Nigeria is eying an opportunity to integrate floating production units on home turf, potentially even building them from scratch. Elaine Maslin found out more.
ADOL from the air.
West Africa is one of the world’s floating production hot spots. Already home to a large fleet of operating floating production, storage and offloading vessels (FPSOs), more are on the way, with deepwater projects planned by Total, Chevron, ExxonMobil, Eni and others.
The growth in the floating production market both off Nigeria and neighboring countries’ coasts has not been lost on both investors and regulators in the country.
Nigeria’s Lagos Deep Offshore Logistics base (LADOL) is eying the FPSO vessel construction market. It wants to first perform vessel integration, but ultimately, it wants to be a fabricator. The organization, backed by private, Nigerian investors, has spent US$300 million on new fabrication facilities and is already working on Total’s Egina FPSO contract, under a joint venture with Samsung Heavy Industries, fabricating modules due to be integrated onto the vessel before it is deployed offshore Nigeria.
Is the idea that far-fetched? Angola has been trying to achieve the same aim. The country, also home to a string of deepwater FPSO developments, recently saw the FPSO N’Goma berth at its Porto Amboim Estaleiros Navais yard (Paenal yard) at Port Amboim. The vessel, already an FPSO, which was being converted to work on Block 15/06 offshore Angola, had two modules fabricated and then integrated at Paenal. Major upgrade work to the hull, turret and integration of new and refurbished topsides was done in Singapore. Paenal was opened in 2008, as a joint venture between national oil company Sonagol and SBM Offshore (OE: October 2014). Paenal’s first FPSO integration project was on Total’s CLOV FPSO, which came on stream last year (OE: July 2015).
Dr. Amy Jadesimi
In both countries, local content requirements have been a strong driver towards increasing FPSO fabrication work. “The local content act was passed in 2010. One of the things made obligatory through the new law was onshore FPSO fabrication and integration in Nigeria,” says Dr. Amy Jadesimi, managing director, LADOL. “This is something Nigeria has been trying to do for decades, because it is such a game changer. If you cannot accommodate something like this [FPSO fabrication] in Nigeria, it is always going to be hard to get local content above 10%.”
What’s more, while Nigeria has had an oil and gas industry for 50 years, the only other significant yard in country is Saipem’s at Port Harcourt.
Samsung started working with LADOL in 2011. The partnership, LADOL hopes, will help introduce and embed the expertise and knowledge the country has lacked, in turn creating a center of gravity for the industry.
A 120,000sq m facility with a 500m-long quay wall area has been created at LADOL, with the capacity to fabricate about 1000-tonne/month, Jadesimi says. Because of its location, the facility can handle up to 10,000-tonne modules, whereas before this had been limited to 500-1000, Jadesimi says.
“This changes the market in West Africa, we will be able to do projects Africa could not do before, and it takes Nigeria to the next level,” Jadesimi says. “Because we can do these very large projects, it will stimulate investment to increase demand for fabrication.”
A quay wall will be ready in Q1 2016, with the Egina FPSO due to arrive sometime in the next 12 months “or so.” Work fabricating some of the offshore modules for the FPSO has already started. Jadesimi was unable to be more precise about the date or about the exact percentage and breakdown of the work packages, other than that the hull will be partially integrated in Korea then modules will be built in Nigeria and the integration completed at LADOL. She says the project, “from our side,” is on schedule. Jadesimi hopes that by the third FPSO project, the full integration work will be done in Nigeria. Longer term, there could be the potential to build a drydock, she says.
Jadesimi admits the technology and knowledge transfer will not happen overnight. The aim is that, over 10 years, expertise will be transferred to local staff, starting with 90% technology and knowhow from Samsung.
This, and the need to pay off the investment in the facilities, will mean one project is not enough to pay off the investment in the facility, so LADOL will be looking for more work. Jadesimi thinks it will be there, with major projects waiting in the wings, including a potential expansion of the Shell Bonga project and ExxonMobil’s Bosi field. Both appear to have been slowed, by both low oil prices, but also Nigeria’s Petroleum Industry Bill, which is still unsettled. But, Jadesimi says there are a lot of smaller fields that could require infrastructure, and which could open a market for FPSO refurbishment at LADOL, as well as potential life-extension projects. LADOL will also look to serve the broader West African market and potentially beyond that, if it can.
Jadesimi also thinks they can have a positive impact on costs. “We want to see how we can benefit small fields and help reduce costs on FPSOs,” she says, by having fabrication and integration more local to projects. “Throughout the next 10 years the cost of these FPSOs will be coming down because it will be cheaper to do it closer to the field.”
LADOL’s project has faced both skepticism that it could work and also a legal wrangle over local content. But, Jadesimi is confident they can succeed: “There is a market large enough to justify this infrastructure investment and we are confident going forward it will be used because of the oil and gas act. The drop oil price will slow down new markets and bring back interest in to Nigeria because it is more developed. But we also expect to see more exploration and production in new countries in West Africa as well.”