• Saturday, June 22, 2024
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BusinessDay

FG’s proposed Brass dry dock threatens $1bn investment in Finima project

Untitled design – 2020-08-12T132427.651

Nigeria risks losing over $1bn investments already secured in the proposed Finima Dry Dock project over government’s plan to set up another dry dock in another part of the Niger Delta with another $10m contract to a Chinese company to begin another feasibility study.

Simbi Wabote, executive secretary of the Nigerian Content Development and Monitoring Board (NCDMB), and Timipre Sylvia, minister of State for Petroleum Resources, announced at the weekend that the FG has awarded $10m contract to China Harbour Engineering Company to start a feasibility study on setting up a dry dock in Brass, Bayelsa State.

The announcement is said to have shocked interested investors the $1bn Finima Dry Dock in Rivers State.

BusinessDay gathered that the local partners in the Finima project went into meetings all through Monday and Tuesday after the minister’s announcement at the weekend.

Wabote had declared how the FG had just engaged the Chinese company for the construction of a shipyard in Brass Island.

In a statement in Abuja, Saturday, the NCDMB said the feasibility study for the project had commenced, adding that when completed, the shipyard would cater for the maintenance and repair services of cargo vessels, oil tankers, and Liquefied Natural Gas, carriers.

The NCDMB disclosed that there were currently over 20,000 ships working for the oil and gas sector in Nigerian waters, with an annual spend of over $600 million in the upstream sector to engage these vessels. The NCDMB said it would provide funding for the feasibility study as part of its overarching mandate to domicile key oil and gas industry infrastructure and increase retention of industry spend.

The scope of the feasibility study, it explained, includes geotechnical and bathymetric surveys, conducting a market study, ascertaining an optimal construction scale, developing technical proposal and construction plan and estimation of the required investment to bring the project into reality.

It disclosed that the project’s schedule indicates that the site work would be executed within six months while feasibility study would be completed in four months.

Speaking at the meeting to kick-off of the project, the Minister of State stated that it would be executed by China Harbour Engineering Company, which he said had carried out similar projects across the globe as well as in Nigeria.

Reacting with utmost alarm, the investors forum in Port Harcourt that has partners from around the world said Tuesday night after their meetings that the Royal Royal HaskoningdHV of Holland had six years ago carried out same feasibility study for the same FG (through the Nigeria Liquefied Natural Gas, NLG) at about same cost ($10m) and that the project had progressed for five years at formative stages.

The investors wondered how two FG groups would be spending in excess of $10m each on same or likely project located few nautical miles apart, serving same market.

Sources said the NLNG had signed non-disclosure deals with the investors so that all activities would progress without noise. It was gathered that a special purpose vehicle was established to carry out the preliminary activities and secure financial and technical partners and FG approvals with location and local memoranda of understanding (MoU) before going open. This is said to have lasted five years so far, and when they were about to file for FG approval to start physical work, the same FG announced it was starting a dry dock in nearby Bayelsa State.

A source in the meeting, who is also the president of the Rivers Entrepreneurs and Investors Forum (REIF), Ibifiri Bobmanuel, confirmed the development and shock to the partners around the world.

Bobmanuel added that the group through the SPV had already reached an agreement with the Finima community and final MoU is awaited, if not for the Covid-19 disruptions, but said it was expected to be sealed in December 2020. The location of the project has since been chosen to be at Light House in Finima, Bonny Island of Rivers State.

The REIF president said: “The announcement by the Minister of Petroleum is a huge shock to the investors. We met all evening in Port Harcourt to file a letter to the Minister and bring him up to speed on this. We have made giant strides. We paid the first official visit to the community in 2016 and paid the second visit in 2019.”

On why the NLNG was mentioned by the Minister in the proposed Brass Dry Dock, Bobmanuel said the NLNG may have been roped into it. He said it takes between five and eight years to establish a world class dry dock. “The process is very long and windy to set up a dry dock and get funding from international investors. Thus, you need to secure all necessary documentation including FG approvals which are key before you sign final MoU with your financial partners which we have finalized. This takes between five and eight years.

He also said it took a lot of time to choose a community that is most suitable, taking into account time-value of money. He said the company, Royal Royal HaskoningDHV of Holland, is industry standard benchmark when it comes to the maritime industry. “Anybody can fact-check this. That must be why they were given the job to do the feasibility study for the Dry Dock by the NLNG in the first place which was completed in 2015.

“There is a checklist of things to do and we have been doing them one after the other. They are very thorough. They were paid to do the feasibility work and they did a good job at that in excess of $10m to do such a thorough job. They came from Holland to Port Harcourt to carry out the feasibility studies and Road Show.

“We have been courting investors and doing meetings following this up in many countries of the world, inspecting the best dry docks in the world. We have been meeting investors in the US, UK, China, etc. It’s not a process for unserious people and short-visioned people. Look, this is project of over $1Bn and we scouted round the world for serious investors.”

The rest of the task was for the local partners to get their own bit of the bargain and get approval from the Federal Government. “This is what we have been perfecting all this while. We have signed with our financial partners and technical partners. Now, one Saturday, the FG says it has given a contract to China Harbour Engineering Company to carry out same feasibility studies that another branch of the FG has already carried out, and at about same cost? You mean the FG is telling the world that it is setting up in Brass, Bayelsa State?.

“Look, we are not against the dry dock being in any suitable place anywhere in the Niger Delta especially if it meets basic threshold. This is because, for $1Bn, you need the best location, and Brass after all was one of the 15 locations that were studied in the feasibility studies. What we are pointing out is that the FG/NLNG has already invested $10m or more in the Finima dry dock and that the process was concluded long ago. Why would the FG deliberately start another process all over with another $10m?”

The investors however said they were pleased that the FG is interested in this project but that money is a scarce commodity that should not wasted. “We have the feasibility study which guides us and we are prepared to share it with the FG if they are interested. We can agree with them on how to move forward. If the FG wants an alternative location, fine. Its not about us or anybody. Nigeria has come of age and we cannot continue to go to other nations to dock our vessels and repair them, such as in South Korea, Japan, etc and smaller ones in South Africa. The one we have in mind is the big one that can take big ships.

“The project we have on RRDL (the SPV) is big and it will employ 100,000 work force directly and indirectly.

“From the Minister’s statement, Nigeria already runs average spend of $600m per year, but that is just on the average. It is more than that. The Nigerian Content Development and Monitoring Board (NCDMB) primary responsibility is to drive local content portion of investments or promote local ownership of ventures (especially in the oil and gas sector), and not to become the investor, especially where investors already exist. It is deviation. They are to midwife investments, not to usurp the process of the private sector.”

On the implication of the Minister’s declaration, REIF boss said such news would scare away foreign partners in the scheme who would think the Government was very inconsistent.

He said they had inspected dry docks around the world and it is wrong to drag the NLNG into this. “Minister must have been misinformed. We are shooting ourselves in the foot, if we start two dry docks at same time. All we need is approval from the FG. How can we throw all of that away? This does not happen anywhere in the world. We hope funds have not been given to the Chinese on this already.”

Saying the Royal HaskoningDHV of Holland is in a world of its own, Bobmanuel said: “I would not as an investor advise the FG to be driver of this project because it is very complicated. The FG can take minority share especially when private investors are willing and ready. So, take minority shares and cut your risk and allow the private sector to do what they know best. There is no sense in starting two dry d