The Executive Chairman, Lagos Deep Offshore Logistics Base, Mr. Ladipopo Jadesimi, in this interview with Eromosele Abiodun, spoke on how the Egina FPSO is a game changer for Nigeria
Recently you recorded a first with the arrival of the Egina FPSO, the obvious question now is the future of Lagos Deep Offshore Logistics Base (LADOL) Free Zone after this achievement
We hope that in six months’ time, the Egina FPSO will leave LADOL and go to the Egina oil field offshore. I think it is 150 kilometers offshore Nigeria and it will be there for 30 years producing oil. What we are set out to do from the very beginning (which is almost 18 years now) is the development of an industrial free zone. For example, the FPSO is essentially a vessel and what is currently going on is the completion of the vessel, a specialised vessel but it is ship building. We can build vessel for any purpose and this FPSO is a vessel that will be utilised in the production of offshore oil but the facility you saw when the vessel arrived is basically a ship yard. There are many other FPSOs in the pipeline and one of the most significant aspect that has now happened in Nigeria is that there are few FPSOs and there are FPSOs that have been working in Nigeria for the last decades but in every single instance, they were completed somewhere abroad and brought only as far as the offshore field where it is going to do its business without touching Nigeria and that meant several things. All the investment going into the building of the vessel was spent outside Nigeria and you all know what that means if that remain perpetually the case.
The major reason for that was because there was no determined political will on the part of Nigeria to ensure that these investments in offshore field that are in the tens of billions of dollars to see how these investments can be capture. In order to do so, you need a suitable facility to be able to accommodate these things.
When we started 17 years ago, this was one of our objectives to build an industrial base that will be capable of handling the very largest of offshore structure, not just offshore but other industries too. As it happened, today the Egina is the largest FPSO in the world.
To answer your question more explicitly, if there are other FPSOs that are in the pipeline, integration of the FPSO can be done in-country because currently, no FPSO can justifiably be integrated outside Nigeria as we have the facility and it can be done and it is being done. So, there is a prospect of more fabrications and integrations of FPSO to be done in Nigeria. However, as I said earlier our facility is basically a ship yard and the fabrication part of the facility can fabricate anything. So, it is not only FPSO related fabrication that can be done there. Part of our immediate plans includes going into the power sector, turbines for example, go into transportation, go into Agro-business. Like I said from the onset, our objective was the creation of an industrial free zone.
Something else is important because I mentioned the development of human capital which is a very important aspect Nigeria needs to do. We expect before the end of the year to launch our technical school that will train hundreds of Nigerians in various skills such as engineering, wielding, fabrication and these skills will be applicable across board in terms of industrialisation.
As we all know, the Dangote Group is building a refinery and a petrochemical complex in Lekki. This is going to require trained man-power. Nigeria can never have remotely enough trained man-power for industrial growth. So, just to sum it up, the facility is there to be involved in all kind of fabrication work. FPSO don’t get built everyday so, you cannot build a facility just to do fabrication for an FPSO which comes every few years, but the key thing is that no FPSO will be integrated outside Nigeria anymore and in fact starting with Egina.
The FPSO is just one aspect of the project which is under $4 billion, the total investment for that field to come to first oil is $16 billion. The depth of the Egina oilfield is something like 100 and half kilometers. So, there is a lot of subsea structures at the bottom of the sea needs to be done that will together bring the oil, flow the oil and eventually send the oil up to the FPSO. There will essentially be some purifying because there will be some water, gas and all that. So, the oil will go through the modules and go purely to the storage part. So, there is huge amount of work to be done including drilling. If you can imagine drilling of that depth, I am more than impressed by the technology and there are all kinds of subsea structures that will be used. The idea is to increasingly domesticate more and more of the investment aspect of the offshore oil and gas exploration and production.
The advantage any country that has oil and gas particularly oil and gas reserves is not the eventual sale of crude like we have in Nigeria which NNPC has certain equity amount of crude and there is petroleum profit tax and all that but in my view, that is the least of the advantages to be gained in oil and gas. The main advantage is to develop capacity to participate in the investment phase because by doing so, it willlead toindustrialisation when you start doing fabrication, engineering, wielding. This applicable across every single industry you can think of.
What are the implications of the arrival of Egina FPSO to Nigeria’s economy?
Yes, that is what I have been trying to expatiate on. The implication can be summed up as a complete game changer. The game changer in that Nigeria is finally beginning to reap the main benefits of having oil and, domesticate investments in the industry.
It is clear that if you have an FPSO of $3.3 billion that is built elsewhere, all that money goes out or the potential investment goes out or the potential employment goes out, it is clear that what you need is to reverse it. In the Middle East, for example, Saudi Arabia and other countries, they saw this a long time ago and you should go to Abu-Dhabi in particularly you will see huge industrial packs that are dedicated to all kinds of fabrication and other hardware that goes into the oil and gas business.
So, the implication is that we have finally started on the part of increasing domestication of investment which will mean employment, which will mean training opportunity which in my view is highly important because if you train a wielder, those of them that are entrepreneurs will end up setting their own business somewhere, some may end up working in North Sea or Angola etc. As it is being said, rather than give a man fish, you can teach him how to fish and that is the way to potential independence.
That is why the significance cannot be over emphasised because there was skepticism four years ago about having a facility like this being built in Nigeria. Like is said earlier, there is no reason any FPSO should be integrated outside Nigeria. When you talk about integration it means modules been fabricated and the fabrication was not done only in LADOL, it was done right across the country from Niger Dock, to Warri, to Port Harcourt and without a facility to integrate, there will be no demand for these fabrications. Since we have the facility, others will do the fabrication then the employment opportunity will spread across Nigeria.
What is the relationship between Free Zones and regulatory agencies like NPA, NEPZA, NCDMB, and OGFZA?
That is a very good point because there may have been some confusion perhaps deliberately so in the minds of the public. Now, LADOL and other free zones were licensed by NEPZA as industrial free zones and all our programmes in our case since 2001 investments were based on the clear regulatory authority of NEPZA that has thus far supervised us very successfully. There is another free zone authority named Onne Oil and Gas Free Zone Authority but as the law stands now, that authority was set up for two things. First of all, to take care of Onne and also do import and export of oil and gas. The important thing is that the Onne oil and gas Free Zones has been attempting to interlope on the activities of NEPZA rather than their own statutory authority and they have the objectives that they were set up to perform and they should get on with it and not seek to interfere with other free zones that has been set up by a separate authority and in many cases they have invested in many decades and have been growing with the active support of NEPZA.
So, the success of a place like Niger Dock, LADOL and others that are under NEPZA is due to the impact of NEPZA because they have not only been supervising us, they have been advising us, supporting us, assisting us especially on how we can better relate with other government agencies. In any event, in the case of LADOL, we are not an oil and gas free zone by any stretch of imagination even from what you saw when you came during the arrival of Egina FPSO does it look like an oil and gas free zone. Like I said, it is a ship building and the modules fabricated are industrial base of fabrication and you don’t build FPSOs every day. So, we didn’t set up our facility to fabricate just FPSOs and indeed we are into other industrial applications, which has been our mission from the very first day.
Equally importantly, Onne oil and gas Free Zone has essentially completely dominated (monopolised) the industry. There was a monopoly in this business until very recently. The cost to Nigeria of the monopoly is certainly in billions because in the first place, the offshore logistic business was never tendered for bid until recently. What that meant was extremely high pricing. What is worst is that other investors were completely shut out of the business and the industry did not grow as it should and could. It is now finally growing because people can freely come, get your certification and you do your legitimate business.
There was a time when the effective cost of the oil and gas industry of a monopoly pricing was something like $5, you can imagine that to the price of every barrel of oil. Fortunately under the current administration, the President and Commander in Chief of the Arm Forces, Muhammadu Buhari took a decisive action to end the monopoly, open up the space for everybody to come in.
For the first time ever, the offshore logistic business is being tendered for bidding. It is almost unbelievable that there was no tender, there was no bid until now. The space is open up for every player to try their luck. If you have invested, you should be supported equally and all that. I have to say that in Nigeria, we have laws, regulations, however, what is even more important is the implementation of these rules and it is very fortunate that the current leadership of the NPA, the current Managing Director is an extremely patriotic and brave Nigerian that has implemented these policies. This simply means freedom for everybody to compete on a level playing field and you will already see that as we speak, many Nigerians who were not even able to dare to do business in their father land have finally taken the bold step to invest. Nigerians are not lazy people, we just need an enabling environment and government support that’s all. We need a truly enabling environment and as we speak, many more others are gearing up because what we are hoping for is that there will be many more LADOLs. It will take many more LADOLs to take Nigeria to where we are going and all we’ve done is to pioneer and show what can be done. We started with the largest piece of offshore facility and that demonstrate that there is nothing that cannot be achieved by Nigerians once we have the level playing field.
What is the current level of the integration of the Egina FPSO?
In terms of progress of integration, the FPSO has been here for a couple of weeks, there are lots of preliminary technical arrangements that have to be made before the lifting. Essentially, these modules that a on the quayside would eventually be lifted and integrated into the FPSO. So, I would imagine that we are still at the preliminary stages of doing that. In terms of how realistic six months is, six months figure is not just a figure picked up out of nowhere. Total is the lead owner of the FPSO and they have people in South Korea, they have people in LADOL monitoring the level of integration.
Actually, we were ready to integrate about three months ahead of time but there were some delays in the FPSO main construction in South Korea before it got here. So, we had plenty of time to complete the modules and to ready to integrate. The expectation from Total base on their intimate knowledge of what the work program is going to be is that six months should be adequate to install the modules and complete the integration.
How much will LADOL base save Nigeria in terms of capital flight?
I can look into the figures and give you later, but the significance of the integration is that we now have the capacity which we didn’t have before now in Nigeria which is to do integration. It is like you build a school and you are now training students and someone is asking you how much it cost to build the school which is equally important but far more important is that you have built a world class school and you have countless people come through and acquire skills. How do you put a figure to that?
As supposed to the fact that you do not have this facility and you are forever flowing out billions of dollars elsewhere. So, the way I would love to look at it is that in terms of the actual cost, I would say value for money. The upside for Nigeria is countless. There will be more fabrications done in Nigeria, there will be training, human capacity development and equally importantly, we can expect inflow of more billions of dollars because before there was skepticism but currently all doubts have been cleared. The construction of the yard was done in record time such that we were waiting for three months for the FPSO to arrive.
As far as I can see, it is clear that the success achieved by LADOL is a huge significance that would lead to even more significant achievement because now you have many more Nigerians, investors coming into various aspect not just offshore but in engineering, designing and I hope eventually maybe not in the not too distance future, we will have the beginning of an iron and steel company. This is because all the steel we are fabricating are imported, and now that there is high local demand for steel, I’m sure this will have an impact on investors looking more seriously into production of the iron and steel.
Even though we are in the information age, in my own view an iron and steel industry remains the back bone of Industrialisation even though information technology is already huge and it is growing quickly but at the end of the day you will have to produce things. You must produce cars, and all manner of things. So, that is one area where it is a big step forward in terms of facilitating an iron and steel industry because we now have high demand for it.
We understand you have plans to invest in Power generation, tell us about this
We are looking into different aspects of the power business including turbines for example and importantly into the LNG gas market. There are various schemes where you can have LNG barge come to LADOL and re-gasified for power production. Already we have a few generators that are powered by CNG and this is an aspect of power that we can surely contribute to. When the LNG comes, it is re-gasified, put into CNG and that will fill generators domestically or maybe for small industry. The potential of power development is almost endless same as transportation. We have a huge railway program in Nigeria but the steels and the rail tracks are imported. Our own message in LADOL is to encourage other people because we need as many people as possible, getting on the train of value addition locally, industrialisation locally. While some will do it by example when they see that things can be done in Nigeria, they will be encouraged. I believe in the potentials of Nigerians especially young Nigerians. They are very brilliant and capable, but they need an enabling environment, government support, consistent policy.
When will LADOL’s training Academy kick off?
It is going to happen this year. We have had some activities in the last couple of years. For example, we have started building the power plant that is gas fired which will be 50MW but the first phase of 28MW is already on the way, so, we have been busy. However, because of the significance of this school of technology, we have finalised our plans to break ground any time from now and hope to complete it this calendar year.
Aside power generation, we heard that LADOL is partnering with American embassy on auto manufacturing. How visible is the project?
We thought of the possibility of doing something with Ford. If and when that sees the light of the day, it will be a joint venture that would required LADOL to make some investment.
Why is LADOL doing all this?
It is because some 20 years ago, I recognised that to have a LADOL type of entity will be critical for Nigeria. I also knew that there is absolutely no way any so call foreign investor would come to Nigeria and be concerned essentially with areas to fast track Nigeria development. That was the main driver however, I didn’t expect the level and depth of the monopoly and the unremitting nature of their opposition. I knew that if we did not do the break through, there will be many others that will take it up. Making a difference is also part of it.