A Review of the Nigerian Energy Industry

Delay in PIB passage has affected oil industry dramatically – Jarmakani

01 December 2014, Lagos – Mr. Mansur Anwar Jarmakani, Executive Director, Jagal Group, owners of Nigerdock, in this intertview, speaks on recent developments in the Nigerian oil and gas industry and his company’s milestones in the fabrication of a Gas Gathering Compression Platform and Non-Associated Wellhead Platfrom for Chevron’s domestic gas project

Mansur Jarmakani

Do you see the falling crude oil price as a threat to execution of new projects in Nigeria’s oil and gas industry?
I am not an oil economist but I can tell you something. The price of crude oil has a direct relationship with investment worldwide. From Saudi Arabia to Nigeria to the United States, there is more than just oil price that will affect projects. So, you cannot look at something singularly; you have to look at it in a scheme of things. As I said, what is the turning point? How are projects coming; this is not a one-item issue.


Talking about how projects are coming, is the non-passage of the Petroleum Industry Bill (PIB) affecting inflow of projects?
PIB delay has affected this industry dramatically. I believe that when the PIB concept first came up, it was to drive investment; it was to drive projects but I think there was, may be, not the right levels of dialogue and there is always room for improvement. I think the PIB, whether in its current form or different form, is a legislation that will happen in this country, a legislation to promote investment and the right return for Nigeria. But as an impact, it has created a bit of slow-down in projects because there is uncertainty on the tax regime. We are just a contractor; we will follow what our industry gives us. The PIB is between the government, the NNPC and the other stakeholders, which are not just the international oil companies (IOCs) – the National Oil Companies (NOCs) have a major role to play because we also rely on them to give Nigerian companies work. So, it is something that is important for the country but I think the PIB will get through in probably, a different format. That is my personal take on it.


When we talk about the Nigerian Content, we have had issues where Nigerian companies had misunderstanding with the multinational companies they are supposed to be in partnership with. What are you doing to ensure that you have a very workable and smooth relationship that will be less acrimonious with your international partner, which in this case is Hyundai Heavy Industries of Korea?
Thank you for that question and let me try and describe what a professional relationship is supposed to look like. A professional relationship is based on a common vision, a focus and an ultimate end goal. If we are desirous or any Nigerian company is desirous of delivering a project or engineering man-hours or anything in our industry, they must take the initiative to invest in their own capability and prove that they are up to the task.

Worldwide, it is always more cost effective to do something locally than to just import a finished good. So, you ask me what are we doing? As a company, we are acting professionally; we invite any company, internationally or local because we have passed that barrier. It is a mind-set change; whether you are an international company or a local company or a highbred, the world today needs to develop its resources.

Nigeria, today, has a vision. His Excellency, Mr. President has put several agenda items that are a must for the economy and we are delivering on them. The only way you can deliver is to bring two companies together, that have common vision, professional attitude and are willing to take that painful journey and deliver the work because we have a lot to learn as an industry and we have a massive challenge in front of us.


Still on workflow, your chairman was expressing fears on the possibility of your projects drying up this quarter or the first quarter of 2015. Has the situation improved?
The situation is yet to take a turn; you know the projects today are coming under a lot of pressure to either be fast-tracked or to push through but I believe and I have the confidence that between the oil companies and between the authorities and between the Nigerian Content Development and Monitoring Board (NCDMB), I think there is now a better alignment that needs to happen to sustain the workflow. Our chairman is still yet to see sort of a firm turn but we see the changes beginning to come. There are projects now that are starting to come through the pipeline into a commercial stage and we have submitted commercial offers for these projects and we hope that in the next quarter or two, they will start to be awarded. We are tendering many.


You once made a remark that you started local content several years before the enactment of the Nigerian Content Act. Since they enacted this Act, how has it impacted on your operation?
It has absolutely impacted on our projects. I think this Act is a natural economic policy that is in every country. In Nigeria, our industry base needs to grow and what this Act has really achieved, for us yes, we are part and parcel of this Act; we have been delivering Nigerian Content way before it was a law but where it has really impacted us is that it has improved the supply chain available to us in-country to interact with other Nigerian companies that have credible delivery of goods and services. That is the real Nigerian impact, it has created a biggest supply chain; it has created a bigger workforce; it has created more talented engineers and fabricators and welders and fitters and buyers and bankers. It has created a critical mass in this industry that is available locally. We don’t have to go half-way around the world to do it; we can do it at home.


A major feature of the Nigerian Content Act is aimed at deepening the economy and boosting employment generation. You have talked about the millions of man-hours you spent in putting this project in place. The fear is this: after this project, what will happen to the hundreds of Nigerians that you trained?
They will go to other projects, hopefully. Today, Nigeria, like every other country, is not immuned to economic strife. The world today, globally, is at a real impasse. You can see the impact on the oil price. There are other tax regimes; as countries around the world struggle economically, they increase their tax but the real issue in this is what happens next. Your question is what are we going to do with this highly skilled trained workforce. There are several opportunities. We as a company are bidding work every day; it is up for the NNPC, the international oil companies and the government to keep the framework at a balance that will give Nigeria the right return on its assets and also create an investment climate that suits further investment into this oil and gas industry. So, for us to take these workers on to the next job, it is our duty; we will continuously bid work. I can tell you that we are confident that we will win work on our capability; on our capacity and on our merit.


What is the significance of the Gas Gathering Compression Platfrom (GGCP) and Non-Associated Wellhead Platform you fabricated for Chevron?
Let me try to summarise it in a way that will reflect on why this project is a milestone. First of all, Nigeria, many years ago, realised that gas is a major component of driving energy. Today, with the Gas Master Plan in effect, with all these issues that are happening, it is very important that Nigeria builds the infrastructure to utilise this gas, not just to flare it or produce it, but to actually make sure that it channels back its way into Nigeria and produce sustainable power. What we built today is part of a project that Chevron has awarded to Hyundai Heavy Industries (HHI) of Korea, with NNPC and other stakeholders as partners, to deliver the facilities that are part of this major gas programme.

So, what we executed today was with over 2.5 million man-hours without lost time incident. That means we delivered the project safely; the project is on schedule and is within its budget. These are significant achievements in the industry because Nigeria is just catching up with the trend of major projects. The Nigerian Content Act was passed in 2010 but Nigerdock had been planning this before it was a law, before it was a plan; before it was something that we have to do. We believe that this is the right thing to do. If you look at this project in a holistic way, it is Decks, Platforms and Jackets with the Piles, which basically is the infrastructure that is put on the field to produce gas.


Does the project produce gas or store gas? What is the specific role of the project?
It is part of the bigger gas production. It is no one single project. In any oil and gas facility, you have major components that assist in production, part of it is for transportation; the other thing is actually to hold everything together. So, you have a lot of engineering; you have a lot of process equipment, pressure vessels – all of these is part of this project. This has some of the process equipment that will be part of the projection and part of it is to put it back into the grid once it hooked up to what we call the Nigerian Gas Master Plan.
We understand that this is the first time this kind of project is being fabricated in Nigeria. What gave you the courage to embark on such ambitious project?
It did not take any courage; it was the right thing to do. Every country around the world today is struggling economically and financially. Nigeria has had the vision for many years; there are yards around the country, all the way from Port Harcourt to Warri and Lagos that have been fabricating different components for decades. But what gives us the courage wasn’t just the Nigerian Content Act; it is the ability of our workers to produce this; it is the training we have done; it is the management that we have got in place and it is the ability to transfer a paper engineering document into a final structure that can stand the test of time and reliably produce these by-products of energy.


Each time we come to Nigerdock, we see improvements by way of infrastructure on the ground. Can you give us a fair idea of the kind of investment you have put on ground to make this what it is today to be able to take on this kind of project?
Thank you for that question. Most of the time, people are just interested in a dollar or Naira number. Most of the time, people are looking for how much did you spend; what people don’t appreciate is with the hundreds of millions of dollars and if want to be conservative, we have spent over half a billion dollars in upgrading this facility alone. Capital expenditure (Capex) investment over the past 12 months is in excess of $100 million. This is part of the plan and we are ready to invest much more. But the real testament is not just the money; it is the man-hours. It is the training; it is the constant reinforcement of a vision because the struggle we have is not just the investment in the equipment in the facilities and infrastructure.

The struggle we have a continuous work flow because it makes it more economic for us as a company in terms of competitiveness but it actually saves Nigeria money. For us, consistent workflow is what gave us the courage; it is what gave us the appetite to invest and we look at this as part of our minimum duty. Talk is cheap; everybody talks about if you give us work, we will do this and that; if you give us this, you know, nobody has to give you anything. You have to earn it; you have to bid it; you have to go out and you have to be competitive. It is no one’s birthright to go and get project; it is your duty to promote Nigeria and say, yes we can; yes we will; yes we are, and in fact today, we just did it.


What is your current staff strength and how do you manage to retain your skilled workforce when you have cause to lay them off and when you need their services again?
It is always the most single painful thing we have to do is to let go of our staff because we invest heavily in infrastructure. It is outright phenomenal what this company has in Africa but what is even more impressive is the talented workforce we have and we have close to 5,000 strong workforce. That has taken us years of development; years of investment and today is a testimony to that achievement. What do we do when we don’t have projects? The first thing we do as a company is to try to retrain. We take an opportunity and a lot of work – our overhead is heavy and it is very painful. But at a certain point, they are either pouched by competitors because we have a basket of qualified individuals and in fact, we have even gotten international companies pouching our people because of their level of competence and we try to make sure that there is a back-to-back sequence of projects.

So, we move them from project to project but the one other thing that we do is that we move them from division to division. We have our ship yard; we have our logistics and marine services; we have our fabrication; we have our training school and we have the infrastructure programme. So, we try to move them around and we try to retain them as much as we can. Sometimes, the work is slow but that is our focus and that is how we look at it.


– Ejiofor Alike, This Day

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