A Review of the Nigerian Energy Industry

Govt insists on transparency, local content in Total’s $2bn Egina FPSO

*As Asian giants clash in bid to win new order

Oscarline Onwuemenyi
with agency reports

15 June 2012, Sweetcrude, ABUJA – The Federal Government has called for transparency and effective adherence to local content laws even as multinational oil and gas giant Total is set to issue delayed commercial invitations to tender covering a trio of major packages on its deep-water Egina project in Nigeria.

Egina FPSO is ultra-large offshore plant, with over 2m-barrel of fuel capacity. The Egina oil field is located 150km off the coast of Nigeria, operated by Total. The French oil major, which has 24% stake in Egina, plans to sign the final newbuilding contract by the end of 2012, to begin production from 2015.

Industry sources said bid documents will be issued to shortlisted contenders for a new-build floating production, storage and offloading (FPSO) vessel, subsea umbilicals, risers and flowlines as well as a subsea production system.

Asian technology and construction giants Hyundai Heavy Industries (HHI), Samsung Heavy Industries (SHI) of South Korea and China’s Dalian Shipbuilding Industry Company (DSIC) are said to have clashed in a bid to win $2bn worth of Nigeria’s Egina FPSO new building order.

President Goodluck Jonathan recently visited South Korea in respect of Nuclear Energy summit and used the visit to woo foreign investors from South Korea especially the giant industries including Daewoo Heavy Industries, Samsung and Hyundai Heavy Industries.

Besides these, the government too has been wooing other direct foreign investment from other climes. But, according to sources in the industry, the government is not going to sleep over issues of transparency and the strict implementation of the local content laws, especially in the face of recent fuel subsidy probe reports in which many companies, including the Nigerian National Petroleum Corporation, NNPC, has been indicted.

It is believed that the delay in the award of the EGINA FPSO which started some years ago must be as a result of government’s efforts to ensure the award is seen to be transparent not just by Nigerians but by keen industry observers and the international community.

Dalian Shipbuilding Industry Company (DSIC) in a consortium with China Offshore Oil Engineering Corporation (COOEC) and Technip.

Even though DSIC is less likely to win the project with no previous experience in building ultra-large FPSO, China National Offshore Oil Corporation (CNOOC), mother company of COOEC, is influential in the bid, having 45% stake in Egina oil field.

On the other hand, Hyundai has the upper hand, having already built and delivered Usan FPSO of Nigerian offshore oil field with its own technology. Samsung also eyes this sector with penning small-and-medium size FPSOs this year.

Hyundai and Samsung have inked newbuilding orders amounting $16.7bn and $14.6bn each y-t-d. In case of Samsung winning this project, Samsung may be able to beat out Hyundai in annual new order for 2011.

However, Korea should be alert to Chinese consortium. Shipbuilding player said, “This is the first time to face China in an international FPSO new building market. China’s offshore plant new building is also expected to grow.”

The Nigerian government’s demand that any likely FPSO bidders and Total stick to strict local content requirements will continue to be a challenge.

The likes of Samsung Heavy Industries and Hyundai Heavy Industries are known to be chasing the multi-billion dollar contract but they are both grappling with how to satisfy Nigeria’s aim for up to 17,000 tonnes of topsides to be built locally.

To secure the Egina contract, which could be worth more than $2 billion, the South Korean players need to invest in local yards, following in the footsteps of Daewoo Shipbuilding & Marine Engineering, which had to take an equity stake in an Angolan yard before it was awarded the Clov FPSO contract by Total.

It is notable that Daewoo is not competing for Egina, though it is thought to be bidding and may have secured a Chinese partner to build the hull.

No single yard in Nigeria has the capacity to handle 17,000 tonnes of topsides so the FPSO bidders have are looking at either upgrading existing facilities — such as Nigerdock and perhaps Acergy-owned Globestar — or distributing the work among a variety of local companies.

Market sources calculated that yard upgrades could drive up the cost of the 200,000 barrel-per-day FPSO by about $500 million, so investors are keen to ensure work exists beyond Egina to keep these revived facilities busy and allow for a return on capital.

Hyundai will be a strong contender to land Egina’s FPSO deal given it also built the huge floaters for Total’s Usan and Akpo projects in Nigeria.

The Surf and SPS packages are rather more straightforward because capacity does exist in Nigeria to meet local content needs.

One source said competition is tough for the $1.4 billion Surf order, though Saipem, with its huge Rumuolumeni yard in Port Harcourt, is in a prime position, added to which it also secured the Surf packages on both Usan and Akpo.

Other contenders include Technip, the new Acergy-Subsea 7 combine and two Nigerian players, West African Ventures (WAV) and Nestoil.

This package calls for about 40,000 tonnes of hardware, including 32 kilometres of production flowlines, 23 kilometres of water injection line and 75 kilometres of gas export pipeline.

WAV is owned by Netherlands-based marine contractor Sea Trucks, which has a separate joint venture with flexible pipe manufacturer Wellstream, called Surestream Surf.

Last week, Sea Trucks raised $200 million in a bond offering and will use the funds to expand its fleet from four dynamically positioned pipelay vessels to seven.

For the $600 million SPS package, involving 44 trees plus associated hardware, the contenders include Cameron — which supplied the subsea hardware on Usan and Akpo — as well as FMC, Vetco and Aker.

All Egina’s contracts were due for award last year and due to ongoing delays, first oil has been pushed back from 2014 to 2015.

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  • oteri classics oke

    D implementation of d local content policies has not really been felt by d people.one d reason is insufficient manpower and lack of infrastructure.