Keep­ing it lo­cal

To­tal’s com­mit­ment to its Egina project de­spite un­cer­tainty over the Petroleum In­dus­try Bill could change the nar­ra­tive on in­vest­ing in Nige­rian deep off­shore oil de­posits. For LADOL lo­gis­tics base and its lo­cal sup­pli­ers the op­por­tu­ni­ties are huge

The Africa Report - - CONTENTS - By in La­gos

In La­gos, LADOL’S lo­gis­tics base and its lo­cal sup­pli­ers eye huge op­por­tu­ni­ties as To­tal’s Egina mas­sive FPSO ves­sel is de­ployed in the com­pany’s deep off­shore field 130km of f the coast of Nige­ria

There is a spe­cial joy for pas­sen­gers aboard a La­gos wa­ter taxi – the free­dom of the wa­ter, slip­ping un­der­neath the wretched traf­fic on the bridge that links La­gos Is­land to Vic­to­ria Is­land. Be­fore long, the Egina ves­sel comes into view, a hulk­ing pres­ence. Lit up like a Christ­mas tree at night, it is bright green by day. Sam­sung built the bulk of this float­ing pro­duc­tion, stor­age and of­fload­ing (FPSO) unit in South Korea be­fore tow­ing it quay­side to the La­gos Deep Off­shore Lo­gis­tics Base (LADOL) free zone, where we ar­rive, land­lub­bers once more. It is early July, and the fi­nal prepa­ra­tions are be­ing made be­fore this 330m-long gi­ant is towed 130km off the coast of Nige­ria to To­tal’s Egina deep off­shore field. It de­parted in late Au­gust, and once it is plugged into 44 sub­sea wells, it will draw up 200,000 bar­rels per day of crude. That is a mil­lion bar­rels ev­ery five days, and some $70m at to­day’s prices. Egina will add 10-12% to na­tional oil out­put. For the scale of en­gi­neer­ing done in Nige­ria, it is a first. Africa’s largest crane was de­liv­ered in more than 100 con­tain­ers to the LADOL quay, and Egina is the largest FPSO in Nige­ria. And, cru­cially, around six of the 18 mod­ules that make up the ves­sel were man­u­fac­tured in Nige­ria by lo­cal com­pa­nies. Niger­dock, for ex­am­ple, built the he­li­pad. A huge man­u­fac­tur­ing fa­cil­ity jointly run by Sam­sung Heavy In­dus­tries and LADOL’S en­gi­neer­ing wing, Mega Con­struc­tion In­dus­try, lies per­pen­dic­u­lar on the shore by the Egina ves­sel, al­most as big as the ship it­self. This re­quired the vi­sion of LA DO L’s founder, Ola di po Jades­imi. He saw the di­rec­tion

of travel of Nige­ria’s oil in­dus­try, says Jide Jades­imi, his son, now an ex­ec­u­tive direc­tor and head of busi­ness de­vel­op­ment at LADOL. “[Oladipo] saw that Nige­ria’s deep off­shore would best be ser­viced out of La­gos,” says Jide. “So he ac­quired a piece of land in­side of Apapa port. And over the last decade, $500m has been in­vested into the in­dus­trial free zone to cre­ate Nige­ria’s only fully in­te­grated lo­gis­tics base.” When the oil ma­jors like Exxon­mo­bil, Shell and To­tal sold off their swamp and shal­low-wa­ter fields sev­eral years ago, they ex­panded their off­shore as­sets. But it also re­quired the ad­vent of Nige­ria’s Lo­cal Con­tent Act in 2010. This in­creased the amount of en­gi­neer­ing and de­vel­op­ment of en­ergy projects done in Nige­ria. It was crit­i­cal, says Jide Jades­imi. “And it’s about leg­is­la­tion but also en­force­abil­ity,” he adds, point­ing to the work done by Nige­ria’s Con­tent De­vel­op­ment and Mon­i­tor­ing Board.

TO­TAL’S GAM­BLE

But projects like Egina are cur­rently scarce be­cause of Nige­ria’s fail­ure to pass the re­forms of the oft-de­layed Petroleum In­dus­try Bill. France’s To­tal, in ef­fect, took a gam­ble on the project with­out know­ing the terms of the new leg­is­la­tion. In so do­ing, it has changed the nar­ra­tive that Nige­ria is not worth the in­vest­ment risks, ar­gues Jades­imi, who re­counts the num­ber of oil ex­ec­u­tives from other com­pa­nies who vis­ited the fa­cil­ity – a unique mar­ket­ing mo­ment for LADOL as it pitches for new busi­ness. “There are a steady stream of these projects over the next 10-15 years,” says Jades­imi. “The es­ti­mates are of around $20bn be­ing spent in Nige­ria’s deep off­shore.” These in­clude Shell’s Bonga South West project and Eni’s Zabaz­aba

field. Jades­imi also points to other heavy en­gi­neer­ing projects that LADOL’S base is set up for, in­clud­ing rails for the Nige­rian Rail­way Cor­po­ra­tion and steel bridges for road in­fra­struc­ture. But the bread and but­ter of the busi­ness plan re­mains ser­vic­ing the fleets that work in Nige­ria’s off­shore oil and gas in­dus­try. The main busi­ness unit is LADOL In­te­grated Lo­gis­tics Free Zone En­ter­prise (LILE), “which ex­e­cutes much of the rig-re­pair work we do,” s ay s Ja des i mi. Com­pa­nies such as Transocean and Noble use the base for reg­u­lar main­te­nance work, with LILE pro­vid­ing man­power and project man­age­ment. LADOL is build­ing new work­shops and chem­i­cal stor­age fa­cil­i­ties, in ad­di­tion to pre­par­ing ‘lay down’ ar­eas for the com­plex drill lines and pipes that sub­sea work re­quires. Jades­imi is most proud of the ‘liq­uid mud’ plant that LADOL is build­ing, an­other first for La­gos. Drilling through rock re­quires lu­bri­ca­tion, and each drilling com­pany has its own re­quire­ments for dif­fer­ent com­bi­na­tions of drilling flu­ids. “When there was a down­turn in the mar­ket, there were lots of re­dun­dant as­sets. Many of these mud plants got sold off be­cause there was no drilling,” says Jades­imi. “So by in­vest­ing in the mud plant, LILE is ac­tu­ally re­liev­ing a lot of these com­pa­nies of the cap­i­tal ex­pen­di­ture [when the cy­cle re­turns].”

EDUCATIVE ROLE

LADOL is also seek­ing to re­lieve the skills short­age that af­fects Nige­ria’s en­gi­neer­ing and con­struc­tions sec­tors. Jades­imi points to the 9% growth es­ti­mates for the con­struc­tion sec­tor and says that the road­block to achiev­ing that growth is a lack of skilled work­ers, in­clud­ing car­pen­ters, painters and elec­tri­cians. “At the mo­ment, we still im­port a lot of work­ers to take on those jobs for the ma­jor­ity of the big jobs in con­struc­tion,” he says. To meet that need, LADOL is in­vest­ing $1.5m in its Up­skilling Academy within the zone, with a first co­hort of 500 stu­dents. LADOL has the am­bi­tion to train 5,000 work­ers per year by 2022. “There will be oil and gas train­ing, sub­sea drilling and weld­ing train­ing,” says Jades­imi, who hopes to build the skills com­po­nent into the com­pany’s push for work in the sub­re­gion, at­tract­ing stu­dents and hope­fully con­tracts from across West Africa. It will also link into the La­gos State gov­ern­ment’s am­bi­tions to im­prove its own ed­u­ca­tion sys­tem. Cur­rently, La­gos State has eight tech­ni­cal and vo­ca­tional train­ing col­leges, “but they are un­der­funded, the teach­ers need up­skilling, the cur­ric­ula need to be up­dated and so on,” ex­plains Jades­imi. “We would set up ‘train the trainer’ pro­grammes within the LADOL Up­skilling Academy, and then those train­ers would re­turn back to the ex­ist­ing vo­ca­tional col­leges.” It has not all been smooth sail­ing for LADOL. Back in 2014, it took its part­ner Sam­sung to court, fear­ing that it was go­ing to be kicked off the Egina con­tract. And though there was a pe­riod of calm while the project was com­pleted, the day af­ter the ves­sel was towed away, Sam­sung Heavy In­dus­tries em­ploy­ees found they were un­able to ac­cess the work­site. One en­ergy sec­tor source says that Sam­sung man­agers be­lieve they have been “roy­ally ripped off, with ex­tra com­mis­sions ap­pear­ing, and even on rent. LADOL is rent­ing space from the Nige­rian Ports Au­thor­ity at less than a dol­lar a square me­tre and then sub­let­ting to Sam­sung at more than 10 times that amount on a 20-year lease.” LADOL ex­ec­u­tives now ap­pear to be pitch­ing the zone to Chi­nese in­vestors.

WAR OF WORDS

Sam­sung of­fi­cials have at­tacked LADOL in the lo­cal me­dia, telling re­porters that they be­lieve the first oil from Egina will be de­layed: “Many ma­te­ri­als that are sup­posed to be put into use for the com­mis­sion­ing of Egina have been trapped at LADOL. Our sub­con­trac­tors can­not also work be­cause they can­not ac­cess the dock­yard,” an of­fi­cial told Van­guard news­pa­per. LADOL man­age­ment hit back in a state­ment, say­ing “Sam­sung’s deal­ings in Nige­ria in the past four years have been fraught with mis­chief and reck­less dis­re­gard for all stake­hold­ers: LA DO L as busi­ness part­ners ; Nige­rian reg­u­la­tors; Nige­rian work­ers and cit­i­zens. Sam­sung has brazenly and per­sis­tently flouted Nige­rian laws and breached con­tracts it duly signed with L ADOL and its af­fil­i­ates.” Nige­ria spe­cial­ist An tony Gold­man of Pro­me­dia Con­sult­ing tells The Africa Re­port: “It was al­ways a some­what awk­ward mar­riage, and the prospect of a fall­ing out be­tween the part­ners will only con­firm what many in the ser­vices in­dus­try in Nige­ria had an­tic­i­pated.” With elec­tions ar­riv­ing in Fe­bru­ary 2019, and vice-pres­i­dent Yemi Os­in­bajo re­cently visit­ing the fa­cil­ity, the dan­ger of the af­fair be­com­ing a po­lit­i­cal foot­ball in­creases. Those with a stake in bur­nish­ing the rep­u­ta­tion of Nige­ria’s do­mes­tic en­ergy in­dus­few months.• try will have a busy

GE­ORGE OSODI/BLOOMBERG VIA GETTY IMAGES

The Egina FPSO ves­sel be­ing fit­ted out at the LADOL Free Zone in La­gos ahead of its deep off­shore de­ploy­ment

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