REVEALED: How Chevron increased Escravos gas-to-liquids project contract cost by 349% in 3 years without FG’s consent

Samuel Agbelusi

A committee of the Nigerian House of Representatives has queried the contract sum of executing the Escravos Gas-To-Liquids (EGTL) project, which saw an increase from $2.9 billion to $10.7 billion between 2008 and 2011.

The committee, saddled with the responsibility of investigating the Joint Venture(JV)  queried Chevron Nigeria Limited (CNL) for increasing the contract sum without the consent of the Nigerian National Petroleum Corporation (NNPC) that was the JV partner.

EnergyDay’s check showed that the controversial project became operational in September 2013, after the JV partners (NNPC and CNL) agreed on the contract sum of $2.9 billion in  2008.

The project cost was later inflated by Chevron to the tune of  $10.7 billion three years, later without NNPC’s(JV partner) consent.

EGTL project is  located in Delta State. The project is a partnership between NNPC and Chevron Nigeria Limited (CNL).  It is located about 300 km southeast of Lagos. The plant receives gas from Chevron-Operated Escravos Gas Plant EGP and convert natural gas into liquid petroleum product.

EnergyDay gathered that the  plant designed to convert 325 million cubic feet of natural gas per day into 33,000 barrels of liquids – principally synthetic diesel. The plant supplies clean-burning, low-sulphur diesel fuel for cars and trucks.

Recall that a similar case was investigated by the Senate in 2016 during the Senator Bukola Saraki-led  8th Assembly but was later abandoned.

The Senate committee chaired by Bassey Akpan (PDP, Akwa Ibom North-East) then blamed Chevron for violating the terms of the Joint Venture Agreement (JVA) by increasing the contract sum from $2.9 billion to $10.7 billion.

The Senate had then asked Chevron to present more documentation showing the level of involvement of both Chevron and NNPC on the project.

Meanwhile, Hon. Hassan Fulata, Chairman of the Committee on the Joint Venture of the NNPC Limited, in a similar manner, raised concerns at the inquiry session on Tuesday, October 4, asking why the cost of the project rose by 349% in less than 3 years.

The committee questioned the Chevron delegation on the reasons for the review of the cost of the project from $2.9 billion to $10.7 billion.

Fulata said that a similar project being executed  in Qatar costs less than $2.5 billion within a very short period.

He also noted that  NNPC Limited should have protested the cost review and demanded a value-for-money audit.

Monday Ovuede, Chevron’s Director of Joint Venture in his response to the query claimed that several factors were responsible for the upward review of the cost of the project from the initial $2.9 billion to $10.7 billion.

“This is a very complex technology to be executed in this part of the world. When the construction of the project started in 2005, commodity prices, including that of oil and steel were not as high as they are on the international market today.

“The project was given as engineering, procurement, and logistics, which means the sum was fixed. In the course of executing the contract, the contractors came back,” he said.

He also noted that Chevron agreed to a value-for-money audit despite not having it in the contract for the project.

Ovuede cited that the Qatar project was built on an already existing industrial complex with a seaport and access to an international airbase, with access to skilled labour, compared to Nigeria.

“The plant in Qatar is built in an industrial complex close to a seaport and there is an international airbase there.

“It has access to skilled labour from Europe. When you come to our side, we try to build for some of the technology, we had to develop the local labour to the level required to implement the project,” he said.

The explanation by Mr. Ovuede did not satisfy the lawmakers, who protested the response. Ibrahim Isiaka, a member of the committee moved a motion for Chevron to submit a written response justifying the increment.

The House Committee however directed Chevron to appear before the panel on Tuesday, October 11, 2022, with relevant documents to defend the issues raised.