The hope of expected amicable settlement of contractual disagreement that arose in the execution of Total’s multi billion dollar Egina Floating Production Storage and Offloading (FPSO) platform, was dashed, as Samsung has forcefully accused LADOL of peddling falsehood.
Samsung said the allegation by Lagos Deep Offshore Logistics Base (LADOL) that it jointly tendered with Samsung Heavy Industries (SHI) for the $3.3 billion FPSO contract was totally false, adding that the contract was awarded to Samsung Heavy Industries Nigeria (SHIN).
In a document made available to newsmen, SHI stated, “The Egina FPSO Contract was given NOT to SHI-MCI, but to SHIN by TUPNI. SHI-MCI is just one of Subcontractors and MCI is one out of two shareholders of SHI-MCI Joint Venture. Neither MCI nor LADOL is a nominated subcontractor under the main EPC contract.”
It stated, “There was no sum of money allocated for development of the yard in the EPC contract price. As the NC modules and integration of the Egina FPSO were to be executed in the yard, the completion of the yard was essential to the success of the project.
“Thus to avert this kind of misunderstanding, Total expressly provided in the main EPC contract that this payment was defined neither an actual cost nor an investment in the yard but merely for purpose of progress weighing. Also, LADOL refers to ‘upgrade’ of its existing facilities. There were no existing facilities. LADOL leased bare land to Samsung and Samsung built a brand new facility.”
The document disclosed that LADOL was not excluded from participation; they had their opportunity but failed to meet with their financial and contractual obligations. Moreover, LADOL is one of the main beneficiaries of Egina FPSO Project.
“SHIN/SHI-MCI have paid huge amount of money in the name of land lease fee and various service charges. In addition, SHI Korea which is the parent company of SHIN provided full guarantee for the debt financing including MCI’s portion, which ultimately gave significant relief in financial burden of LADOL. Samsung didn’t push LADOL to take unreasonable financial
burden for 80% of share. It was LADOL itself which insisted to take 80% of share beyond its financial capacity.”
Samsung said, “SHIN did not unilaterally fix the costs of the facility; the valuation was based on industries practice and quotation from third parties.
“The option of project finance was not feasible with respect to the facility as it was a Green field project without any assets and no guarantee could be provided, except Samsung’s own credit. Hence, the option of corporate finances.”
SHI maintained that, “As earlier mentioned, there was no monetary contribution from Total for the development of the facility. Consequently no fraud or misrepresentation by SHIN. This matter has been clarified by Total in writing and resolved before the Senate.
“It is also noteworthy that at conclusion of the hearings, the Senate, in writing, also commended SHIN’s adherence to its local content’s commitments. In any event the matter is before the Court and would be resolved by the Courts in due course.”
It pointed out that, “It is totally untrue that Total paid Samsung any amount for the upgrade of any facilities. LADOL keeps misleading the Public based on its own allegations about EPC Contract terms and conditions of Egina FPSO Project where LADOL has no authority to access the details.
“Total did not make any investment in the yard. Managing Director of Total did indeed make the referenced statement in the said letter of 14 February, 2018. SHIN, conscious of the fact that LADOL may deliberately misapply/misinterpret this statement consequently, issued a letter to Total on the same date of 14 February, 2018, requesting Total to clarify the purpose of the payment towards providing clarity to the Senate and other relevant parties.
“During the second Senate hearing, Total issued a letter clarifying that Total did not make any investment in the development of the fabrication yard, by a letter dated 21 February, 2018, wherein it stated as follows: “In this regards. Company hereby confirms that the amount assigned for the above work unit in the Contract, has been apportioned from the contract lump sum for the sole purpose of progress measurement for effective project management
“This amount shall not be construed as an investment by the Company in the development of SHI-MCI Worksite, given that this development was to be undertaken by a joint venture and the “the entire investment in new fabrication yard will be financed in the ratio of equity and loan from local or international bank to SO percent and 50 percent respectively” as contained in the Contractor’s Nigerian Content Plan”.
“It is indicative of the bad faith of LADOL to cite the letter of 14 February, 2018 and deliberately refrain from citing the letter of 21 February, wherein Total provided clarity on the payment.
The document also claimed that Samsung did not take LADOL equity in SHI, explaining that, “It financed including guarantee for the debt of LADOL’s and built the facility in Nigeria and cannot remove it or carry it away, and so the facility remains Nigerian for all time. The only issue is ownership of the facility, which LADOL is attempting to seize through abuse of its position as the free zone manager.
“The facility was used to execute the Egina FPSO Project and during the peak period SHI-MCI created over two thousands direct employment. Employment capacity of the facility is not tied to ‘ownership’ but availability of the facility.”
Contrary to allegation by LADOL that Nigerians were intentionally excluded the project execution, SHI stated that the contract provided the opportunity for the company to transfer technology to Nigerians.
Specifically, it disclosed that the company trained more than 600 trainees (welders) as part of Human Capacity Development (HCD), adding that, “In addition, under the Capacity Development Initiatives (GDI), 105 Personnel were sent on 6 months training in Korea. SHIN paid LADOL $2.7million to set up training center – in five years; LADOL has not completed the ground work. LADOL is not excluded from the facility. It is a 30% shareholder in the JV which is the entity that is building the local capacity.”
Concerning the sublease contract termination, Samsung disclosed that, “During the settlement period in the year of 2014, SHI-MCI had agreed to pay advance payment of USD 45 million to GRML for the 5 years sublease.
“The tariff in 2011 LADOL provided to SHI-MCI was USD 4 per square meter, which LADOL asserted that was a mistake, skyrocketed to USD 48 per square meter in 2013 and this jumped once again to USD 74 per square meter in 2014, which has been increased 18 times over last 3 years. As shown earlier in the movie, the tariff, USD 74 per square meter, was based on bare land which did not reflect the market value at that time for a bare land.
“For SHI-MCI’s stable operation and cost competitiveness in future EPC projects, SHI-MCI had no choice but to request reasonable tariff for the remaining period of sublease agreement.
“The right to terminate the sublease is expressly stipulated under clause 14 of the sublease agreement. One of the circumstances for termination is for a ‘Material Breach’, which in turn is defined to include a breach of clause 9 (Sub-lessee’s Covenants).
Ladol has only cited an alleged breach of clause 9.6(b), which only deals with situations ‘where the consent or approval of the Sub-lessor [GRML] is required to any act of the Sub-lessee [SHI MCI FZE] under this Sub-lease Agreement.