• Friday, March 29, 2024
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Debut of offshore floating LNG in Nigeria opens new opportunities – Rone

UTM Offshore signs FEED contracts with 3 firms for Nigeria’s first floating LNG project

JULIUS RONE is the managing director of UTM Offshore Limited, a local oil company, pioneering Nigeria’s first Floating Liquefied Natural Gas (FLNG) project. In this interview with DIPO OLADEHINDE, he explained the challenges he encountered in building Nigeria’s first FLNG project.

In recent years, indigenous oil companies like UTM Offshore Limited have started developing the capacity to match the International Oil Companies (IOCS), especially in terms of exploration. Is this sustainable and are there still gaps?

From my assessment so far, Nigeria is more than ripe for indigenous companies to actively explore more opportunities in the oil sector.

There are many success stories of local companies doing extremely well. Although, there are one or two cases with cause for concern, however, everybody will not run at the same speed and will not get to their destination at the same time.

Nigeria’s upstream sector is full of challenges; with focus, dedication, and handwork, I feel it’s the right time for local companies to start doing bigger projects because the serious players in the industry will always get the right support from the government which will make them excel and break the jinx.

For almost three decades, the PIB has been in the works. Are we moving in the right direction in terms of legislation?

The government is putting in efforts and timelines to make sure the PIB is feasible this year, however, Nigeria also needs an attractive fiscal law in terms of gas. With the right gas law, Nigerian can sweat out its proven 200 trillion cubic feet (TCF) to over 600 TCF.

Most of the IOCS are sitting backward in terms of initiating investments in gas because the majority of Nigeria’s gas assets are all under the Production Sharing Contract arrangement. So the earlier the right laws are passed, the better for Nigeria.

Nobody is going to wait for Nigeria, if we are not ready investors will always take their money to places that are ready. The more the delay, the more uncertainties in the sector.

Read Also: Nigeria’s palm oil industry blossoms as policy spurs investments

Is the Nigerian oil and gas industry as attractive as it used to be in the early 1990s?

A lot of things have changed over time; the technology used in extracting oil for commercial value has improved compared to the early 1990s.

Also, the cost of doing business in Nigeria is very high now compared to previous years. For example, if an investor can produce oil at $4 in Guyana, or $6 in Ghana why would they come and do business in Nigeria and produce higher than $10.

In order to remain attractive, Nigeria currently needs to be more competitive in terms of ease of doing business in order to become more attractive for private investments.

Nigeria has joined the league of nations with Floating LNG plants, after issuing its first license to UTM Offshore at its Yolo field. What are your expectations?

When my team conceived the project in 2019, we agreed FLNG is the solution in terms of access to stranded gas all over the world but we also ponder on why Nigeria is not looking in that direction, considering its proven gas reserves.

Although other foreign companies have tried it in the past, they couldn’t succeed because of few bottlenecks. However, for us at UTM, we have done our homework well and we believe we have what it takes to deliver at the highest stage.

The FID for the project will be signed in the second quarter of next year, the expectation is to deliver Nigeria’s first FLNG project by 2025. Issues surrounding funding have also been sorted out as well.

We are driving this project as an indigenous developer with international standards. For example, we are working with one of the best international engineering and construction firms, Japan Gas Corporation (JGC), a company that has built over four FLNG in the world and is currently managing two for Exxonmobil and Malaysia oil. Also, Kellogg Brown and Root (KBR), another company we are working with was among the four companies that built NLNG Bonny.

We brought in global energy consultant Wood Mackenzie to do a feasibility study on the development of FLNG and also narrow down the assets that meet up parameters to do an FLNG.

It is a project that is a win-win situation for the country and for all relevant stakeholders, it is a pride that Nigeria is on the world map among the country that’s developing FLNG and once this succeed, it will create a lot of opportunities that will unlock stranded gas sitting offshore, because one major factor we need to consider is the cost of running a pipeline, to take stranded gas to shore and liquefy is very enormous.

For us floating LNG, is to meet the gas at its location, connect the gas and liquefy it, export the one that needs to be exported, support gas to power in terms of gas requirement in Nigeria, get a regasification unit, take that gas from offshore, bring it downshore and then use it to support the mainstream economy.

How are you funding this capital intensive project?

Afrexim bank is our financial adviser for this project, they are raising 70 percent debt and 30 percent equity for this project.

In terms of funding, we don’t have a problem, because our financial advisers are sorting out investors who have indicated interest to participate in this project.

Shell’s billion-dollar Prelude FLNG project is yet to produce after a year, why are you sure your project will be any different?

There is a misconception that Shell’s Prelude FLNG project failed. It did not fail, it had a shutdown due to a power surge and the problem has been resolved. The project is up and running.

FLNG is a new technology, however, there are success stories. Malaysia’s National oil company and Brazil’s Petrobras have a working FLNG, even Cameroon has an FLNG which was initially meant for Nigeria but because they couldn’t navigate some issues.

The Shell’s Prelude FLNG project was a big project and the water depth is completely different and two times more than what we are planning in Nigeria.

UTM offshore was one of the 16 consortia selected by Nigerian National Petroleum Corporation (NNPC) for its new crude-for-fuel swap contracts for one year starting in August. Do you have what it takes to deliver considering the fact that you’re working on an FLNG project?

One of the ideas that encourage Nigerian companies like UTM to participate in this Direct Sales Direct Purchase (DSDP) program was because before the advent of President Muhammad Buhari administration, it was only international companies that were involved in the program but the current administration put an end to that.

I remembered when we got into the DSDP, NNPC’S late group managing director, Maikanti Baru said to me ‘Nigerian companies can now use this opportunity to drive into other investments in the oil and gas industry.’

For the late GMD, you are not getting into DSDP just because you want to bring in oil, No. They put you on the DSDP because you are qualified and have what it takes to bring in the product. But beyond that, local companies also need to target how they can attract other international companies.

We pride ourselves among the lucky indigenous companies lifting Nigeria crude.

What is the next big news we will receive from UTM offshore? And where do you envision UTM offshore in ten years’ time?

Expect a tsunami from UTM in the next two years.

For us at UTM, the FLNG project is a done deal already by the special grace of God. We’re not saying these because we Nigerians have stronger religious beliefs. We know too well that it is not by prayer alone that you deliver on this project. You have to put in the work which is why I am always on the phone with my team for 12 – 16 hours every day on this project.

If I wake up at 5 am to discuss with any member of the team, I am always asking questions: what are the impediments? What do you think will disturb us? We negotiated the pre-field contract in the next three months, so if we do that for another three months, we cannot sign the field because there is a sequence to deliver a project.

So it is a lot of detailed processes because we must deliver, the world is looking at you.

No one believes Nigeria would have dreamt of floating an FLNG, a project worth over a billion dollars, if you put that in naira, you know what it translates to.

So for you to ever imagine that you can deliver such a project, to galvanise all the investors to believe in you and put their money in such a project, you can’t have 24 hours sleep but the more you go, the more you see the opportunities.