Mr. Bayo Ojulari, Managing Director of SNEPCo at NOG 2019
One of the successful projects in Nigeria’s oil and gas industry space is the Bonga south west currently ongoing of which Shell Nigeria Exploration and Production Company, SNEPCo, is the progenitor.
Just like its counterpart, Egina that was built by Total, another multinational oil company, Bonga southwest Akparo is expected to pave the way forward for other projects in the oil industry in Nigeria.
Showcasing the Bonga South-west Akparo at the ongoing Nigeria Oil and Gas Conference, NOG19, Managing Director of SNEPCo, Bayo Ojulari, made it known that projects should be done in the country such that it will be cost friendly and competitive.
Projects should be competitive and if they are expensive due to different local conditions, it will be difficult to attract investments in Nigeria.
According to Ojulari, having competitive project will give room for others to thrive instead of being stagnant.
The SNEPCo MD made it clear that a new tender for the project has gone out since 2017 while Shell commenced a negotiation of Production Sharing Contract, PSC, terms after almost ten years of stagnation. But early 2019, the company signed a term with the Nigerian National Petroleum Corporation, NNPC, which was done together with other International Oil Companies, IOCs, that have interest in the project. Stakeholders resolved dispute by agreeing on principles in which a new PSC will be put in place while unlocking the Deepwater in Nigeria.
He revealed that expectation of stakeholders is to sign dispute resolution agreement in 2019 while the new PSC is being signed as well. This will make Nigeria’s Deepwater to be active in future.
The fiscal condition of the Bonga project is significant for its success. A bill is at the National Assembly on adjustment of PSC in terms of royalty. Deliberations are ongoing between stakeholders and law makers and the outcome will rather make or mar the project.
Ojulari stated thus, “If the discussion goes in the wrong way, Bonga South-west and all the other seven FPSO that are line up to be developed in Nigeria will be frozen for some time. So, it is important that at the public hearing, we all stay alert and we don’t blame the regulators by just staying in our offices and complaining, we all need to join the debate.”
He emphasized that the basic economics of Exploration and Production, E&P, has to do with competitive pricing and it is not difficult to know what is possible and impossible. Therefore, if royalty is pegged at 50% it will hamper the project.
He enjoined participants in the conference that if they want Nigeria Deepwater project to succeed, they should speak by showing concern so that legislation that will be put in place will unlock the country’s resource volume.
THE ACHITECTURE OF BONGA PROJECT
In Deepwater, the project is 1200 water dept with the FPSO awaiting crude tankers that will be used for loading with subsea well head of more than 1000 metres at the sea bed where wells be drilled at every station.
For impact of the Bonga project, Ojulari was of the view that Nigeria should maintain continuity. He said the Total Egina project achieved 77% but Bonga aims for 80%. The idea is to build on the successes that have been achieved. Thus, it is a collaborative journey being governed by the Department of Petroleum Resources, DPR, Nigerian Content Development Monitoring Board, NCDMB and NNPC. Successes of FPSO must be sustained.
Besides, impact of FPSO projects is enormours leading to more than 1200 direct employment with 5000 indirect employment during four years of project execution.
Significantly, the SNEPCo boss disclosed that in terms of fabrication capacity, about 45000 metric tons of fabrication are to be executed in-country.
He bemoaned the fact that some fabrication yards in the country are empty because people have built capacity that are not utilized. Projects should be ongoing so that capacities that are developed will be sustained. He advised that yards with huge investments that are idle should be utilized.
Over 150 Nigerian engineers will be trained offshore and Deepwater engineering with construction as the project progresses. This will be additional capacity.
Ojulari reiterated that the only way FPSO projects can be sustainable is through a virile fiscal policy and that bills passed by legislators should be investor-friendly. “On my count I expect six other FPSOs behind Bonga South-west. Just imagine an environment where there is six FPSOs and there is continuity of work and activities, it is going to be a different place, he added.” The impact on the economy should be considered.
The dream of the Bonga project can only exits if there is confidence with thorough commercial terms and effective fiscal policy agreed by relevant regulators that will engender competition owing to reasonable cost of the project.
He noted that contractors have supported the project on the grounds that commercial frame work will be resolved.
The SNEPCo MD told participants at the NOG conference that the project is not, “Just about Shell, it is not about IOCs, it is not about independent Nigerian companies, it is not about Nigerian contractors, it is about every stakeholders staying alert and ensuring that they influence whether from the communities or the state, local government or respective institutions to have a voice and ensure that they unlock the Nigerian Deepwater.”
He averred that delay in the project has led to capital flight with billion of dollars lost. If Nigeria wants to attract capital to the country through investments, only collaboration can earn that right.