NNPC Confirms AKK Financiers’ Departure But Is Mum Over Alleged Contract Inflation

NNPC Kyari

In order to complete the Ajaokuta-Abuja-Kano pipeline, the Infrastructure and Commercial Bank of China (ICBC), Infrastructure Bank of China, and China Export Credit Agency (SINOSURE), which were expected to contribute $2.38 billion, or 85% of the project’s total cost, withdrew. As a result, the Nigerian National Petroleum Company Limited (NNPC Ltd) has already spent over $1.1 billion.

The Group Chief Executive Officer of the NNPCL, Mele Kyari, confirmed an earlier exclusive report on the AKK project by The Guardian about the withdrawal of the initial financiers as a result of the contract’s inflation by 570 percent and said the national oil company would continue to finance the project despite the fraud allegations.

Regarding the alleged contract inflation, Kyari remained silent. According to an exclusive revelation by The Guardian, the project failed due to a lack of financial integrity and adherence to international best practices.

It was noted that similar initiatives cost far less in other parts of the world. According to the research, the Yucatan Peninsula Gas Pipeline, a 693 km project in Mexico, cost $266 million.

Additionally, the 3,700 km Export Pipeline between Bolivia and Sao Paolo cost $1.8 billion, while the 460 km Export La Moran Pipeline built between Argentina and Chile cost $360 million.

The examples show that Nigeria has the most expensive contract of this type, which is one of the reasons the funding businesses left as they “cannot afford to go into cahoots with Nigerians because they could be exposed when they submit their financial reports to their countries of origin.”

“Globally the cost of high-pressure transmission gas pipelines is built at $800,000 per kilometer. In Nigeria, the final investment decision (FID) for EPC was scheduled at $4,560,260 million, which is a 570 per cent margin above global standards. Procurement fraud because we neglect public procurement rules and global best practices as it relates to industry standards for EPC on project financing, the economy is practically unable to fund any CAPEX through revenue, and even when funds are borrowed, it finds itself unable to maximize cost,” the report said.

On Monday, Kyari visited a few of the project sites in Kogi State with the help of a number of senior NNPC Limited and Oilserv Limited (pipelines and facilities), the project’s contractor.

Despite lacking outside financing, Kyari highlighted that the corporation would keep funding the enormous project that was delivered in stages and has been ongoing. But he omitted to say why the outside funders pulled out of the project.

He stated: “So far, NNPC Ltd has funded over $1.1 billion of the project. To date, none of the project activities is abandoned as reported and we reassure all stakeholders that we have a line of sight to project delivery on schedule. NNPC Limited remains highly committed to the delivery of strategic national infrastructure projects through responsive project delivery, active collaboration with government security agencies and communities as well as deployment of technology.”

“This is one of the most massive projects of proportion value to our country for economic growth. It is a must-deliver project and we have continued to fund it despite not having third-party finance support, we will deliver this project.”

“We do not owe a dollar to our contractors, there are over 30 sites that are active today in this project. We are hopeful to deliver this project.”

He condemned the growing unrest, which had resulted in the deaths of some construction site employees. He made a suggestion that 70% of the welding work had been finished.

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