19 February 2019, Sweetcrude, Lagos —The Executive Director, Business Development of, Lagos Deep Offshore Logistic Base, LADOL, Mr. Jide Jadesimi in this interview provides insight into LADOL Integrated Logistic Enterprise, LILE (pronounced LILLY) (A Business Unit of LADOL) operations, and services to International Oil Companies, IOCs, and Indigenous companies.
What is LADOL Integrated Logistic Enterprise, LILE and what are your operations?
LILE which is LADOL Integrated Logistics Enterprise has been in operation from the inception of the LADOL Industrial Free Zone and it centers on drilling, production support services, logistics, fabrication, vessel repair and maintenance capabilities of LADOL. We have executed some of the biggest jack-up rig repairs and maintenance projects in the history of Nigeria for companies like Noble Drilling. During the six-month project, LILE provided the bulk of the 370 multidiscipline workforces, accommodation and logistics support. Lead by Noble’s team LILE’s skilled welders, fitters, electricians, and scaffolders worked in teams around the clock ensuring the fastest possible turnaround.
When Noble decided to change the original scope of work – as the company decided to carry out additional repair works after initial kick-off – LILE accommodated these wishes without a glitch. In total over 450 tons of steel were replaced during the six-month timeline. LILE managed to complete the project within agreed timeframes and within budget.
By partnering with LILE, Noble managed to save drastically on the project. Not only did the company reduce its transportation costs, it also managed to shorten the time the rig was out of operation. Instead of towing the rig to a wharf in South Africa or Tenerife, due to the capabilities of LADOL Noble chose LILE as a local partner to do the work in Nigeria.
Basically, LILE is a fully integrated offshore drilling, production, logistics support and vessel repairs and maintenance company. Its streamlined business model is based on years of operating the best practices of leading international offshore support bases. The LADOL Free Zone has robust and technologically advanced infrastructure that can operate safely and efficiently 24 / 7 to support high-value industrial projects.
A few days ago, we had the arrival of a jack-up rig from Shelf Drilling called the Adriatic 1 which will be alongside The LADOL quayside for around three months while work is ongoing. A second rig the Trident 8 will be arriving at the LADOL Free Zone this week from the same company. The rig will require a lot of maintenance and repair work, including changing one of the deck cranes, we will be providing manpower, scaffolding, blasting and painting services.
This is an extremely important business unit for LADOL, LILE is responsible for all logistics services, moving cargo, personnel, materials, and OCTG equipment for our clients. We provide all requirements including warehouse and workshop space, offices, accommodation, meals, utilities, etc. for the vast majority of service partners. Indoor and outdoor inventory management services, storage and maintenance. Storing equipment and materials in specialised areas as per requirement by our clients, these can be heavy load bearing lay down or temperature and humidity-controlled conditions.
A good example of the sort of equipment LILE stores for clients are the three Total subsea reels weighing over 300 tons each for the Egina project, which are currently being stored at the LADOL quayside. We also do RFI-D tagging and bar coding which allows our clients to track their equipment and goods directly from their factories whether they are in Asia or Europe all the way to LADOL where we have specialized racking and shelving to warehouse their equipment. LADOL runs a streamlined fully integrated logistics service, minimizing set-up cost for service providers, maximizing reliability and quality control and thereby we have built a platform for full-service support for the oil and gas industry.
All these factors equate to cost savings for the oil and gas industry, and for our clients by maximizing the efficiency of our operations to deliver 50% cost savings.
This is what LILE does and LILE will continue to expand as we sign up more. It is really the heart of the business.
Having more rigs and vessels come to LADOL quayside, what are the implications for the oil and gas industry?
The indices are good for the economy and specifically for the oil and gas industry. It indicates that there is lot more confidence slowly coming back into the market. The two rigs that we’ve got from Port Harcourt are coming in for maintenance and repair works. So typically rig operators do turn around maintenance before an upswing in the market. We see a lot of these requests coming in from rig owners and it is a positive indicator for the industry which coincides with the stabilisation of oil prices in the international market over the past few months. Oil has remained between $60 and $70 per barrels and the positive effect is trickling down making for more confidence for a lot of the subcontractors and operators in the industry. We now need more of the offshore projects that have been in the planning phase for some time Like Bonga SW, Zabazaba, Nsiko, Owowo amongst others to reach final investment decisions (FID). This will ensure stability and growth in employment, human capital development to keep yards across Nigeria busy and inflow millions of dollars of investment into the country.
What is the drive and motive behind the creation of LILE?
The concept and investment in LADOL started as far back as 2001 when the developers were researching the most efficient operating model for a logistics base in the world. LADOL being an integrated support base means changing the full range of services that our clients need for their production and drilling programs, thus optimizing on efficiencies to deliver cost savings to our clients.
LILE was the bedrock of the business and everything else has been built on top of that as we develop the LADOL industrial Free Zone and diversify to support other sectors in heavy industries, maritime, agribusiness and high value inputs such and technology being done cost efficiently, safely and reliably in Nigeria and creating a positive global perception of our country, thereby attracting hundreds of millions of dollars of private investment which will be invested across the country creating hundreds of thousands of jobs and driving up our GDP.
How do you intend to achieve 50% cost saving?
If you look at some of the most efficient oil and gas local content dr the ven countries in the world like Brazil, fully integrated onshore support bases have been prevalent in the market for over 20 years. The unfortunate situation in Nigeria is that we lack local capacity. The Nigerian market has been kept artificially expensive due to the presence of a monopoly in the oil and gas logistics market there was no level playing field and a lack of competitiveness. This was because a few people, who were not indigenous Nigerians, were ripping off the country while preventing Nigeria from industrializing by stifling modern industrial and maritime facilities like LADOL being built.
The way that LADOL is delivering significant cost savings to our clients is by tailoring our pricing to our client requirements, this means that we don’t have a standard off the shelf pricing model. Instead, we have a model that is tailored specifically to the requirements of each client. If you add that to the efficiency with which we operate in a fully integrated world-class onshore base facility which hasn’t been present in the market before LADOL was established, that is why it is a new model for doing business which is new for Nigeria but not new for the rest of the world.
How many enterprises do you currently have?
We have over 30 enterprises currently registered in the LADOL Industrial Free Zone not just in oil and gas industry but there are a host of subcontractors that are also registered in the Free Zone. We don’t only have International oil and gas companies as our clients, there are also a lot of independent Nigerian oil companies for whom we provide services. A good example is in 2016 when LADOL provided the installation onshore support services for the Folawiyo Aje (FASL) project. Aje is a field 24 kilometres offshore Lagos in block (OML) 113 and all the installation support was provided by LILE for the Front Puffin FPSO with has a storage capacity
750,000 barrels and production of 40,000 barrels of oil per day. LILE’s comprehensive support services contributed to the success of Aje’s achievement of first oil on the 4th May 2016. Throughout the duration of the installation project from October 2015 to March 2016, equipment was available at short notice, 100% HSE compliance achieved, zero lost time incidents (LTIs) recorded. Due to the performance of the expert LILE team. Once the installation contract was completed, LADOL was awarded the drilling and production support as well.
At least 40 logistics personnel were involved in delivering the support services to FASL. LILE leveraged its capability to mobilise all the specialised plant and equipment required by the client. The cargo vessels MV Industrial chief and MV Panagia delivered over 9,300 Freight tons of FASL equipment to LADOL. The LILE team facilitated the installation of the subsea mooring system and production/gas lift flow lines, suction pipe and manifold, as well as the anchor, buoy and chain bundles for the FPSO.
FASL and LILE worked successfully in partnership to complete the installation contract on time. This project is a great example of local content cooperation. Through local collaboration achieving cost savings, successful results and setting a model for the future economic growth of Nigeria. That was the first time a 100% fully indigenous Nigerian support base provided onshore support services for 100% Nigerian oil company.
It was not only a first for the industry in Nigeria it also played a role in Lagos State becoming an oil producing state for the first time.
What has been the challenges for LADOL?
The challenges for LADOL have been significant right from inception, requiring a tremendous amount of resilience and operational excellence to enable LADOL to be recognised by the industry and patronised despite the hostile environment. The monopoly that had up until recently existed in the offshore oil and gas logistics business in Nigeria engineered a lot of obstacles in our path. The monopolists previously made Nigeria the most expensive location in the world by a long way in terms of fabrication and logistics support services at a cost to the Nigerian economy in the billions of US dollars.
What support has NCDMB given to LADOL in the implementation of local content?
We’ve been strongly supported by NCDMB financially and in creating the enabling framework by enforcing the 2010 Local Content Act. One clear benefit for Nigeria has been the Total Egina project itself with over 25 million-man hours of local content. It was the first major offshore development that was commissioned after the 2010 Local Content Act was passed. The level of Local Content that was mandated through Local Content legislation and enforced by NCDMB and raised the bar in terms of local content levels for future projects post-Egina. For LADOL this resulted in six topside modules fabricated in our facility. Over 7000 metric tons of steel were fabricated in LADOL shipyard and a total of 12,000 tons of topsides are currently being integrated unto the Egina FPSO at LADOL, this figure includes components that were fabricated in other yards across Nigeria. Due to the presence of the integration capabilities in LADOL, with heaviest lifting capacity in Africa up to 5,000 MT, the demand for in-country fabrication will increase, meaning that for future projects thousands of jobs and billions of dollars in investment will be generated for yards across Nigeria.
All these things would not have been possible but for the existence of the Local Content legislation and the strong leadership of the Executive Secretary of NCDMB.
How are you coping with the cost of production?
When oil was at $100 and over per barrel, there was no real incentive for the oil companies to look at cost savings as a critical component of their bottom line. In 2016 when the oil price dropped below $30 a barrel, a decrease of almost 75% since 2014 it created an environment where LADOL became an even more attractive option because of our efficiency, fast turn around times, the range of integrated services that we deliver to our clients and our competitive pricing model. The low oil price environment created an opportunity for LADOL’s growth. Duty-Free Zones throughout Nigeria represent engines of industrial economic development, creating an enabling environment for companies to set up and thrive and key into the government policy of ease of doing business in Nigeria. We are a platform where companies inside and outside of Nigeria who want to take advantage of the duty-Free Zone can invest and grow their businesses and thereby drive GDP and grow our economy.
Aside from the cost-saving option, what other services will benefit the Nigerian economy does LADOL provide?
I like to answer the question differently and make the point that without indigenous Nigerian companies, investing in long-term infrastructure developments such as LADOL and other facilities and industries throughout Nigeria, we won’t grow into an industrialised economy and achieve our full potential of becoming a G20 nation by 2050.
Nigeria’s economy remains structurally weak although we are technically out of the recession. Nothing has changed fundamentally for the better. We are still dependent on oil for 90% of our foreign exchange earnings. Our dollar revenues still depend on crude oil earnings and our budget is burdened by large and unproductive recurrent expenditures. Poverty rates are at 60%, electricity and other infrastructure remain inadequate. There is a difference between economic growth, economic development, and structural economic transformation.
It, therefore, requires local investors to add value by taking a long-term view in spite of the risks which is something that only indigenous investors can do. We can’t rely on foreign investors to grow our economy. There is no industrialized economy in the world that achieved that status solely on the back of foreign direct investment.
Industrial Duty-Free Zones like LADOL which operates 24/7 reduce the bureaucracy and red tape involved in doing business in Nigeria and are designed to address the chronic lack of infrastructure and human capital development.
How many jobs have been created by LADOL?
In terms of the LADOL mega fabrication yard, there are less than 10% foreigners that are in the yard doing the work on the current TOTAL Egina project workforce is Nigerian. In terms of total numbers, we will create directly 5,000 jobs over the next three years within LADOL and the key component of the job creation capability is the multiplier effect of the 50,000 jobs being created throughout Nigeria because works will be stimulated in other yards across Nigeria from Port Harcourt to Lagos all over the country.
We have many Nigerians in our senior management team and we have a high female proportion of senior managers. We actively seek Nigerians in the diaspora to join our management team bringing the added value that they provide from their international experience. It is a key way to boost and drive the performance of our company and a good sustainability model for companies throughout Nigeria.
How do you handle hazards?
HSE is one of our highest priorities. We’ve maintained a very good Health and Safety record in LADOL. My personal philosophy on operating in a safe environment is that it’s about prevention and good communications. It is critical to talk and share observations because a close shave today can become a hazard tomorrow. That is how we maintain our high safety standards at LADOL. The ongoing TOTAL Egina FPSO fabrication and integration project has recorded five million-man hours with no lost time incidents, but we realise that these high standards must be maintained, and we will work hard to continue to do so.
Can you give an insight into the LADOL Upskilling academy?
The LADOL Upskilling academy will be a leading vocational training hub for Nigeria and Africa. The key goal is to fill the skills gap and help Nigerians build carriers in impactful and meaningful jobs. We need to reduce the number of Nigerians who are going abroad for training and really catalyse on the multiplier effect of upskilling throughout Nigeria. We have an urgent need to create jobs in Nigeria and reduce the skills gap. Youth unemployment continues to grow year-on-year and it is one of the biggest challenges faced by the country.
The Nigerian government recently acknowledged that 80% of Nigerian youths are unemployable or underemployed. Workers lack ‘employable’ skills due to poor education and lack of vocational programmes together with the lack of private sector linkages. The opportunities are great, through providing qualified staff both for the companies and sectors that are active in LADOL and for sectors and companies across Nigeria that are a priority for the economy to thrive.
According to the Bureau of national statistic, the most dynamic sectors in the economy in employment generation given their compounded average growth rate (CAGR) are information and communication technology (ICT), agriculture, retail, hospitality, and construction with 3.5 million jobs to be created over the next three years.
The LADOL upskilling Academy will scale in three stages, focusing on current activities in LADOL, a strategic expansion to focus on future tenants’ sectors and needs, i.e. to start building a workforce ahead of tenants moving into the Free Zone. Finally expanding to service sectors outside of LADOL, across key sectors in Nigeria.
Welding is a key specialty that LADOL has built up over 15 years. Welding and fabrication training and qualification will be an important component of the value proposition for the upskilling academy. We have about a thousand certified welders in Nigeria which does not meet the demand, the shortfall is filled by expatriates and we need to address that.
If you look at underwater welding which is in high demand, there is currently no single training facility throughout Nigeria that can deliver that training, these are areas we would address with the LADOL upskilling academy.
There is a lack of skilled workers in the construction sector such as qualified and certified welders, as well as upskilling of the workforce for the industry. Improperly trained workers slow down project development, increase risks and costs.
Projected growth in the construction sector from a total industry value of $3.3 billion to over $9 billion by 2021 and an average annual growth of 9.2% from 2012 to 2021. There is a strong potential for development of infrastructure since the government has prioritized investment in critical infrastructure. The LADOL upskilling academy is working with partners in the development of a construction training centre. This is an attractive option since it is a big industry and some jobs require between 20 and 200 hours of training to achieve certification.
We are going to break ground by Q4 of 2018 and build a platform which we will continue to grow in a stepwise manner creating a sustainable and scalable model.
Technical Vocational Education Training (TVET) effectively equips students with practical skills, knowledge and entrepreneurial tools that match labour market needs. Such programs provide quality training and accreditation in the field of study and directly link students to the industry through apprenticeships. Lastly, TVET ensures that all students, regardless of gender, are equipped to make informed career choices, and provides equal access to both men and women to opportunities that will sustainably improve their career prospects.
Private sector representatives report that the industry needs nearly 50,000 TVET trained personnel by 2020, including 10,00 welders. The industry will also need more highly skilled technicians, engineers, and scientists.
What will the entry requirement into the Upskilling academy be like?
We are going to have a rigorous assessment process to ensure that the candidates who enter the upskilling academy will have the maximum chance of gaining value from the curriculum and programs. We have a partnership with training organisations in Nigeria who are registered with the Oil and Gas Training Association of Nigeria.
In terms of the structure, we have several aspects, taking inexperienced candidates and enrolling them in long-term residential training programs.
We will focus on delivering qualifications, the train the trainer program, for example, training doctors and nurses in rural primary healthcare facilities. As well as Running a remote education tech hub in the upskilling academy, targeting Nigerian growth sectors and setting up specific schools in the academy to teach those skills. The LADOL upskilling academy model will be able to achieve scale and address the needs throughout Nigeria.
Any plan to absorb those trained in the academic?
There is demand from companies and sectors that are present in LADOL Industrial Free Zone. Accordingly, the initial training will be for ongoing activities in the Free Zone. However, a significant part of the training will be for companies and sectors across Nigeria. So, it is going to be a mix. It is not going to be the case that everybody who is trained in the upskilling academy will be employed in LADOL. That wouldn’t be a sustainable model and it wouldn’t scale to the level required by the national labour. The upskilling academy will retain a database of all the people that pass through the academy as a resource available to companies inside and outside of the Free Zone.
What is this year’s outlook for Nigeria’s economy, oil, and gas industry?
The outlook for the oil and gas industry is positive. Markets are driven by confidence. So, if you have a stable oil price remaining close to $70 per barrel and OPEC does not cut the Nigerian production quota of 2.3 million barrels per day then investor confidence will increase.
The important thing though is for Nigeria to increase refining capacity, grow the petrochemical sector and monetise gas reserves.
There are still two other major projects awaiting FID Bonga South West and Zabazaba. when these projects come on stream in 2018 and 2019 respectively, that will be a real boost to the Nigerian oil and gas sector. I believe the outlook for this year is positive with the arrival of Egina FPSO at the LADOL Free Zone in January 2018 as an indicator.
The Minister state for Petroleum, Dr. Ibe Kachikwu visited the LADOL base in February 2018, accompanied by the Executive Secretary of NCDMB Engineer Simbi Wabote, as well as the MDs from Exxon Mobil, Chevron, Total, Addax, and ENI. They were very pleased to see that multiple activities welding, fabrication, and preparation for integration of six topside modules unto the Egina FPSO was ongoing. The landmark nature of this project, the first-ever onshore integration of an FPSO in Africa unto the biggest FPSO in Africa in terms of production and storage capacity, that many people inside and outside Nigerian oil and gas industry believed was not possible.
Egina has set the bar for local content which will be exceeded by the next project and the next one after that. Engr. Simbi Wabote was very clear and unequivocal that the levels of local content participation will continue to increase. It is hoped that the Petroleum Industry Bill (PIB) will eventually see the light of day soon and provide the necessary incentives needed to encourage even more investments in the industry.
What should we expect from LADOL in the next five years?
From LADOL’s perspective, our outlook and projections are extremely positive. The unique and strong value proposition of LADOL will be strengthened further as we continue to invest in people and operations, making it attractive for people from outside Nigeria to do projects in Nigeria ensuring that Nigeria becomes the hub for Africa