Samsung Elevates the Egina Project
The recent sail-away of the $3.3 billion FPSO for the $18 billion Egina deepwater oilfield from the Samsung Yard in Geoje, South Korea, to the company’s yard in Lagos where it will be integrated locally, represents a new record in Nigerian content develop
With the high level of insecurity, long contracting cycle, lack of respect for sanctity of contracts, inconsistency of policies, overregulation and bureaucracy, Nigeria remains a high risk environment for the oil and gas industry. To guarantee inflow of investments in the oil and gas sector and also ensure that the accomplishments in Egina project are exceeded, the country should improve the ease of doing business by reducing the operating risks
On October 31, 2017 at exactly 7.18am Korean time, the Floating Production Storage Offloading (FPSO) vessel for Nigeria’s Egina deepwater oilfield being developed by Total Upstream Nigeria Limited (TUPNI) left the quay side at Samsung Yard in Geoje, South Korea, on its long anticipated journey to Nigeria.
Located in South Gyeongsang province, off the coast of the port city of Busan in South Korea, Geoje Island hosts SHI yard in Gohyeon.
It is expected that it will take about 90 days for the vessel to arrive the SHI-MCI FZE quayside (Samsung Yard) in Lagos, where it will be integrated locally before the $3.3 billion facility sails away to the deep offshore oil field, which has scored first on many fronts.
THISDAY gathered that the FPSO, which has already passed Taiwan, will arrive Nigeria by end of January 2018.
Samsung Heavy Industries (SHI) was awarded the contract for the Engineering, Procurement, Construction, Integration, and Commissioning of the 2.3 million barrels capacity FPSO for the Egina oil field, being developed by Total at the cost of $18 billion in Oil Mining Lease (OML) 130, offshore Nigeria.
Total’s Egina field is not the first deepwater field to be developed in Nigeria as the country already has five other giant deep offshore producing oil fields – Shell’s Bonga, ExxonMobil’s Erha, Chevron’s Agbami, Total’s Akpo and ExxonMobil-operated Usan field, which was also developed by Total.
However, the uniqueness of Egina lies in the fact that it is first on many fronts.
In the area of engineering and management, the Project Management Team (PMT) and all the main contractors’ PMT offices are based in Nigeria, with 94 per cent of basic engineering executed in Lagos by Nigerian companies.
Also detailed engineering was done in-country with a consortium of three Nigerian companies with 85 per cent of engineering man-hours expended in Nigeria.
Second, in the area of fabrication and integration, SHI had also set a new record in Nigerian content development when it locally fabricated six modules or about 60,000 tonnes of the equipment out of the 18 modules, representing over 30 per cent of the main packages of the project.
The six FPSO topside modules for Egina FPSO were fabricated in-country across fabrication yards and will be integrated into the main FPSO when the FPSO arrives at the Samsung Yard (SHI-MCI yard) in Lagos, the first of its kind to be berthed at quayside in Nigeria.
The fabrication and integration facility, which was constructed and developed under the technical, managerial and operational expertise of SHI while its partner, LADOL, a logistic service company, provided the ferry and electricity service.
SHI has invested $300 million in the SHI-MCI yard, which consists of yard area, assembly shop, assembly yard, fully enclosed blasting and painting shop, warehouse, African 1st quay wall for FPSO integration, heavy lift with large capacity and sufficient water depth by dredging work.
So, Egina field is also first in the sense that apart from the fact that it has the largest FPSO in Nigeria, its FPSO will also be the first to be fabricated and integrated locally in Nigeria, and indeed, Africa.
Also the assembly of the integrated control and safety system of the FPSO will be fully performed in-country, while it has the largest subsea equipment – manifolds, risers ever completed in Nigeria, above what was achieved in previous deepwater project.
Indeed, the Managing Director of Total Nigeria E & P, Mr. Nicolas Terraz and the company’s deputy managing director in charge of Deepwater District, Mr. Ahmadu-Kida Musa told participants at the recent 7th Practical Nigerian Content conference held in Uyo, Akwa Ibom State, that the company had achieved 44 per cent Nigerian Content in Akpo deepwater project in 2006, 60 per cent Nigerian Content in Usan project in 2008 and 77 per cent in Egina project.
The company has challenged other operators to exceed the Egina’s Nigeria Content accomplishments in future projects in the country.
In the area of human capacity development, Total, NCDMB and SHI also made significant contribution to Nigerian Content development with an ambitious objective to train 200 engineers and technicians, where 500,000 man-hours would be expended both in Nigeria and overseas.
Improving ease of doing business However, for the oil and gas operators to exceed the accomplishments of Egina in future projects, the country should strive to continuously improve the ease of doing business, especially in the oil and gas sector.
The Vice-President of Nigeria, Prof. Yemi Osinbajo had stated at the recent 55th anniversary of the Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry (LCCI) that the oil and gas sector would benefit from the federal government’s efforts to improve the ease of doing business in the country.
The country recently moved up 24 places in the World Bank’s Doing Business report to the 145th position, through the efforts Osinbajo, who chaired the Presidential Enabling Business Environment Council (FEBEC), and the Minister of Industry, Trade and Investment, Dr. Okechukwu Enelemah.
However, a lot of work is still needed to be done to encourage investors by reducing the Nigeria-specific risks in the oil and gas sector, which have discouraged investments and escalated costs of projects.
With the high level of insecurity, long contracting cycle, lack of respect for sanctity of contracts, inconsistency of policies, overregulation and bureaucracy, Nigeria remains a high risk environment for the oil and gas industry.
To guarantee inflow of investments in the oil and gas sector and also ensure that the accomplishments in Egina project are exceeded, the country should improve the ease of doing business by reducing the operating risks.
SHI was able to achieve the feat being celebrated by Total and NCDMB in the Egina project as a result of South Korea’s high ranking in the ease of doing business, which created conducive environment that helped the company to grow into shipbuilding giant.
While Nigeria is celebrating that she moved up just 24 places in the World Bank’s Doing Business report to still far less influential position of 145th, South Korea ranked the fourth best country for doing business among the industrialised countries in the World Bank report.
According to its latest ranking, the World Bank’s report showed that South Korea is the fourth best country for businesses after New Zealand, Singapore and Denmark.
In the ranking, South Korea was followed by Hong Kong, US, UK, Norway, Georgia, Sweden, Ireland, Germany, Spain, France, Japan, Russia, Rwanda, Italy, Mongolia and Somalia.
The enabling business environment in South Korea contributed largely in helping SHI and other Korean giants to build local capacity, which they are exporting to other countries as evidenced in the Samsung’s multi-million dollar fabrication and integration Yard in Lagos
Samsung is ranked 7th on best global brands and is the world leading company in electronics, shipbuilding and machinery, services, chemicals and finance, through the various subsidiaries.
Reputed as the engine of the Korean economy, Samsung has a global network of 33 affiliated companies, 559 offices and facilities in 74 countries.
With total employees of 427,000 worldwide, it has $530 billion worth of assets and sales revenue of $305 billion.
All these could not have been achieved if the operating environment of South Korea and the other oil-producing countries where the company operates were as difficult as Nigeria.
Future projects For future oil and gas projects to set a new record on Nigerian Content, investors such as SHI, which took the risk of establishing the SHI-MCI FZE in Lagos as the first ever fabrication and integration yard in Africa should be encouraged.
In the Egina FPSO, SHI fabricated in-country, six modules or about 60,000 tonnes of the equipment out of the 18 modules, representing over 30 per cent of the main packages of the project.
However, for the Zabazaba deepwater project, the NCDMB has stipulated that the contractors must fabricate and integrate over 50 per cent of the topsides of the FPSO in Nigeria to ensure that the Zabazaba project impacts the Nigerian economy much more than previous deepwater projects.
In order to achieve this target, the existing fabrication and integration yards must be fully utilised in future projects to maximise Nigerian Content and boost the country’s economy.
By encouraging operators that have demonstrated faith with the Nigerian Content by investing heavily in local yards, massive jobs will be created for Nigerian facilities and manpower.