Lead Editor Business
A new scandal has emerged at the state-owned National Gas Company Ltd, this time the cost to taxpayers is almost $200 million and the company has said it has learned its lesson from the débâcle.
The revelation comes on the heels of another scandal where it spent well over quarter billion on a failed attempt to save Atlantic LNG Train 1 and its board of directors asked the Government, and received protection, from responsibility for the loss of taxpayers dollars.
At the centre of this latest scandal, the NGC started a project in 2017 that included the design, procurement, construction, and commissioning of a compressor facility at NGC’s New Abyssinia Accumulator Station (NAAS) Beachfield facility, Guayaguayare. Well into the project the company discovered there was no need for it and after spending $197.5 million stopped it. The result is a loss of the money and the company stuck with $100 million worth of compressors it has not been able to sell.
Thanks to another whistle-blower the Business Guardian has numerous documents including the bilateral agreement between bpTT, NGC, TT LNG and NGC pipeline company over the project that seem to suggest it was poor project planning and a lack of delivery of the project on time that led to the fiasco and the inability of the NGC to recover its money.
In response to a number of questions from the Business Guardian, the NGC admitted to the failed project and the loss of the money. It said, “A management review of the business case for compression facilities at NAAS in the latter half of 2018 was precipitated, noting the substantial costs remaining to complete the project. Both technical and commercial assessments were conducted and, following NGC’s governance process through the operations committee, NGC’s board accepted management’s recommendation to mothball the compression project in December 2018. The cost incurred at that juncture was $197.5 million.”
The company said the main reasons for the decision to abandon the project were:
• Firstly, the reduced likelihood of operational scenarios that would trigger the need for the compression of low-pressure gas due to TROC project operation.
• Secondly, improvements in NGC network management capabilities.
“This decision avoided an additional cash outlay of $127.5 million to complete the project and an operating cost of $15.0 million annually. This is in the context that there would be a low probability of use of the installed equipment, and attendant costs of infrequent operation,” NGC told Business Guardian.
It added that one key learning was that projects needed to follow a robust stage gate methodology process.
This, it explained, gives management the opportunity to stop the project at earlier stages, as technical and operational information become available, versus, in the case of the Beachfield project it proceed into execution.
“Therefore, since 2018 NGC has focused on organising workflows to follow a project management methodology stage gate process, which also improves the integration with supply chain management.
“This, along with improved reporting of project performance including tracking stage gate compliance, scheduling, and costing, ensure compliance to governance requirements. Since 2018, with these interventions, project management performance has stabilised, become predictable and improved as follows:
• Project portfolio schedule performance: From 30 per cent of planned performance in 2017 improved to 85 per cent of planned performance by end 2020.
• Project portfolio cost performance: From 80 per cent of planned performance in 2017 improved to 94 per cent of planned performance by end 2020,” the state enterprise reported.
But could the NGC have avoided this fate? Well documents which the Business Guardian has show that bpTT was to reimburse NGC for 100 per cent of the approved budget which was up to US$50 million but NGC had to complete the scope of works for the compressor installation by December 31, 2017. NGC did not meet the timeline and even though it tried several times over the years to get bpTT to reimburse it, bpTT refused stating that NGC did not comply with the provisions of the bi-lateral agreement.
You see, NGC initiated the Beachfield compression project in 2012 to improve the reliability of its gas supply to the Point Lisas Industrial Estate. The design capacity was for compression of up to 750 million standard cubic feet per day. The gas received from NGC’s gas suppliers from offshore east coast Trinidad, arrives at the NAAS facility at different operating pressures. With compression, NGC would gain operational flexibility at NAAS to use natural gas supply from all gas suppliers during lower supplier operating pressures to sustain reliable gas supply to Point Lisas Industrial Estate.
But according to the NGC detailed engineering and optimisation work for the specific project where the $197.5 million was lost was completed by AMEC Foster Wheeler in June 2016 and long-lead equipment procurement, including the compressor packages followed thereafter.
The Business Guardian has the tender document, the award document for the procurement of three compressors valued at almost $100 million. The Business Guardian also has documents that show the NGC terminating TOSL from the project, and documents that demonstrate the slippage of the timeline for its delivery. In May 2017, the competitive tender was completed for the procurement of the compressor packages, and the contract awarded to TOSL, following what the NGC said was normal governance process of NGC’s tenders committee and the board.
The compressors were delivered to NGC in February 2018. Work on development of scopes of work for installation of the compressors and related equipment started in 2018. In parallel, bpTT LLC initiated the TROC project in 2015.
BpTT’s project scope included design, procurement, construction, and commissioning of a compressor facility at the inlet facilities to the four-train Liquefied Natural Gas (LNG) complex located at Point Fortin to lower the operating pressures of certain portions of bpTT’s gas network, as well as the pressures on NGC’s Cross Island Pipeline.
This project was completed in April 2017 and improved the reliability of bpTT’s supply to NGC and its other customers but according to the NGC had the impact of reducing the technical need for compression at NAAS.
The NGC admitted not expecting this outcome and hence it wasted $200 million behind a failed project. As part of the arrangement with bpTT said upon start-up of the TROC compressor, bpTT made additional gas available to NGC for use in the downstream petrochemical sector.
BpTT said in learning its lessons from the failure it has initiated the integration of supply chain management enabled by the use of e-Auctions for tendering of project related scopes of work.
“This has allowed NGC projects to deliver enhanced value by reducing construction costs by up to 15 per cent since 2019. Therefore, the decision to proceed with the compression project was based on operational needs identified at the time.
NGC is currently assessing the options regarding disposal of the purchased compressors and exploring further feasibility with respect to the need for compression infrastructure, based on long-term development plans of upstream gas suppliers,” the company added.
NGC’s president Mark Loquan has two more months left on his contract as president of the NGC and with this revelation he has overseen at least the loss of half a billion dollars on failed projects. At a political meeting on Monday night, Prime Minister Dr Keith Rowley expressed confidence in Loquan.