Nigerdock Banks on Local Content Law for New Work
Upstream Online, Barry Morgan, 9/07/2010
Nigerian yard looking to fresh legislation and foreign tie-ups to raise game
Shiprepair still accounts for 20% of all activity at NigerDock on Snake Island, off Nigeria’s commercial hub of Lagos, but new owner, the Jagal Group, anticipates a boom in offshore work once this year’s Nigerian Content Development (NCD) law feeds through into the system.
Aside from Saipem’s Port Harcourt yard, which already has full engineering, procurement and construction capability, NigerDock is currently the busiest of its competitors, having stolen the lead from local fabrication yard Dorman Long, South Africa’s Grinaeker, Acergy’s Globestar yard at Warri and the former Willbros facilities, now owned by Ascot Offshore.
NigerDock secured considerable favour from state-owned Nigerian National Petroleum Corporation (NNPC) under the previous regime but, to meet expectations, it must proceed with planned investments in new equipment, yard expansion and a skills upgrade to handle “exotic” materials for fabrication work.
Snake Island now includes a deep-water base heliport and an oil and gas training centre touted as a one-stop-shop for developing local capability. A senior manager defended the local content premium incurred, saying “it may increase costs in the short term but will have overall benefits for the economy and society in the long run”.
Under last month’s legislation, “exclusive consideration will be given to Nigerian indigenous service companies which demonstrate ownership of equipment, Nigerian personnel and capacity to execute”.
NigerDock, established in 1986, secured the ASME ‘U’ and National Board stamp of approval for fabrication of pressure vessels back in 2006 — the first in West Africa — and was the first yard in Nigeria to be ISO-9001 certified in 2008.
Project management, systems completion integration and commissioning are key areas where gaps will be plugged ahead of offering EPC solutions.
Grinaeker is already teaming up with WorleyParsons’ DeltaAfrik Engineering to create an indigenous EPC capability, so the race is now on.
“So NigerDock has adopted a risk-based approach by actively assembling critical joint ventures and partnerships to achieve results with minimum risk to project outcomes,” the manager says.
Moreover, unlike Saipem’s Port Harcourt location, Snake Island is easier to secure against militants and criminal gangs.
NigerDock’s own track record presently lies in priming EPC contractors — such as Amec, Hyundai Heavy Industries, McDermott, Daewoo Shipbuilding & Marine Engineering, SBM Offshore, Bluewater and Acergy — and expects to secure Nigerian participation through more sophisticated links in the value chain such as FPSO integration.
Strategic partnerships with mainstream international contractors are lined up to launch NigerDock into an integrated EPC role within two years. Shell’s 1000-tonne Bonga buoy was fabricated for delivery in 2004, surpassed in 2005 by ExxonMobil’s 1200-tonne Erha buoy.
Ongoing jobs include two integrated wellhead platforms for ExxonMobil’s Abang and Itut satellite field developments, scheduled for delivery next February; structural steelwork on Total’s Usan FPSO, for which topsides modules will be completed for contractor Hyundai this October; and the construction of a 200-tonne catenary anchor-leg mooring buoy for SBM for delivery in November.
About 4200 tonnes will therefore be delivered this year while total tonnage due for delivery in 2011 is calculated at 2971 tonnes for ExxonMobil and already 80% complete.
Still off the order books but eagerly expected are a raft of jobs under NCD encouragement. Among those up for grabs is ExxonMobil’s Erha North phase two scheme comprising 8000 tonnes of subsea equipment, tie-back systems and FPSO topsides modifications, starting in the first quarter of 2012 for delivery in the fourth quarter of 2013.
Also on the horizon are three Chevron packages including 3976 tonnes of jackets, piles, tripods and bridges for the third phase of the Escravos gas project starting next February for delivery in August 2012.
There is also another 1500 tonnes of wellhead topsides fabrication for the Sonam field starting in September 2011 for delivery in September 2013, and 9729 tonnes of modulars for Chevron’s Gas Supply Expansion Project tipped to start in January 2012 for completion 12 months later.
The Nigerian market is heavily leveraged around these jobs, including ConocoPhillips’ long-awaited Brass LNG scheme, all of which are scheduled for award in the first quarter of 2011.
However, project execution could be stalled by politics as electioneering gets under way ahead of national polls looming next year.
Despite a 20% state holding, NigerDock is worried that “uncertainties arising from government policies, proposed reforms under the Petroleum Industry Bill and the lack of counterpart funding remain major issues affecting the sector and could delay or even reduce anticipated volumes in 2011”.
In the meantime, Jagal is retaining the bulk of its 1700 workforce, though it laid off 30 individuals this past month for corrupt and criminal practices. Finishing off the current Hyundai job is testing since there is a shortage of skilled experienced Nigerian welders — and it would take about six years to train up new ones even before adding the experience necessary to perform on site.
“Of 126 would-be welders that passed the initial visual test only a dozen got through to the next stage of evaluation, so this is the scale of the problem.”
NNPC upstream monitor, National Petroleum Investment Management Services (Napims), fears persistent delays by Chevron and contractor Hyundai to the Gas Supply Expansion Project — originally tipped for 6900 tonnes of local fabrication but likely now dipping below 4000 tonnes — are a deliberate ruse to avoid local content commitments.
Napims fears less than 5% of the work will eventually go to Nigerian yards.