A Review of the Nigerian Energy Industry

‘Falling oil price may not affect $3.8bn Egina project’

24 February 2015, Lagos – The current economic impact of global downtrend in the prices of  oil that is already taking its toll on key sectors of the Nigerian economy may not have adverse effect on the country’s Egina oil platform project valued at $3.8 billion.

The project was awarded by Total E&P Nigeria to Samsung Heavy Industries, with a mandate to integrate a Floating Production Storage and Offloading, FPSO platform at the LADOL base in Lagos, as the local content partner.

Oil price crash
Oil price crash

Managing Director of the Lagos Deep Offshore Logistics, LADOL base, Dr. Amy Jadesimi, said that although the oil price fall portends worry for the economy, Nigeria’s fledging logistics sector may not be affected.  According to her, “There are two sides to this. terms of our business and local content, the falling oil prices actually play in our favour. The premise of LADOL and the lots of new entrants coming into the market is that we are actually creating value.

We are lowering costs and we are making it easier for foreign companies to do business in Nigeria both by lowering their costs and increasing the efficiency of their operations.” She described logistics support bases as small industrial villages with full services offering which significantly lower the cost of activities in the oil and gas sector.

“Obviously we have created jobs. With the project we are doing now, we have created 5000 jobs directly and 50,000 indirectly. Now, the investment in our free zone is up to $450million. Going forward, the investment that would be attracted not just to LADOL but related facilities is in the $10billion range and it comes back to capacity development.”

Jadesimi pointed out that due to oil price fall oil companies will embark on portfolio management. “When they are looking at the West African market, you can’t ignore Nigeria. Now we have a big project coming up for Shell, Bonga South-West that many people have been watching and counting on. They were supposed to spend $40billion in Nigeria over the next decade.”

Referring to recent announcement of project cancellation by the Shell Group, Jadesimi noted that there are fears that the oil conglomerate may extend such project cuts to Nigeria due to the price fall. “Shell is committed to Nigeria, the oil reserves that Shell has in Nigeria make up a significant proportion of the company’s total reserves and now that Shell has divested some of their onshore assets, development of Bonga becomes more important.”

The situation, she said, portends positive trend for local content development in Nigeria because such huge projects are under significant price pressure and cost pressure. “So for those companies to continue to make the decision to go ahead with these projects, we have to continue to lower our costs and increase our efficiency. That is what LADOL is all about and that is what many local content companies are all about.

They are about local people making investments and by us making certain investments in infrastructure, in service provision to enable these oil companies to continue to work in Nigeria.” She however warned against the over-dependence on oil proceeds for the sustenance of the nation’s economy. “What we have to worry about is the future. Our government has made a good point that we have to diversify the economy.


– Godwin Oritse, Vanguard


In this article

Join the Conversation