How Mele Kyari Secured $300m Reduction In AKK Gas Project

Facts have emerged as to how the Group Managing Director of the Nigeria National Petroleum Corporation, Mele Kyari secured a $300m reduction in the Ajaokuta-Kaduna-Kano Gas project

It was learnt that after several failed attempts in the last 13 years to commence project activities, the leadership of the NNPC led by Kyari within one year of his stewardship brought the project on track.

This led to the award of the contract at a competitive price and eventual flag-off of construction that the world witnessed in June 2020.

The project which is expected to be completed within a 24-month timeline, is a section of the Trans-Nigeria Gas Pipeline with the capacity to transport about 2.2 billion cubic feet of gas per day.

While there had been issues around the viability of the project, the NNPC on Monday explained that at conception of the project in 2013, a project bankability study was conducted by Standard Chartered Bank to confirm appetite for attracting financing from international community.

During that period, project feasibility and Front End Engineering Design was carried out by a reputable international company (ILF of Germany) in 2014.

The details developed at this phase had enough engineering design to enable a competitive class of estimate to be submitted by the contractors.

The Project was publicly advertised in both local and foreign print media in 2013. After completion of the FEED study by ILF in 2015, the prequalified bidders were issued tender documents.

When financing was not to be provided by the contractors and a stalemate reached because of their inability to progress financing in 2019, NNPC under the current GMD approved the re-negotiation of the contracts and obtained a further reduction of about $300m.

This is with a view to cream all financing cost associated with the tender. This task was reviewed and approved by the Federal Executive Council in March 2020.

To ensure transparency in the implementation of the project, a Steering Committee was formed by the GMD in July 2020 to include stakeholders of the project, comprising of NNPC, Ministry of Finance, Ministry of Justice, Central Bank, Debt management office, NEITI and representative from the Presidency.

Following a detailed review and analysis of the procurement bid, BPP confirmed that the unit costs for line pipes adopted by the NNPC for the project was reasonable when compared with current market prices for 40”, 36”, 20” and 14” steel pipes.

The project, according to the Corporation, would be executed in a transparent and aggressive manner.

In statement on Monday in Abuja by the Corporation’s Group General Manager, Group Public Affairs, Dr. Kennie Obateru, the Corporation dismissed, in its entirety, the allegation that the project was inflated to the tune of $1.527bn.

It described the accusation by an online medium against the National Oil Company as false, baseless and unfounded.

The NNPC stated that it was considering instituting legal actions against the medium and its collaborators.

The Corporation in the statement said that it brought the unfounded accusation to the attention of the Bureau for Public Procurement which completely rejected the speculative analysis of the online medium as false and not portraying the true position of the BPP’s report on the subject.

It noted that the approval of all relevant authorities were obtained after an intense scrutiny by the various agencies, as it underwent transparent and open competitive tender process to which the most competitive bidders emerged.

The Corporation further faulted a deliberate attempt to mislead the Nigerian public with baseless information, adding that the AKK pipeline project is one of the key landmark projects that has had transparent processes from inception to date, with the entire evaluation exercise carried out by NNPC and Infrastructure Concession Regulatory Commission.

It said the AKK pipeline had undergone stringent due processes reviews and scrutiny internally and externally.

The NNPC further stressed that bids were competitively tendered and evaluated by both NNPC and transaction advisers, Alpine and also a team from the Infrastructure and Regulatory Commission.

It added, “BPP carried out an extensive review of the project design and the final cost in 2017 that culminated in the issuance of a Certificate of ‘No Objection’ in August 2017.

“Other due process certificates obtained for the project include Original Business Case and Final Business Case from ICRC and Local Content Compliance Certificate from NCDMB before presenting to FEC for approval in December 2017.

“NNPC hereby inform the Nigerian Public to ignore the report as it is malicious, baseless and direct attack on the character of the person of the GMD and the Bureau of Public Procurement. A legal action will be instituted by NNPC on the publishers of this report.

“It is time to give the administration the credit it deserve and follow the execution of the project in a transparent and aggressive manner completely a departure from the traditional project execution we have seen in the country demonstrating the implementation of our TAPE agenda.”