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$800m Loss Forced Termination Of Oil Pipeline Security Contract, Says NNPC

The Nigerian National Petroleum Corporation (NNPC) Tuesday stated that an $800 million loss of crude oil worth so far in 2018, despite a previous security contract, led to its decision to cancel and re-award the contract for security of 87-kilometre Trans Forcados Pipeline (TFP) to a new firm.

A statement in Abuja by the Corporation explained that the decision to assign the TFP surveillance package to indigenous firm, Ocean Marine Solutions, was reached after consideration of the stated losses.

The Corporation noted that it reached the decision after appraising the new company’s record of performance on the Bonny-Port Harcourt and Warri-Escravos crude evacuation lines, and found it impressive. It added that the new contract would entail Ocean Marine paying for any damage to any inch of pipeline under its watch.

The Corporation explained further that owing to massive losses in projected revenue, stakeholders in the TFP which reportedly account for daily production throughput of over 250,000 barrels of crude oil were unanimous in the decision to seek better ways of ensuring reliability and availability of the line, hence, the termination of its previous security deal.

Giving more insight. NNPC said “In 2018, we lost over 60 days of production due to incessant breaches on the TFP despite having a security contract in place. In terms of production numbers, this translates to over 11 million barrels of crude oil which on face value equates to over $800 million in lost revenue to all the stakeholders in the matrix which includes NNPC, its Joint Venture partners and the Nigerian Federation.”

Furthermore, the statement said under the old contract, the NNPC and its stakeholders spent over $32 million on repairs, protection of the TFP and clean-up.

It noted that no responsible business entity or government would allow such level of loss to go on without taking swift actions to stop the losses.

“This arrangement is totally different from the old order where the contractor gets paid for surveillance duties and totally exempted from repair cost or any form of responsibility in the event of any line break or breach to the pipeline he is paid to watch,” the statement noted.

On concerns that the new contract did not go through due process as mandated by law, NNPC said the government-approved procurement processes and procedures in the award of highly sensitive national security contracts were followed.

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