“At the conceptualization of the project we insisted in line with our mandate that a significant portion of the manufacturing activities must be carried out in Nigeria with the strong involvement of Nigerian experts and professionals. This is why you see the Egina FPSO coming from South Korea to Nigeria for integration.”Engr Simbi-Wabote, Executive Secretary, NCDMB
The focused drive of the Simbi-Wabote led management of NCDMB to enforce strict compliance with the local content law in the oil and gas industry is producing practical positives and measurable results for the country. As a result, international oil majors are expanding business partnerships with indigenous operators and landmark local equipment manufacturing projects are being executed. The upbeat in activities is producing more jobs for local experts and boosting the overall pool of local technical capacity to support growth of the sector.
One example or the tangible dividend of NCDMB’s proactive local content drive is the $3.3bn Egina Floating Production, Storage and Offloading Vessel (FPSO). The Egina FPSO, which arrived last month is the largest of its kind in the country. The floating oil production vessel is a critical component of the $16bn, 200,000 bpd Egina deep-water oil field scheduled for completion in the fourth quarter of 2018. It has capacity to handle 2.3 million barrels offshore and will be used to produce and store oil from 57 subsea Egina wells 130 km off coast at water depths of 1,500 km.
The Egina field was discovered by Total Upstream Companies in Nigeria and is being developed in partnership with the NNPC, China National Offshore Oil Corporation (CNOOC), South Atlantic Petroleum (SAPETRO), an indigenous company, and the Brazilian oil firm, PetroleoBrasileiro(Petrobras).
To ensure that Nigeria reaps significant and sustainable benefits from the project, NCDMB, in line with its mandate to boost indigenous participation in the sector made Total and its partners commit to a 40% local content retention in the project. Because of this tie-in, the program implementation of the different phases of the project is yielding several positive economic dividends for the industry as well as the Nigerian economy at large.
The first major impact is on the massive boost in local equipment manufacturing capacity in the oil and gas sector. The local content law stipulates that a significant part of the infrastructure should be developed and built in the country. This includes a 500 m long quay to assemble the FPSO.
Today, this has become practical reality at many levels. First, six out of the 18 modules of the Egina FPSO were fabricated in Nigeria, a first-time achievement for the country. The vessel, which arrived Nigeria from South Korea last month will be fitted with the locally fabricated modules in Lagos before it proceeds to Egina. Asides the modules, several other components of the FPSO including 60,000 tons of fabricated materials were manufactured locally. It is also noteworthy that the paint used for coating of the FPSO was made locally.
Second, Nigeria now has a world class 500-meter long quay to support the assembling of other large vessels at Tarkwa Bay, Ladol Island, Lagos. The $300 million facility was constructed by Samsung Heavy Industries Nigeria Limited, builders of the FPSO. When the vessel arrived Nigeria, it docked at the quay and will be there over the next few months for the integration.
The second area of impact is that of enhanced local technical capacity building, job creation, and increase in the pace of technology transfer in the industry for Nigerians. According to the terms of the local content agreement, 21 million man-hours are to be worked locally on the project. This corresponds to 70% of the total man hours planned for the project.
So far, the project has employed 5,000 Nigerians, including professionals and artisans into various roles and they have been sent or are receiving advanced trainings in different aspects of oil production operations.
The integration yard alone has over 1500 employees from technicians to high level operations whoare receiving advanced training in FPSO integration and other related oil production operations. About 250 Nigerian engineers are currently engaged on the FPSO project.
The third implication is that with the strong local content participation in the project, the country now has both the physical infrastructure and is building relevant professional human resources to support advanced operations in the oil and gas industry. This is significance for domesticating expertise locally. It will in addition to building efficiency, providing world class technical support services to oil companies help the country stop capital flight and conserve foreign exchange.
The Egina FPSO is indeed a gamechanger with many positives. By ensuring compliance with local content law, NCDMB is getting local businesses more involved in oil production activities and gradually ushering in a new era of technology transfer through collaboration between major international oil companies and their local counterparts. This deserves commendation. This has helped to create jobs, increased capital retention in-country and improved the opportunity to grow local expertise.
It is inspiring to note that NCDMB is already thinking beyond the remarkable 40% local content inclusion that it secured for Nigerians in the FPSO project. At the ceremony in Lagos to mark the arrival of the vessel, the Executive Secretary, represented by General Manager, Projects and Operations Division, Engr. Paul Zuhumben stated that NCDMB’s plans are to ensure that new deep-water projects set new records that go beyond beyondlocal integration of FPSO vessels. He further stated that NCDMB was working with operating companies and project promoters to ensure that new projects like the Bonga South West and Zabazaba deep water projects surpass the significant Nigerian Content levels attained on the Egina project.
Analysis of the major contractors that submitted bids for the $12billion Bonga South West FPSO and $13.5billion Zabazaba deep-water project show compliance with NCDMB’s directive to provide concrete plans to fabricate and integrate over 50 percent of the FPSO topsides locally. The multinationals bidding for the projects include Nigerian Agip Exploration Limited (NAE) and Shell Nigeria Exploration and Production Company (SNEPCO). Agip is developing the Zabazaba field with proven reserves of 560 million barrels of oil as a standalone development in the eastern portion of the Niger Delta in water depths ranging from 1,200 to 2,400 metres. These are not projects that are to be completed soon.NCDMB has already finalized thetechnical and commercial evaluations of bids for the Zabazaba project that includes FPSO unit, subsea wells, installation and rigs.
The Bonga South West project includes the construction of a new FPSO facility with an expected peak production of 225,000 barrels of oil per day.
A successful lock-in and commitment of these two oil giants working on these multi-billion-dollar deep water projects will have major economic impact on the oil and gas industry exceeding that being witnessed with the Egina FPSO.
Another remarkable aspect of NCDMB’s approach to enforcing compliance with the local content law is the ability to secure the buy-in and cooperation of the multinationals that have enjoyed dominance of the industry business. Mr. Simbi Wabote, NCDMB’s Executive Secretary has effectively demonstrated that NCDMB is a partner whose work is to build efficiencies in the market and enable stronger local support for the multinationals. And there are sufficient reasons to see value in this proposition. A technically vibrant and competent pool of local resources and capacity will eventually help reduce operating costs of multinationals, create a stronger sense of involvement and ownership by local businesses and communities. This will help stave the spate of attacks, vandalism and make their businesses more profitable.
Speaking at the reception of the Egina FPSO, the Managing Director, Total Upstream Companies in Nigeria, Nicolas Terraz, captured the new mood in the industry succinctly.
He said “This is for me a collective success. Together with our partners, we are kind of making history. It is the first time we will have such a big vessel and such an activity of integration taking place in Nigeria. So, I am grateful to the partners and the authorities”
The arrival of the Egina FPSO marks a major shift in the country’s oil and gas industry. It is practical proof of the Buhari administration’s reforms in the oil and gas industry which are being championed by the Hon. Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu. The ability of the Wabote-led NCDMB Management to ensure 40% local content retention and the benefits in boosting local manufacturing capacity, creating decent jobs, enhancing technical capacity of local professionals signals a new era. This makes the Egina Project a stellar testimonial of the Board’s aggressive local content drive. NCMB’s plan to ensure that subsequent projects such as the Bonga South West and Zabazaba project exceed the historic achievements of Egina give hope of even greater and deeper positive impact on the industry and the Nigerian economy.
This feat deserves commendation and the Wabote led-NCDMB needs to continue to enjoy the encouragement and support it has been getting from the Presidency, Hon. Minister of State, Dr. Kachikwu as well as the Governing Council of the Board to strengthen the resolve to continue the good work they are doing.
The Egina project is a landmark but what makes it and other upcoming big projects even more significant is the high levels of local content participation and the significant and measurable impact on the Nigerian lives, the Nigerianeconomy and Nigerian businesses.
Paul K. Adegboyega
Adegboyega is public policy analyst