The groundbreaking ceremony for Ajaokuta-Kaduna-Kano (AKK) pipeline project currently dominates the hype in the infrastructure delivery agenda of the government. The AKK projects goes beyond infrastructure to amplify the gains of the Nigerian Content policy in the petroleum industry with the choice of indigenous Oilserv Limited as lead contractor. Chairman of the company, Engr EMEKA OKWUOSA, who was on ground at Ajaokuta spoke to BusinessDay and provides atypical insight into the significance of the project. Excerpts…
May we know your role in the AKK pipeline project?
I am Emeka Okwuosa. I am the Chairman of Oilserv Limited. Oilserv is an Engineering, Procurement and Construction (EPC) company. We are a consortium partner and the lead contractor for the first segment of the AKK pipeline project.
Considering the scope of work and criticality of the first segment of the project which is going to carry the full pressure of the full pipeline volumes, do you guarantee readiness and capacity for delivery?
We are ready for it. In fact, what we are carrying out today is official flag-off which is the groundbreaking ceremony. But as you can see over there, we are ready. We are already working: we are laying the lines.
Oilserv is a 100 per cent indigenous company currently employing more than 600 staff. With this AKK we probably will go to between 1,500 and 2000 at the peak of the personnel matrix. But the fact remains that we are ready. This is not the first project. We are commissioning the OB3 gas project which is actually slightly larger than this in terms diameter. The OB3 gas pipeline is 48 inch in diameter.
So, we have the experience, we have the personnel, we have the equipment and we are capable and we will deliver this project.
What plans do you have for the host community youths that might seek participation in the project?
Like I said, we will crank up our employment by more than 1000 and major part of this 1000 will be indigenes of the areas where we are. We have a clear programme to develop the areas where we build pipelines.
What does this project represent in the Nigerian Content policy implementation?
First of all I give thanks to Mr President for being in the forefront of driving progress in the oil and gas industry.
As you may be aware, which a lot of people may not, President Buhari built the infrastructure we had in the 1970s when he was the Federal Commissioner for Petroleum Resources. Most of these refineries you see today were built within the period when he was there.
When President Buhari came to power in 2015, he made the domestic gas infrastructure development a cardinal project. This project has been in the drawing board since 2008, 2009. He made it happen. What this project shows clearly is the dedication of President Buhari to local content and local capacity. Oilserv is an example of that, and Oilserv shows clearly that government means what it says.
We have been operating before the local content law came into being, but we have continued to build capacity, including building capacity beyond Oilserv by empowering other contractors to grow. So, we constitute a team with federal government in this regard.
How are you managing the project partnerships to guarantee smooth process and collaboration in the project delivery within the time frame?
We have partners as I said earlier. It’s a consortium arrangement and this consortium arrangement has a Chinese company called CFHEC. You may be aware that this project is also not funded directly by the government. This project is funded using facilities or loan that is obtained for this project. This project is commercially viable. It’s a project that the loan can be taken care of by the commercial nature of the project.
So in lieu of that we have injected a Chinese partner to meet the Chinese content requirements. But Oilserv is the primary EPC company. Our experience is what will also help to drive this process. We also have Oando in the consortium as partner. They are not an EPC company but we have been together for a long time in other projects where Oilserv is the EPC company.
May we get more clarification on the viability profile of the project and how it is going to generate funds to address the loan?
Like I said, this is fully viable. The facility being taken is meant to be repaid in 15 years; but this project can pay itself in less than 10 Years because this is a commercial venture. When you pipe this gas you have gas flowing through to industries, to power plants. There are tariffs to be paid to even transport this gas.
If you understand the mechanism of gas transportation, for every cubic meter of gas that passes by there is an amount that is paid by those who use it. In addition to that, the gas itself that passes by would have to be paid for to be used. So this is a commercially viable project. It’s not the kind of a project that government has to support for it to be viable.
What challenges do you envisage in delivering the project, and what are your fears?
I won’t say I have fears. Every project comes with its challenges. There are challenges to build a project like this in virgin forests, to go through rivers, to go through rocks, to deal with security issues. These are challenges; but I don’t have fears because we have the knowledge and the experience to deal with it. We are very ready to deliver the project and deliver the project on time.
May we share your perspectives on the value proposition of AKK pipeline for the economy?
Gas is very important to the economy of Nigeria. Nigeria is predominantly a gas country, and not necessarily an oil country. We have an abundance of gas reaching up to 200 trillion cubic feet of gas already proven and existing reserves; but clearly there is far much more than that because exploration has not gone far in the gas sector.
When we look at the real gas issues in the country, I would say that Nigeria has not developed the capacity to utilize gas; and the capacity for gas utilization is about infrastructure.
You cannot easily store gas after producing it. The reason is simple. Gas is very difficult to hold unlike liquids. And for you to keep gas in a place, you have to pressurize it in order to move it to a location. There are many ways to move gas. One is the liquefaction system in which you have to pressurize, compress and freeze it in order to ship it. That is what the NLNG does presently.
But to utilize gas in Nigeria, what is required is clearly a gas transportation infrastructure.
Nigeria has conceived this in a clear way since the early 2000s and come up with the Nigerian Gas MasterPlan of which a portion has been constructed. One is the Escravos to Lagos Pipeline which starts from Escravos, goes through Benin and then heads to Lagos. It goes all the way to the Egbin Power Station and feeds the entire Lagos.
The other section of the NGMP is actually what was going to kick off from the Qua Iboe Terminal (QIT) in Akwa Ibom State, and then goes through Ibom node, then to Umuahia and Enugu to Ajaokuta. The system would now progress from Ajaokuta to Abuja, to Kaduna and Kano.
So what we are working to achieve now is the AKK which is the section from Ajaokuta to Kano. And the Ajaokuta-Kaduna-Kano is very important because without the existence of this pipeline, the entire section of the Qua Iboe pipeline which ends in Ajaokuta will not be commercial enough in the sense that the offtake will not be robust enough to justify that pipeline.
So, in reality gas will make a lot of difference because with gas availability industries can run. And besides industries running, we are also talking about power generation, gas based industries like the urea plants which manufactures fertilizers. So with AKK you will be able to locate these plants where you need the fertilizer which is where you have agricultural activities going on. That makes it cheaper and more available.
So, in terms of the economic effect it is going to be massive. So, AKK is very important and it is going to make a lot of difference in the economy of Nigeria.
Why is AKK now perceived as the main project in the entire Nigerian Gas Masterplan, especially when there are no sales agreements justifying pipeline?
It is important to state clearly here that this issue of Nigerian Gas Masterplan is well articulated, and it has been there for more than 20 years. The implementation of the masterplan started with the Escravos to Lagos pipeline which is already in place. I will come to that. The materplan also involves the OB3 pipeline which is the East to West interconnector.
Now when you look at the NGMP, it is just well articulated. The execution of the AKK part of it, as well as other southern parts, has been delayed for quite a while and the reasons are there. But we give credit to President Muhammadu Buhari for taking the gauntlet and making this a reality and supporting it strongly.
Most private operators in the country’s petroleum industry already have plans for their equity gas commercialization. Is there obligation on operators to feed gas into the AKK pipeline?
Let me say that all these activities are centered on NNPC’S state of operations. They articulate this with the International Oil Companies (IOCs). When you look at the midstream industry which is these pipelines, you find out that NNPC is at the center of activities; and the corporation has done a lot of studies, a lot of operations economics, a lot of work on long term outlook value generation, a lot of work on industry collaboration. I am privileged to be pretty involved in all these.
I am an optimist and that is why I am also an entrepreneur. I am involved in the set up and building of all the pipelines in Lagos delivered by Gaslink which was owned by Oando. Those pipeline supply industries from Ikeja all the way through Ikorodu Road and down to Western Avenue.
Even before that, the entire Ikeja was served, Ilupeju was served, Ilasamaja was served. As we speak today, the reason industries are bubbling around Ikeja and environs is the presence of energy source. And this energy is gas.
So, let us also put this in perspective when we talk of AKK pipeline. Industries that are already moribund are huge in number. If you go to Kaduna you will see that, and if you go to Kano you will see that. So, when there is energy in the form of gas, these industries will have the impetus to kickstart again. Of course, we are not yet talking about other industries that will spring up from the scratch. So I am optimistic.
There are arguments that gas infrastructure is needed more in the upstream industry to connect and enhance production of stranded gas?
In addressing the issues of stranded gas, let me point out that when you talk of stranded gas it doesn’t translate to production. But let us remember one thing: that you do not talk of production when there is no offtake. And the reason why production is muted is because of offtake issues. Offtake cannot happen if you do not have infrastructure to deliver the gas. These are step by step issues.
Now let me be a bit selfish. When you have stranded gas and you have this need of interconnecting it to demand centers, it creates a business case for investments. And the investment that comes in is what drives employment; it is what drives capacity building. As we speak today, we all know that AKK will generate thousands of jobs. It is not just all about jobs, local vendors will come in, and materials will be supplied locally during construction phase.
Given the terrains that the pipeline will traverse, do you think the 2023 timeline for delivery is feasible given the obvious challenges in the operating environment?
Of course, you will always have challenges when you construct pipelines in Nigeria. Those challenges come from the issues of security, issues of local conditions, road conditions because you have to move the line pipes by road most of the times. We do not have the robust rail system to do that. So, that impacts a lot on the speed.
Having said that, the timing put on this project is well articulated. It is feasible and we know it is possible. It is just that we have to work hard on it because it is necessary to do that.
So, when you look at the economic impact, I would say clearly that the impact of this project is massive in concept and will be massive in reality.
What guarantees do we have that the AKK pipeline will not be vulnerable to fuel thieving syndicates that plague NNPC’s pipelines?
On pipeline security, I would emphasize that we are not waiting for explosion to happen, but the issue of public education is necessary. Gas pipeline is not oil pipeline. Gas pipeline has massive amount of pressure. And when you talk of pipeline of 40 inch diameter size, and you look at the length of this pipeline, then you imagine the amount of pressure that is built up there. Any attempt by anybody to sabotage the pipeline will lead to catastrophe for the person and for any person around. It is not oil pipeline, so people should endeavour to keep away from it.
Having said this, we take serious action during construction to bury this pipeline about two meters below the surface. We also install fibre-optic system to monitor when somebody is trying to break in. These are some of the measures to prevent third party infringement. There are other measures we take but these are some of the ones that we put on ground to ensure that no unauthorized person interferes with the lines.