Samsung collected $214m from Total Upstream Nigeria for yard construction

Evidence has emerged that Samsung Heavy Industries Nigeria Limited, SHIN, collected US$214 million from Total Upstream Nigeria for construction of a shipyard for Nigeria as part of the multi-billion-dollar Egina project, but is now claiming ownership of the yard.

Despite the claim, the company (Samsung) cannot show proof of capital investment in the shipyard at the Ladol Free Zone in Lagos, yet it is insistent on ownership of the facility.

It was gathered that Samsung was paid to build the shipyard as a contractor to Total, as part of the over US$4 billion Egina Floating Production, Storage and Offloading, FPSO, Engineering Procurement Construction, EPC, contract.

Construction of the shipyard was included as part of EPC contract scope to meet local content requirements, under which Samsung negotiated an original amount of US$168 million, which was later increased through variation to US$214 million.

Our Energy Correspondent, National, reports that according to documents at our disposal, the draft Egina FPSO contract between Total and SHIN clearly shows that the money was specifically for the shipyard and that the contract sum was increased from USD$168 million to US$214 million based on Samsung's request for additional funds due to increased scope of work in the yard.

The final revision of the FPSO contract also showed that Samsung identified need for the yard to fulfil local content requirements.

A government official who pleaded anonymity explained that Samsung is a foreign contractor that has so far been paid US$3.9 billion under the EPC contract for the Egina FPSO, adding that even though the US$214 million was money paid by Total Upstream,  Nigeria has been debited and would have to refund the money through profit oil.

“It is only proper that Samsung be held to account for that expenditure. How can a contractor turn around to claim ownership of a project he was contracted to execute?

“There is no proof that Samsung spent any money of its own on the shipyard at Ladol Free Zone. But it now claims the yard belongs to it. The US$214 million spent on the shipyard is Nigeria’s money and the Federal Government will hold Samsung to account. We should begin to ask questions about this expenditure and Samsung’s general handling of funds in Nigeria,” the government official added.

He explained that the money in question is fund from the NNPC/Total partnership, which was approved for expenditure on the Egina FPSO contract by the NNPC subsidiary known as National Petroleum Investment Services, NAPIMS, stressing that it is not actually Total’s money. 

“Total only provided initial funding for execution of the Egina project and funding has to be reimbursed by Nigeria. Basically, it is Nigeria’s money.

“The claim on the shipyard is a ruse by Samsung to pocket US$214 million, which is a needless controversy. 

There is also report of the company demanding variation on the Total Nigeria-operated Egina FPSO vessel.

Investigations revealed that the requested variation represents 47 per cent increase on the original contract value, from $2.99 billion to $4.4 billion.

According to the report, the contract for construction of the Egina FPSO was originally awarded for $2.99 billion.

SHIN then made two demands for variation totaling $908.8 million, both of which were approved.

Total Upstream Nigeria Limited, however, got to learn that all was not well when the construction of the Egina FPSO was completed in Geoje, South Korea.

Between September and December 2017, while the Egina FPSO vessel was still at the Samsung yard in Korea, even though the contractual fees including variations, had been paid, Samsung decided to hold Total to ransom, demanding payment of an extra $1.65 billion as a precondition for release of the FPSO vessel.

However, Total refused to pay the extra cost, instead, paying $160 million before the Egina FPSO was allowed to set sail for Nigerian waters and the Ladol yard in Lagos.

It was gathered that both Samsung and Total had agreed that before the FPSO departed the Ladol yard in Nigeria for its location on the Egina field, the outstanding variation claim would have been sorted out.

Following horse trading between both parties, Samsung reduced its ransom demand from $1.65 billion to $500 million but this money was not paid before the vessel was ready to leave the Ladol yard for the Egina field.

Samsung only allowed the Egina FPSO to leave the Ladol yard because an executive director of the Nigerian National Petroleum Corporation, NNPC, threatened to ban the company from doing any more work in Nigeria for the next 10 years if they refused to let the vessel leave the Ladol yard for the Egina.

Up till now, Samsung is still demanding payment of the outstanding $500 million ransom.

In oil and gas industry circle, Samsung is seen only as a contractor as the company has made no investments in the country.

Yet, it is battling to seize a Nigerian local content facility – the shipyard at Ladol Free Zone, and in seizing this facility, the company hopes to use it to win billions of dollars of new contracts in Nigeria.

The company is also in court against the Federal Government of Nigeria in an aggressive attempt to overturn the termination of its lease with the Nigerian Ports Authority.

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