30 January 2018

Nigeria: Egina Field Set to Flow

With the recent arrival in the country of the $3.3 billion Egina Floating Production Storage Offloading unit from South Korea, Nigeria is set to add 200,000 barrels of crude oil to her daily output from the $16 billion Egina oilfield.

The Floating Production Storage Offloading vessel (FPSO) unit for the Egina oilfield, which left the quay side at Samsung Yard in Geoje, South Korea on October 31, 2017, finally berthed at the newly built 500-metre FPSO integration quayside at the Samsung Yard (SHI-MCI Yard), at the LADOL Free Zone in Lagos last Wednesday.

With the arrival of the $3.3 billion world's largest FPSO, history is upon the oil and gas industry as the country is set to add 200,000 barrels per day of crude oil to her current production capacity.

The Egina FPSO, at 330 metres long, 61 metreswide, and 75 metres high with a production capacity of 200,000 barrels per day, was constructed at the Samsung yard, Geoje, South Korea.

The Egina FPSO was constructed by Samsung Heavy Industries Nigeria Limited (SHIN) for Total Upstream Nigeria Limited under the Oil Mining License (OML) 130 and is commonly referred to as the Egina Project.

As a commitment to building local capacity and ensuring technology transfer, SHIN together with its joint venture partner, established SHI-MCI FZE (SHI-MCI) as a joint venture entity.

The SHI-MCI facility, located at Tarkwa Bay, is West Africa's first fabrication and integration yard and is on a land mass spanning 121,000m2and has a 502 metre long deep quay wall that is the largest in Africa. Six out of the 18 modules of the Egina FPSO were fabricated in Nigeria, which is a first time achievement for the country. Major components of the six modules were fabricated at the SHI-MCI yard, the place where those six modules will be integrated on top of Egina FPSO.

With state of the art equipment and technology know-how, SHI-MCI has the capacity to fabricate 10000mt and is recording high productivity at an early stage of its operations due principally to the influx of Samsung's technical expertise which has greatly aided speedy technology transfer.

Samsung invested over $300 million for the construction of the fabrication yard and through SHI-MCI, it is fully committed to technology transfer and training of local capacity in the field of shipbuilding and offshore plant manufacturing technologies.

The Egina Project has set the bar very high in terms of compliance with Local Content laws with over 1,000 Nigerians employed in various capacities.

The arrival of the Egina FPSO in Nigeria is a huge milestone towards the completion of the Egina Project and eventual recovery of first oil. After the arrival of the Egina FPSO at the SHI-MCI quayside, the integration of the six modules fabricated in Nigeria will commence.

It is noteworthy that the Egina Project is progressing smoothly and is expected to be completed on schedule this year.

Once completed, the Egina FPSO will sail away to the Egina field and will be sited at the block offshore were oil production is expected to commence and add 200,000 barrels per day to Nigeria's daily output..

Local content devt

Speaking during the arrival ceremony, the Managing Director of Total E & P, Mr. Nicolas Terraz, said the six locally fabricated modules of the FPSO would be integrated into the FPSO at the Samsung Yard over the next six months before the FPSO sails away to the Egina field.

Terraz noted that the local integration of the FPSO is a first for Nigeria and Africa.

He said with a length of 330 metres, the Egina FPSO is the largest FPSO ever installed in Nigeria and the largest FPSO built by the Total Group worldwide.

According to him, the integration of the six locally fabricated topside modules at the SHI-MCI Yard before its final sail-away to the Egina field is a game changer and a remarkable achievement in local content development in Nigeria.

"Being the first project to be launched after the enactment of the Nigerian Oil and Gas Industry Content Development Act in 2010, Egina is advancing Nigerian Content to record levels and has by far the highest quantum of local content completed for any oil & gas project in Nigeria, but also for Total's projects worldwide," Terraz said.

Terraz added that several technological feats have been recorded by the various entities involved in the Egina project.

Before Total launched the Egina project, all the 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, and local capacity development, as well as job creation.

But with the signing into law, the Nigerian Oil and Gas Industry Content Development (NOGICD) Act on April 22, 2010 by former President Goodluck Jonathan, the law mandated the Nigerian Content Development and Monitoring Board (NCDMB) to deepen the participation of Nigerians and Nigerian facilities in the oil and gas industry, by facilitating local capacity development and ensuring that the execution of large components of any project is domiciled in-country.

With the backing of this piece of legislation, the NCDMB insisted that any future integration of FPSOs must be carried out locally.

The agency also directed that a large fabrication scope of FPSO project must be performed in Nigeria.

By insisting on domiciling certain scopes of oil and gas industry jobs in-country, the NCDMB incentivised indigenous providers of services to invest heavily to build capacity to be able to meet the expected demand in more challenging jobs.

However, it was quite a challenge to find the shipbuilding company, which will be able to make such commitment and that plan to come true.

SHI had committed to make local entity within the Free Zone, and against all owes, has shown to make No.1 yard in Africa.

Thus, the planned local fabrication and integration of Egina FPSO and indeed, all future FPSOs built for the West African sub-region by SHI, is a game changer in Nigerian Content development.

The project will potentially make the country the hub of oil and gas business with huge Nigerians expected to be gainfully employed directly and indirectly.

Since the commencement of the project, SHI has made deliberate efforts to build local capacity by training Nigerians in Nigeria and South Korea.

The fabrication yard has already provided 1,200 employment opportunities in the areas of welding, fitting and other support services; while the cascade effect outside the yard will generate huge jobs over the coming years.

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.

Again, in the area of fabrication and integration, SHI has also set a new record in Nigerian content development, having 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 in Lagos, the first of its kind to be berthed at quayside in Nigeria.

Apart from the fact that the Egina field has the largest FPSO in Nigeria, its FPSO will also be the first to be fabricated and integrated locally in Nigeria, and indeed, Africa.

Challenges

There is no doubt that Nigeria's oil and gas industry is characterised by high level of insecurity, long contracting cycle, lack of respect for sanctity of contracts, inconsistency of policies, overregulation and bureaucracy, which have made the country a high risk environment for the oil and gas industry.

So, it is not surprising that the Egina project has experienced some challenges and setbacks which are the common issues with doing business in Nigeria.

However, the challenges are very enormous and a setback to the federal government's efforts to enhance the country's position in the global ease of doing business ranking.

According to the partners in the Egina project, government bureaucracy, length of time in obtaining licenses and permits, bureaucratic bottlenecks at various government agencies, have been setbacks experienced by SHIN and SHI-MCI in delivering the Egina project.

As foreign businesses wish to protect their interests and investment, only a conducive and enabling environment will ensure that more foreign investments come into the country and foreign businesses already established do not leave.

The challenges highlighted have to be totally eradicated and the Nigerian government has a major role to play in this regard, which we are optimistic with our current Government.

Nigeria

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