As international oil companies (IOCs) operating in the country increasingly focus on expanding their footprint in the offshore areas of the Nigerian oil industry, the expected increase in deepwater floating production, storage and offloading (FPSO) facilities presents opportunities for local firms who have capacity to render requisite services.
“Offshore reserves in Nigeria are really huge. We are just scratching the surface, and it is actually the future,” Adeola Elliott, managing director of Steeving Enterprises, who worked in the oil and gas for many years, told BusinessDay.
Nigeria, Ghana, Angola, Congo, Gabon and Equatorial Guinea are said to be among the world’s largest FPSO operating areas, with over 40 FPSOs currently deployed in the region. West Africa continues to provide wider business opportunities for FPSO deployment as large oil reserves are being uncovered in the Gulf of Guinea.
“The potential increase in the number of FPSOs portends opportunities for local oil services firms that have the capacity. Unfortunately, I do not know that many of them have that capacity,” Ayodele Oni, an energy law and policy expert and senior associate in the law firm, Banwo & Ighodalo, said in an emailed response to questions.
With the implementation of the 2010 Nigerian Oil and Gas Industry Content Development (NOGICD) Act or local content, local servicing firms have been ramping up capacity mostly in the areas of engineering, design and fabrication.
Akin Adetunji, executive vice chairman, Terra Energy Services Nigeria Limited, who noted that there are quite a number of companies in Nigeria coming up to do fabrication and engineering for FPSOs, said some local companies can do mooring systems and production systems.
“We already have local capacity to do aspects of FPSO systems. We have companies that fabricate separators and stabilizers, but we don’t have capacity for 100 percent tankers conversion to FPSOs. Tanker conversion to FPSOs is a complex process that takes place in shipyard.
How many shipyards do we have in Nigeria?” Adetunji said.
While foreign giants still dominate the deepwater offshore services segment and FPSO platforms being produced abroad, local players are expanding their engineering, procurement and construction portfolios for oil producers. The industry has, however, seen a larger component of fabrication and assembly in Nigeria in recent times, with some new capacity in pipe mills coming on stream.
The NOGICD Act, which directly affects operating companies, contractors, sub-contractors and service providers, seeks to increase indigenous participation in the oil and gas industry by prescribing minimum thresholds for the use of local services and materials and to promote the employment of Nigerian staff in the industry.
“Interestingly, the Nigerian Content Act makes copious provisions on the requisite Nigerian spend and man-hours in relation to offshore floating structures thereby giving local companies the needed encouragement. A way for many of these companies to benefit would be to forge alliances and also make extra efforts to very quickly develop capacity,” said Oni.
Among major deepwater projects in Nigeria is Total’s Egina field, which received a positive investment decision in 2013. The project will entail 44 wells connected to an FPSO with capacity of 200,000 barrels per day (bpd) and storage for 2.3 million barrels. Construction was awarded to Samsung Heavy Industries in early 2013, and assembly of the FPSO’s hulk scheduled to take place at an extension of the Lagos Deep Offshore Logistics Base (LADOL), an indigenous oil servicing company.
