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Author Topic: Local Content on Trial  (Read 1136 times)

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Local Content on Trial
« on: April 28, 2015, 01:27:02 PM »

How the Federal High Court in Port Harcourt decides on the suit between Arco Group Limited and the Nigerian Agip Oil Company will go a long way to show how Nigeria enforces its Local Content Act, writes Davidson Iriekpen

The legislative intention and the nationís will to enforce  its own laws are about to be tested in a first-of-its-kind law suit filed at the Federal High Court Port Harcourt,   by Arco  Group  Plc,  one of the leading indigenous Nigerian engineering companies  in the oil and gas sector of the economy.

The suit is essentially a complaint against the Nigeria Agip Oil Companyís (NAOC)  for refusing to comply with the  provisions of section 3 subsections (2) and (3) of the Nigeria Oil and Gas Industry Content  Development Act (NOGICD) 2010  (popularly known as the Local Content law) and will also  highlight the extent  to which the foreign  multinationals are prepared to go  to perpetuate  their  domination  of the entire specter   of the oil industry, notwithstanding Nigeriaís national aspiration for self-reliance and technological

advancement,  as well as frustrate any  perceived  incursions by  indigenous Nigerian entities into the areas considered by them as their  exclusive zones of operations.

Not deterred  by the seemingly  herculean task, Arco by an originating summons in suit No. FH/PH/CS/02/2015 between Arco Group Plc v. Nigeria Agip Oil Company  Limited and three others, is among others, seeking  from the court, a declaration that by virtue of section 3 subsections (2) and (3) of the NOGICD Act, 2010, having demonstrated ownership of equipment, Nigerian personnel and capacity to execute the task of performing the contract for the maintenance service of rotating equipment machines at the Nigerian Agip Oil Company gas plants at OB/OB, Ebocha and Kwale, it is entitled, being a Nigerian company, to the exclusive  right to be considered and granted such contract including any extension of its duration.

It is further asking the court to declare that the persistent and deliberate refusal, failure and neglect by Agip to give exclusive consideration to it in respect of, and award to it, the contract for the maintenance service of rotating equipment machines at the Nigerian Agip Oil Company gas plants at OB/OB, Ebocha and Kwale, and to grant extension of the contract by way of an interim or a stop-gap contract, is a deliberate violation and sabotage of  both the spirit and letter of section 3 subsections (2) and (3) of the Nigerian Oil and Gas Industry Content Development Act, 2010, and is, therefore, illegal, unlawful, ultra vires its powers under the law, null and void and of no effect whatsoever.

The plaintiff wants the court to determine whether in view of the provision of section 3 subsections (2) and (3) of the Nigerian Oil and Gas Industry Content Development Act, 2010, having demonstrated ownership of equipment,

Nigerian personnel and capacity to execute the task of performing the contract for the maintenance service of rotating equipment at the Nigerian Agip Oil Company gas plants at OB/OB, Ebocha and Kwale, it is entitled, being a Nigerian company, to the exclusive right to be considered and granted such contract including any extension of its duration?

It also asked the court to determine whether the persistent and deliberate refusal, failure by the first defendant to give exclusive consideration to the Plaintiff in respect of, and award to the plaintiff, the contract for the maintenance and service of rotating equipment machines at the Nigerian Agip Oil Company gas plants at OB/OB, Ebocha and Kwale and to grant an extension of such contract by way of an interim or stop-gap contract is a violation of the spirit and letters of section 3 subsections (2) and (3) of the Nigerian Oil and Gas Industry Contract Development Act, 2010, and therefore illegal, unlawful, ultra vires its powers under the law, null and void and of no effect whatsoever.

The recourse to approach the court came after the Italian oil firm turned down many entreaties and appeals by Arco, the Nigerian National Petroleum Corporation (NNPC), Conoco Philips Petroleum Nigeria Limited and Nigeria Petroleum Investment Management Services (NAPIMS) to honour the agreement.

On February 4, the court restrained Agip and its agents from awarding or taking any step to award to any person, company or firm except Arco any contract whether designated as interim, stop-gap for the maintenance  of gas turbines or rotating equipment at Agipís OB/OB, Ebocha and Kwale gas plant pending the hearing and determination of the motion on notice for the order of interlocutory injunction. Since the order was made, not only was the chief executives officer of the company alleged to have disobeyed it but was equally alleged be avoiding service of the court order. This prompted the Nigerian company to initiate a contempt proceeding against the Italian company.

When the case came up last week before Justice Lambo Akanbi, he ordered the Managing Directors of Agip and Plantgeria Company Limited, Mr. Insula Massimo and Mr. P. L. Carrodano to appear before the court on Monday, April 27, to tell the court why they should not be committed to prison for disobeying the order of the court. Justice Akanbi equally granted Arco the leave of the court to serve the chief executive officers of the companies the notices of the consequences of disobeying the courtís order (Form 48) by substituted means. Specifically, since the defendants were alleged to be avoiding service of the court order made on February 4, the court ordered that they be served by substituted means through advertorial in two national newspapers, namely THISDAY and The Guardian.

Trouble started when Agip refused to comply with the  provisions of section 3 subsections (2) and (3) of the Nigeria Oil & Gas Industry Content  Development Act, 2010, after NAPIMS, a subsidiary of the NNPC awarded a contract to them.  NAPIMS action  was entirely motivated by the need to reduce costs, preserve scarce foreign  exchange, create opportunities  for transfer of knowledge and technology to skilled Nigerians  as set out in the NOGID Act.
According  to the documents filed in court, Arco  with its erstwhile  partner,  General Electric International Operations Nigeria Ltd (GEION),  won a contract in 2006 to  maintain  NAOCís  rotating equipment, gas turbines and machines at NAOCís  OB/OB, Kwale and Ebocha gas plants in Delta and Rivers States of Nigeria.  NNPCís approval conveyed to NAOC was that the award be made jointly to GEION  and Arco.  NAOC however, ignored the approval and gave the contract to GEION alone. It then compelled Arco to accept a subcontractor status,  rather than co-contractor  in the  scheme of things, which was seen as a clear  violation of NNPCís  approval conveyed in writing via letter dated June 6, 2006.

Not deterred by that act of injustice, Arco forged ahead, and in 2007 the Niger Delta crisis erupted.  GEION of course immediately abandoned site, withdrew  its expatriate personnel  and sent them back to Italy.   Arco was then left behind to handle all of the maintenance work alone.  To everyoneís surprise, Arco single-handedly carried on with the job and ensured that the plants enjoyed smooth, uninterrupted  and efficient  operations throughout  the period of the crisis.  NAOC  was so impressed with the performance  that it issued letters of commendation to Arco staff engineers and technicians.

According to Arco, after the expiration of the contract in 2011, negotiations started for a short term or stop gap contract  that was to precede the award of a new five year contract to replace the expired one.  It said while those negotiations dragged on, NAOC resorted  to the issuance  of a Purchase Order every two days to GEION  to keep the plants running.

The cost of the every two day arrangement, it said, was a whopping US$87million per annum which  was a needless drain on the  nationís  economy.

Not satisfied with the state of affairs, NNPC and its joint venture partners convened a meeting in Abuja  on July 17, 2013  to try to reduce the operational cost of the contract  as well as comply with the Nigeria Oil & Gas Industry Content  Development Act 2010    which had enshrined statutory provisions to guarantee the participation of Nigerian companies which  had demonstrated capacity and skill in the oil & gas  industry.

Prior to the meeting, the JV partners had  requested both GEION  and Arco  to submit separate bids  for the entire work scope of the stop gap contract which the JV wanted to put in place,  pending the award of a replacement  five year  contract.  Both bids were received, evaluated and fully considered.

It said its bid was adjudged as more competitive, and NNPC directed that the contract  be awarded to it.

The firm stated that the evaluation of all technical bids for the five-year replacement which had been advertised previously had also been concluded.
The firm said it had the highest score of 8.68 of all the 10 bidders.  The next ranked bidder scored 6.76, adding that in spite of this, NAOC steadfastly resisted the directive  that the stop gap  contract should be awarded to it.

Attempt by the NNPC and the Nigeria Content Development and Monitoring Board (NCDMB) wade into the crisis by writing several letters to the Italian firm  on the matter reiterating  the directive and urging that the stop-gap contract be awarded to Arco were ignored.

As at the time of filing this report, Agip was yet to file its defence to the suit and all efforts by THISDAY for the company to comment on the suit proved abortive. A source close to the company said it could no longer comment on it since the matter was already in court.

Many analysts believe that how the court will decide the case will go a long way to show how Nigeria enforces its own laws enacted to protect indigenous companies.

http://www.thisdaylive.com/articles/local-content-on-trial/207935/?


Adewale Odubiyi
Owner, Nigeria Oil & Gas Forum

Nigeria Oil & Gas Forum

Local Content on Trial
« on: April 28, 2015, 01:27:02 PM »

 

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