Before the introduction of the Local Content Law, the absence of local capacity in the oil and gas industry had resulted in the repatriation of about 90 per cent of the $12 billion yearly industry spend, with its adverse effects on job creation and overall growth of the economy. Absence of in-country capacity and inadequate manpower were identified as factors that denied the country the full benefits of her petroleum resources as only a few indigenous facilities and manpower were available in the oil and gas industry.
Over the years, the Nigerian ports have experienced persistent congestion due to inadequate investment in infrastructural development. This has negatively impacted the free flow of goods and services into the country. Infrastructure deficit at the Lagos Port’s fuel jetties, for instance, causes massive delays in petroleum products’ discharge and huge losses in form of demurrage. With daily consumption of over 35 million litres of Premium Motor Spirit (petrol) in Nigeria, about 12 trillion litres of PMS is imported into the country annually. Fuel jetties at the Apapa, Lagos Wharf serve as the major entry points for vessels bearing Automotive Gas Oil (diesel), PMS, Multi-Purpose Kerosene, and Aviation Turbine Kerosene, among other products.
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There are several constraints with the existing Jetties. The first relates to the existing draft constraint which reduces the capacity of vessels that can be received in one lot, thus resulting in larger vessels having to lighter into smaller vessels. The second addresses the congestion and discharge inefficiency resulting in excessive demurrage fees which contribute to substantial losses on income to petroleum marketers. Over $50m is said to be lost annually to demurrage, thus increasing operational expenses for marketers. These issues have led some major fuel importers to develop a preference for discharging their products outside Nigerian waters, specifically at the ports in Cotonou, Niger Republic and Lome, Togo.
With the enactment of the Local Content Act, Nigerian companies have been given a platform to demonstrate their competencies and capacity in infrastructural development thereupon contributing immensely towards the growth of the Nigerian Oil and Gas landscape. It is the development that enabled ASPM Ltd, a subsidiary of OVH Energy who recently achieved a ground-breaking milestone in launching its Lagos Midstream Jetty (LMJ) located at the Lagos Apapa Harbour. The Lagos Midstream Jetty, conceived by Oando PLC, is West Africa’s first privately owned mid-stream jetty, designed to increase the delivery capacity and offloading efficiency of petroleum products into marketers’ storage facilities in Apapa Lagos.
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The Lagos Midstream Jetty is expected to alleviate the perennial infrastructural hiccups experienced in Apapa, eliminating the lightering and demurrage charges currently being incurred by petroleum marketers by NGN8.3 billion ($23m) and NGN9.8 billion ($27m) respectively. Additionally, the Jetty will reduce discharge time from 21 to 3 days, increasing product availability allowing marketers who discharge offshore to approach the Apapa Harbour using the midstream jetty with more confidence and the opportunity to save costs on their product imports.
As at today, the Lagos Midstream Jetty (LMJ) is fully operational, having berthed 11 vessels and discharged products totalling about 300,000 metric tonnes of cargo demonstrating its potential as a functionally efficient and safe facility. With a monthly volume capacity of 240,000metric tonnes or 240,000,000 litres, the Lagos Midstream Jetty is set to substantially boost the supply of petroleum product into Nigeria, and contribute an estimated $50 million cost savings in product imports and associated transactions.
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This project is a relief to both the oil sector and the entire country, considering the estimated $60 billion required to develop oil and gas infrastructures. The Jetty will also unlock job opportunities, create wealth and strengthen social and economic development across the country.
The Lagos Midstream Jetty is representative of a successfully executed Public-Private Partnerships and proof that both the private and public sector has realised that infrastructural investment and build is a shared responsibility requiring collective leadership, learnings and innovative thinking.
This $150 million novel piece of infrastructure is already transforming the receipt of petroleum products into the country, creating sustainable product receipt efficiencies within the downstream sector. It is estimated that this new addition to the African oil and gas landscape will save petroleum marketers approximately $50 million annually; increase receipt capacity, efficiency in product discharge and reduce vessel waiting time; ultimately eliminating demurrage and lightering requirements.
This laudable project is evidence that home-grown capacity can resolve the country’s economic and social challenges. We, therefore, call on all stakeholders to create a more enabling environment for more partnership opportunities in delivering the critical energy infrastructure that will spur the growth and development of the country.
FRANK UZUEGBUNAM
