*Begins production Q1 2013
*Gets NNPC, IOCs support
24 August, 2011, Sweetcrude, Abuja – The longitudinal submerged arc welded pipe mill to be set up in Nigeria by Jiangsu Yulong Steel Pipe Company of China will employ at least 5,000 people directly and indirectly when it begins production, the Executive Secretary of Nigerian Content Development and Monitoring Board, Ernest Nwapa said on Tuesday in Lagos.
Speaking during the presentation of the project to officials of international operating oil and gas companies, Nwapa described the pipe mill as a corner stone facility, which will attract cluster of industries and employ thousands of Nigerians.
The engagement with supply chain managers and major project promoters was part of the highlights of the seven-day visit by a four-man Yulong delegation that included the Chief Marketing Officer, Mr. Abass Mohammed, member of the Board of Directors, Mr. Liu Yan, the Chief Technical Officer, Mr. Yao Guarijli and the company’s Nigerian representative, Mr. Festus Olaoye.
The Yulong/NCDMB team also presented the project to the top management of the Nigerian National Petroleum Corporation and Nigerian Investment Promotion Commission in Abuja and got assurances that government will provide it with generous incentives and patronage.
There were also inspection visits to the proposed site in Polaku which is close to the shore line of River Nun in Bayelsa State and other adjacent industrial complexes like the National Integrated Power Project, Gbarain and Shell Gas Plant in Gbarain Ubei.
The visits by the Yulong management served to progress their collaboration with NCDMB towards setting up the pipe mill and secure the support of government and industry stakeholders.
Giving reasons why the Board is promoting the pipe mill project, the Executive Secretary said it is geared to ensure compliance with the Nigerian Content Act which provides that all steel pipes be sourced locally.
He emphasized that when the mill becomes operational, operators of the industry will not be allowed to buy pipes abroad until they exhaust Yulong’s capacity.
The mill which is expected to begin operations by the first quarter of 2013 will help retain about $500 million annual industry spend, add value and increase local supply and processing activities.
It is also expected to increase the speed of delivery of oil and gas projects in Nigeria as the proposed site is close to demand locations.
According to the Executive Secretary, a recent industry study sponsored by Shell Nigeria revealed that the Nigerian oil and gas industry will within the next five to seven years demand about 4.5million tons of Seamless Steel Pipes, (SMLS) Longitudinal Submerged Arc Welded Pipes (LSAW), (Helically Submerged Arc Welded Pipes (HSAW) and High Frequency Welded Pipes (HFW).
Of this demand profile, about 1.5million tons will be for LSAW pipes.
The demand for the pipes will be driven by oil field developments and crude production, industrial and domestic natural gas distribution projects (Gas revolution projects) and export gas pipeline projects.
Other drivers will include LNG and other process plants, fabrication yards and construction industry and regional oil and gas development and infrastructure pipe network like the West Africa Power Pool and Trans Saharan Gas Project.
The Federal Government is also working on replacing some of the oil and gas pipelines laid in 1970s and 1980s, some of which have been compromised over time.
In his presentation, the Chief Marketing Officer of Yulong, Mr. Abass Mohammed confirmed that the company has acquired equipment for the Nigerian LSAW mill preparatory to shipment as soon as the site is ready.
He said the company will in the next few years move its Helically Submerged Arc Welded Pipe mill and coating plant to Nigeria, adding that some of its plate and coil suppliers in China have expressed interest in moving to Nigeria.
Mohammed who put the planned annual production capacity of the LSAW mill at 250,000 tons, said it will produce a pipe range of 16 inches to 58 inches.
According to the project schedule, Yulong will carry out equipment engineering between August 2010 and December 2011, incorporate a Nigerian Holding company before the end of December 2011 and acquire the land and do pre-engineering between June 2011 and March 2012.
Site installation of the equipment and infrastructure is planned for January and December 2012 while commissioning and start up is scheduled for January to March 2013.
Yulong also plans to carry out local and foreign training of workers between November 2012 and December 2012, start commercial production by March 2013 and carry out Quality Certifications between June and August 2013.
Mohammed also listed the technical and economic advantages of the proposed Pipe Mill to include the opportunity to employ and train 1,000 engineers, machine operators, inspectors and other technical personnel by 2013, set up a training school in Nigeria and deliver quality, competent and cost competitive products and services within schedule.
He said the project will also help Nigeria become an exporter of JCOE Pipe Technology to West Africa and Central Africa and achieve significant cost reduction through the avoidance of the high import related charges on finished line pipe products and reduce stock holding costs.
Some of the oil industry officials who spoke during the engagement promised to support the project and assured that their companies will place orders in the mill when it is completed.
In his remarks, the Manager Community Content, Shell, Dr. Ama Ikuru charged Yulong to ensure that the project adopts sound business principles, meets international quality and project schedules.
Speaking after the top management of NNPC received the pipe mill project team in Abuja, the Group Managing Director, Engr. Austin Oniwon advised Yulong to speed up the movement of the mill to Nigeria, assuring that it will get huge patronage as many oil and gas projects are scheduled for the next few years.
According to him, “if the pipe mill is here, and the price is right and the quality is assured, the market will be yours for the taking. We hope you will accelerate the pace of taking the final decision to be on ground in Nigeria.”
Oniwon also stated that the corporation will engage Yulong in further discussions on the possibility of joining the project as a joint venture or an equity partner.
In his remarks, the Group Executive Director, Gas and Power, NNPC, Dr. David Ige explained that the pipe mill project will fit into Government’s plan to lay 1000 kilo meters gas pipeline from the Southern part of the country to the Northern part between 2013 and 2016.
He added, “We also looking to build industrial complexes in the West, Free Trade Zone in Koko, fertilizer plants, petrochemical and LPG plants.
“All those plants will have gas lines bringing feed stock to them plus an expansion of pipeline distribution network in Lagos and other parts of the country to serve the manufacturing industry.
You will see a range of pipeline requirement from as small as 18-inch diameter to 48 inches.”
The GED further stated that, “Over the next few years, there will a significant amount of pipes to be laid in Nigeria. It will be a major period in Nigeria in terms of economic activity. Having this capacity domiciled in Nigeria is going to allow us maximize the benefits of this phase of transition of our country.
“There could not be a better time for Yulong to come in and there couldn’t be a better thing for them to invest in than pipelines which is so crucial to realizing our agenda in gas and oil.”
Similarly, the Nigerian Investment Promotion Commission promised to grant Yulong extra incentives beyond the five years tax holiday and other statutory assistance offered foreign investors in Nigeria.
Director, Executive Secretary’s Directorate, Mr. Amos Sakaba, who received the Yulong Project team in Abuja, promised that the commission work out specific incentives for the project, some of which will depend on the import substitution value of the company’s products.
He said, “We can come up with more incentives. You can negotiate for more and government will grant some of them.”
Sakaba also noted that NIPC will help Yulong with legal and regulatory processes associated with starting a company as well as help set up meetings with ministries and agencies.
He added, “We can provide immigration support for your staff; we have a one stop shop that includes 26 regulatory agencies involved in investment so as to relieve investors the stress of shuttling around while starting up their business.
“No investor in Nigeria fails to make returns because there is market even though there are some challenges. This is the best time to invest in Nigeria because politically the country is stable. NIPC Act also provides guarantees for your investment so they cannot be nationalized.”
To ensure the cooperation of all government agencies, Sakaba suggested that NCDMB sets up an Inter Agency Task Force on the pipe mill project.
He said the Task Force will serve to resolve all problems that might hinder the investment and recommend to Mr. President to grant extra incentives for the project if the need arises.
The proximity of the proposed 10 hectare project to shore line of River Nun will aid the transportation of steel plates and finished pipes.
The site also has easy access by road and potentially by rail and is near Gbarain Ubei National Integrated Power Plant from where the plant can source its electricity needs
It is also close to the pipeline corridor for gas infrastructure development.