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How NOGICD Act Is Transforming Nigeria To Africa’s FSPSO Hub



Before the enactment of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act in 2010, most fabrications, engineering, and procurements in the oil and gas industry were done abroad, leading to loss of $380 billion and two million jobs. CHIKA IZUORA here examines the impact of Floating Production Storage and Offloading, FPSO fabrication in Nigeria and it’s cost saving effect.

The executive secretary, Nigerian Content Development and Monitoring Board (NCDMB), Simbi Kesiye Wabote, when he took over the responsibility of the Board gave a vivid description of significant capital flight which has occurred following several decades of oil exploration in the country. The losses were coming from jobs executed abroad through juicy contracts award by international oil companies (IOCs), operating in the country.
He lamented that this has led to capital flights and two million jobs losses. Wabote, who addressed participants at the first national seminar for Justices and Judges on the Role of the Judiciary in the development of the Nigerian Local Content Law and Policy, organised by the Juris Law Office and NCDMB in collaboration with the National Judicial Institute (NJI), recently, said that most fabrication, engineering, and procurement in the oil and gas industry were done abroad prior to the enactment of the NOGICD Act in 2010 and it resulted in estimated capital flight of $380 billion over the last 50 years.
“Estimated job lost opportunities was in the region of two million. The narrative then was that nothing can be done in-country resulting in less than five per cent of in-country value addition,” he said. The narrative has changed as Wabote disclosed that the Board has recorded 28 per cent local content achievement since the enactment of the Act till date, achieved by using the passion and commitment of the various directorates in the Board. “Our next big leap from 28 per cent to 70 per cent in-country value retention will require step change in the enforcement of the law to drive reversal of capital outflow,” Wabote said.

SHI-MCI Opening FPSO Fabrication Frontier In Africa
In the past eight years, the Board has focused the thrust of local content implementation on promoting indigenous ownership of equipment used in industry operations; promoting oil and gas components manufacturing; giving first consideration to Nigerian indigenous companies; ensuring that Nigerian content targets are met for projects and operations; creating and utilising training and employment opportunities for indigenes; deploying the Nigerian Content Development Fund for targeted capacity building; ensuring that local capacity investors have work to amortize investments and involving oil producing communities in the activities of the sector.
The board’s strategic implementation of the NOGICD Act has been very impactful in the oil and gas industry and the wider economy. Several Nigerians service companies have invested in sophisticated vessels and rigs assets that used to be the exclusive preserve of foreign companies.
Local firms now enjoy patronage and even exclusivity in certain areas, retaining huge industry spend in the economy, employing Nigerians and building skills. Many hi-tech fabrications, manufacturing and engineering facilities have also been developed and upgraded, domiciling most industry work that used to be exported.
Nigerian Content has also grown remarkably on the production side. Indigenous and marginal field producers now account for about 15 per cent of Nigeria’s crude oil production, contributing about 53 per cent of domestic gas supply requirements.

Policy Creates 30,000 Jobs
LEADERSHIP Sunday reports that even though the oil and gas industry is not a high employer of labour like agriculture and construction, NCDMB bullish implementation of Nigerian content has helped to create over 30,000 jobs and funneled about 5,800 young persons in various projects based trainings. The total value of contracts awarded to Nigerian companies in the industry has risen to 83 per cent while average Nigerian content retention in-country has shot up to 28 percent.
Although, many stakeholders are pushing for increased performance, it is imperative to note that the implementation is a marathon and not a sprint, Wabote said. Nigeria however achieved a significant milestone on January 24, when the biggest Nigerian Content achievement to date was attained when the Total E&P’s Egina Floating Production Storage and Offloading (FPSO) vessel arrived the SHI-MCI Yard, LADOL Free Zone, Lagos for the integration of six modules that were fabricated in Nigeria. The arrival of the FPSO was a huge testament to the giant strides Nigerian content development has made, particularly in the development of infrastructural and human capacities.

Sustaining The Momentum, $200m Fund
Going forward, NCDMB has set new targets for itself and the industry, and has developed a 10-year strategic roadmap with which it is pushing to retain at least $14 billion out of the $20 billion annual industry spend and create 300,000 direct and indirect jobs.
The Board also hopes to grow aggregate in-country value addition from 28 per cent to 70 per cent by 2027. And these targets are backed with specific initiatives such as completion of five planned oil and gas parks to grow local manufacturing, establishment of two additional pipe mills, local fabrication of modular refineries; attaining at least 50 percent FPSO Integration in-country during the implementation of the world-class Zabazaba and Bonga SouthWest Aparo projects.
The Board has sustained the momentum of implementation and injected some fresh impetus, and its first major activity was to convene the Nigerian Oil and Gas Opportunity Fair (NOGOF), to aggregate industry business plan.
This culminated in the compilation of a compendium of investment opportunities in the industry, and subsequent launch of the $200 million Nigerian Content Intervention Fund (NCI Fund) in partnership with the Bank of Industry (BoI).
The fund offers a single digit interest rate with five year tenure and the agency hopes to unveil the first set of successful applications soon and the goal with the NCI Fund is to optimize the capacity and efficiency of local supply chain and the overall competitiveness our oil and gas industry.
The Board has also issued guidelines to drive research and development implementation in the oil and gas industry, and this is also followed by the Nigerian Oil and Gas Research and Development Fair held in September 2017 to sensitize and galvanize the industry and relevant stakeholders to embrace the culture of research and innovation, a key parameter for sustainable local content practice.
It has also concluded the bid evaluations for Nigeria Agip Oil Company, NAOC’s Zabazaba Deepwater project within an unprecedented period of 14 months, in line with the directive of the Minister of State for Petroleum Resources to reduce the protracted contracting cycle in the industry.
Just recently the agency held the ground breaking of the pilot Nigerian Oil and Gas Park Schemes NOGAPS) at Odukpani, Cross River State, leading the rest of the industry to mark the eighth anniversary of the Nigerian Content Act. He explained that Nigerian Content is not about Nigerianisation but has the main objective of domiciliation and domestication of value-adding activities in-country.

Landmark Success
Commenting on the Egina FPSO, the chief operating officer, Samsung Heavy Industries, Nigeria, Frank Ejizu told our correspondent that the country made a landmark success with the in-country integration of the FPSO, vessel built by Samsung Heavy Industries Company Limited (SHI) of Korea for Nigeria’s Egina deepwater oil field.
Located at the Oil Mining Lease (OML) 130 offshore, the 200,000 barrels –per-day capacity Egina deepwater field, is being developed by the French oil major, Total Upstream Nigeria Limited (TUPNL). Total awarded the contract to SHI in 2014 after the Korean firm emerged the winner, following a rigorous tendering process.
The Egina FPSO is not the first FPSO to be deployed in Nigeria’s oil and gas industry as the country currently has 14 FPSOs all built in foreign yards. Of these 14 FPSOs, five were built for giant deep offshore oil fields – Shell’s Bonga, ExxonMobil’s Erha, Chevron’s Agbami and Total’s Akpo and Usan fields, all located several kilometres offshore, in water depths ranging from 200 metres to 1.2 kilometre.
However, the uniqueness of the Egina FPSO, Ejizu recalled lies in the fact that apart from being the largest FPSO in Nigeria, it was the first FPSO to be integrated locally in Nigeria, and indeed, Africa. All the other FPSOs operating in Nigeria’s oil and gas industry were built and integrated in foreign yards, thus denying Nigeria the huge benefits of growing her Gross Domestic Product (GDP) through in-country domiciliation of the huge expenditure, local capacity development, as well as job creation, he said.
Even the modules such as bridges (gangway), helipads, and other platforms, which were fabricated in Nigerian yards, in line with the then local content policy of the federal government, were shipped to Korean yards for integration into the main FPSOs before the FPSOs sailed to Nigeria. But SHI has changed the game as it successfully integrated six out of the 18 modules of the Egina FPSO in Nigeria, the first time such complex task was performed in Africa.
Ejizu explained that in order to carry out the integration of the Egina FPSO in Nigeria, Samsung Heavy industries had to build an integration yard in Lagos, which has the same standard with the Korean and Brazilian yards. To actualise this feat, the Korean giant partnered LADOL and built a world-class fabricating and integrating yard within LADOL’s virgin land mass.

Hub of FPSO Integration
LEADERSHIP Sunday gathered that the partnership led to the creation of an independent entity, SHI-MCI in Tarkwa Bay area of Lagos, and with the creation of this partnership and the successful integration of the Egina FPSO, which has sailed to the offshore oilfield, Nigeria has positioned itself as the hub of FPSO integration in Africa with a capacity to fabricate and integrate the FPSOs for the upcoming Zabazaba, Bonga South West and other deepwater projects that have been on the drawing board for several years.
Commenting on the Egina FPSO and how it has transformed the industry, Amy Jadesimi, managing director of LADOL said the work that was done in LADOL free zone and really exceeded expectations. According to her, “The quality of the welding from Nigerian staff was above international standards. The safety standards again, international standard. Not only that, the work that was done went very smoothly, considering just a few years ago, the ship yard wasn’t there.
“That’s really important for people to appreciate. The quality of FPSO, the level of finishing on this FPSO is the highest of any FPSO that has ever been launched in Nigeria and waters. So, from a local content perspective, from the Nigerian perspective, this project is not only a huge success, that is important, but it is also clear demonstration of the high capabilities that we have in Nigeria for future projects to be done and for more work to be done in future projects in Nigeria” she said.
Dr. Jadesimi told our correspondent that what LADOL is targeting is actually 70 per cent local content, adding, “As I said, that will require many more capacity development. LADOL, as it stands, is a hub for integration but we need something to integrate, that means we need things to assemble. AT LADOL, the fabrication capacity we have is relatively small. We need more fabrication capacity, capacity in two ways. Capacity in sense of improved quality. We have to produce quality products in Nigeria and then those products can be brought into LADOL to be assembled.
“We also need capacity in terms of range. We need different types of fabricators, different types of manufacturing. The market has been kept artificially small because it benefited foreign contractors to stop work from being done here, but this is where the work is. So, for the international companies, for the indigenous Nigerians who are also looking to build facilities, there is a huge demand.
“From the oil company perspective, they will save themselves billions of dollars by using local capacity and we know that because every country in the world, without exception, where local content has worked, prices have gone down. That’s what we are already seeing in LADOL, as I said, with our logistics base, we’ve halved the cost for offshore logistics support. Now, the second thing is for the indigene.
“So right now, before LADOL, if you fabricated something as an indigenous Nigerian from your yard, you will have to sell out to the other side of the world to be made part of a larger hub. Clearly, there’s no economic benefit to that. It’s like someone saying you want to build a car but you are going to sell all the parts to America. They are going to assemble the car in America and then send it back, there’s no point in that” she said.
The LADOL boss speaking further added that what we need is a situation where we can do everything in Nigeria. “So, now that it’s clear that if you are an indigenous fabricator, if you fabricate good quality products, those products can be integrated, can be assembled in Nigeria. That opens up a multi-billion dollar market that our companies can now participate in. So for us, there’s no reason why Nigeria cannot achieve the same level of local content that they have in Brazil and in Brazil, they have 70 per cent. So, we think Nigeria should also be targeting 70 per cent” she concluded.