RE: Premium Times Publication Of September 16, 2015 Regarding Domestic
Transporation Of Crude Oil Contract By PPP Fluid Mechanics Limited (PPPFM)
And Ocean Marine Solutions Limited (OMS)


Our attention has been drawn to the report of an online news
platform-PREMIUM TIMES of Wednesday, September 16, 2015- written by one
Ogala Emmanuel regarding the above-captioned contract of PPPFM and OMS
with the Nigerian National Petroleum Corporation (NNPC). The publication
contained largely in all material facts false assertions, misinformation
and outright misrepresentation of facts regarding the said contracts. The
writer of the publication obviously to make it attractive to the readers
linked some of our promoters including Captain Idahosa Okunbo and Dr
Olatunde Ayeni with the immediate past president, Dr Goodluck Jonathan and
the immediate past Honourable Minister for Petroleum, Mrs Diezani
Alison-Madueke.
The intention of this publication is to correct the false impression that
PREMIUM TIMES sought to create while also putting the appropriate facts in
the public domain. We state with all sense of responsibility that the
facts stated in this publication are verifiable with NNPC. While the
companies have nothing to hide, we state that the sponsors of this
offensive publication, whosoever they are, know themselves and the reasons
for the malicious report. But it is important to state that PREMIUM TIMES
does not need to pull down our companies and/or our promoters in an
attempt for some others to rise.
It is astonishing that the writer of the so-called investigative report
never met with any official of our companies or the promoters named in the
story before the said publication.
STATEMENT OF FACTS
1. Contrary to the publication, our companies wish to state that the
contracts awarded them by NNPC followed due process and complied with the
relevant extant provisions of the Public Procurement Act. We state
unequivocally that there is nothing illegal in respect of the security
contract awarded to OMS and the movement of crude oil by marine vessels
contract awarded to PPPFM from inception to date.

2. Before the award of these contracts, following a detailed study and
analysis by NNPC management, a report indicated that it became
uneconomical to transport crude oil from Escravos to Warri refinery
through the pipeline in view of Government’s huge expenditure of about
$121 million for the maintenance and repairs of the Escravos-Warri broken
crude oil pipeline. Furthermore, the report also indicated an estimated 40
percent loss of crude oil pumped through the Escravos-Warri pipelines due
to persistent pipeline vandalisation and oil theft.

3. Besides the specific losses stated above, it is public knowledge that
the Warri and Kaduna refineries before the engagement of PPPFM had been
shut down for about 48 months due to lack of supply of crude oil feedstock
to make the refineries functional. For the avoidance of doubt, these
facts are also verifiable in the records of NNPC.

4. The above circumstances made the sourcing of alternative means of
transportation of crude oil other than through the pipeline inevitable,
according to the report, in order to minimize the negative impact. This
fact is also verifiable.

5. PPPFM was originally owned by some Israelis who incorporated the
company in 2008. NNPC records will confirm that they were the first to
secure the contract for the transportation of crude oil by marine vessels
from Escravos terminal to Warri refinery from the NNPC in December 2010
through an international competitive bidding with 13 other companies for
the transportation of crude oil by marine vessels from Escravos to Warri
refinery.

6. It is therefore totally untrue to claim as PREMIUM TIMES did that the
contract was awarded without due process. PPPFM insists that due process
was followed in the award of the contract.

7. In June 2011, the present owners acquired the company (PPPFM) from the
original owners through share purchase agreement and inherited the
contract, contrary to PREMIUM TIMES’ allegation of hostile acquisition of
the company.

8. We wish to state categorically that contrary to the assertion in the
publication under reference also to the effect that the contract was
awarded at the cost of $15.4 per barrel, the contract for the
transportation of crude oil using marine vessels was indeed awarded at the
cost of $2.79 per barrel, which was later negotiated and reviewed to $3.87
per barrel. The review was undertaken by NNPC special team from five
different departments of the corporation. Consequently, the review was a
product of mutual negotiation.

9. At this time, the dedicated security surveillance for the provision of
six security boats awarded to OMS was running at an average cost of $1.5
per barrel.

10. Further to satisfactory performance of our companies with Warri
experience, NNPC invited our companies to consider rendering similar
services to Port Harcourt refinery, which understandably has suffered a
greater fate in the hands of pirates than Warri refinery before our
companies’ intervention under a similar arrangement. Indeed, NNPC added
issues of statutory NPA port and cargo charges, ship dues, NIMASA cabotage
fee, offshore sea protection levy, offshore compulsory terminal pilotage
dues and dedicated security surveillance. All these led to another
negotiation painstakingly carried out by officials of NNPC with our
company.

11. As at the time of PREMIUM TIMES publication, the contract between our
company and NNPC, which now includes the provision of dedicated security
patrol boats, was at a total cost of $5.68 per barrel contrary to the
$15.4 per barrel alleged in the publication.
12. In the course of our operations during the pendency of these
contracts, PPPFM has had cause to incur operational losses of US$
5,790,482.74 and NGN 207,230,168.10 in 2011 and another loss of about $32
million in 2012. In spite of these losses, the company has soldiered on
because of the positive impacts of the company’s initiatives and services
to the nation. From 2011 till date, a total of 65,597,698 barrels of
crude oil have been delivered to the refineries by our company under the
contract without any loss.

13. It is important to state that with our company’s intervention as
stated above, it is estimated that the nation has been saved about $1.6
billion based on NNPC’s admittance of an average loss of about 40 percent
of crude oil pumped through the Escravos-Warri pipeline due to
vandalisation and crude oil theft. This saving is definitely more if the
analysis were to be based on the 70-80 percent estimated loss of crude oil
pumped through the Port Harcourt-Bonny-Okrika pipeline.

1. Our companies came into these contracts at the height of piracy in our
country. We believe that NNPC’s initiative in this direction was a
product of the grave situation occasioned by the illegal act of piracy in
the Niger Delta at the period and the devastating consequences it had on
the economy of the nation. Ours was and is a patriotic act to our
fatherland, and the companies do not think that they should be repaid with
orchestrated campaign of calumny, neither do we think the promoters of the
companies deserve sponsored blackmail and attack on their persons or their
reputations which have taken them several years to build. The promoters
are known to be men of high integrity and impeccable character both in
their private and public life.

SIGNED
MR KUNLE OYELAKUN
MANAGING DIRECTOR/CHIEF EXECUTIVE OFFICER