL) base and the Samsung Heavy Industry (SHI).

This is because Samsung has complained about inability to access its yard to move materials offshore for Egina’s hook-up.

Egina is the biggest project currently ongoing in the nation’s oil and gas industry and it was gathered that the production from the FPSO was expected to begin in January 2019 may no longer be visible.

Also,  plans to export one million barrels of the first oil from the FPSO in January, 2019 and to enhance the revenue profile of Nigeria and other stakeholders will be affected.

Speaking to newsmen on Thursday, the Chief Operating Officer of SHI-MCI, Frank Ejisu said the delay in accessing the Samsung fabrication yard could affect the first production date.

He said,  “The delay itself did not enable us move some material offshore because it has an impact. We have schedule on hook-up but because we did it ahead of time by six days we gain a little time but this effect of locking our  yards impacted on moving our materials out of the yard earlier than we should so definitely it will have an impact on the job that’s the truth. Basically, it will have an impact on first oil production,” he said yesterday.

The Samsung COO who alleged that LADOL has been a law upon himself said the company has refused to abide by the directive of Nigeria Export Processing Zones Authority (NEPZA) to allow Samsung into their yards.

He stated that LADOL however failed to renew its operating licence because it was adamant against paying an illegal Free On Board charges.

His words,  “SHI-MCI Operating licence was effective from 30 July 2017. We approached GRMFZC to renew our licence but it insisted that except we pay the FOB Charge, it will not renew our licence. Even though the FOB Charge was acknowledged not to be SHl-MCl’s obligation at Stakeholders meeting of 16 July 2018, GRMFZC still refused to renew SHl-MCl’s licence.

“On 24 July 2018, prior to expiration of the licence, we filed a case before the Federal High Court to determine whether SHl-MCl is obligated to pay the F0B Charge and whether it is legal for GRMFZC to refuse to renew the operating licence because SHl-MCl refuses to pay the illegal charge.

“Since we commenced the proceedings, GRMFZC has changed its positions several times. After we commenced the case, they came up with different positions alleging several regulatory infractions which we had replied.”

“Recently, they also alleged that they did not renew the licence because of their shareholding in SHl-MCl. As stated above, the only reason, GRMFZC has refused to renew the licence is the FOB Charge. Any other reason, is an after-thought and a bad faith effort to discredit SHl-MCl to withdraw its case in court. NEPZA has instructed GlRMFZC to renew the licence but GRMFZC has refused.

“GRMFZC, and the Ladol Group as a whole, is the party that ‘has’ placed itself above Nigerian Iaw and free zone regulations … was law unto itself, acted with impunity and had been in persistent and deliberate violation of extant laws and regulations. Moreover, it had been defiant and unruly.”

However,  he also accused LADOL of arbitrary increase in the sublease agreement for 18 times in three years.

He said, “During the settlement period in the year of 2014, SHl-MCl had agreed to pay advance payment of USD 45 million to GRML for the 5 years sublease.

“The tariff in 2011 LADOL provided to SHl-MCl was USD 4 per square meter, which LADOL asserted that it was a mistake, skyrocketed to USD 48 per square meter in 2013 and this jumped once again to USD 74 per square meter in 2014, which has been increased 18 times over last 3 years.

“The tariff, USD 74 per square meter, was based on bare land which did not reflect the market value at that time for a bare land.”

“For SHl-MCl’s stable operation and cost competitiveness in future EPC projects, SHl-MCl had no choice but to request reasonable tariff for the remaining period of sublease agreement.

The right to terminate the sublease is expressly stipulated under clause 14 of the sublease agreement. One of the circumstances for termination is for a ‘Material Breach’, which in turn is defined to include a breach of clause 9 (Sub-lessee’s Covenants). Ladol has only Cited an alleged breach of clause 9.6(b), which only deals with situations ‘where the consent or approval of the Sub-lessor [GRML] is required to any act of the Sub-lessee (SHI-MCI FZE] under this Sub-lease Agreement.”

“SHl-MCl is not in breach of any applicable law or the Sublease Agreement. We have commenced proceedings on this dispute. This will be determined by the appropriate body.”