Logistics service providers in the nation’s energy sector have been urged to take advantage of the otherwise worrisome free fall of oil prices in the international arena to improve on their potentials in providing the logistics needs of oil majors operating in the country.
The advice was made by the managing Director of the Lagos Deep Offshore Logistics (LADOL), Dr. Amy Jadesimi, who maintained that rather than grief over the bad news that oil price fall portends for the industry, harnessing the attendant opportunities offered by the development would be in the best interest of the economy.
Dr. Jadesimi, a former investment banker, is hoping that renewed pressure on oil majors to cut costs will spur them to take advantage of a logistics base she has developed to serve a projected boom in deepwater oil production.
According to her, “For the past 10 years, oil companies have agreed with us that they need a base in Lagos for deep offshore production and drilling support,” hence the idea of LADOL was born.
“They agree it’s more efficient, but they haven’t made the move because economically there wasn’t enough of an incentive.”
She noted that Nigeria’s hopes of significantly boosting its oil exports which is currently about 2.1m barrels a day, rest on expanding a fleet of giant floating production platforms similar to the Bonga vessel operated by Royal Dutch Shell.
According to her, the advent of local content law in Nigeria has reversed the long lost hope of indigenous participation in the country’s energy sector, saying all that is needed now to up the ante is for government not to yield to the quest of certain interest groups who were out to impose monopoly in the industry.
Industry critics have often pointed out that ever since the first commercial oil discovery in Nigeria in 1956, oil majors such as Shell, Chevron and Total have taken the lead in building Africa’s largest oil industry while local companies struggled to muster the expertise, technology and capital to compete.
Jadesimi however contended that the passage of the Local Content Act in 2010 has given a fillip to local business by requiring international oil companies to increase significantly their reliance on Nigerian staff and services.
Nigerian energy companies, she said, have also increasingly been able to acquire assets such as oilfields and tap international capital markets to finance projects.
She said LADOL which models itself as an exemplar of this trend has developed its facility as the first fully Nigerian-owned hub to offer the kinds of specialist engineering, manufacturing, port and shipbuilding services needed to support ambitious deepwater projects in the Sub-region.
Jadesimi said the company has spent more than $400m to develop its base at Apapa, the district including the port of Lagos, as it now counts Nigerian and international oil service companies among its client. For the oil majors to start using LADOL as a logistics base is now a question of time, she added.
With international energy companies forced to slash spending because of the halving of oil prices in the past year, Jadesimi hopes her on-going discussions will finally start to convince international energy companies that they will make significant savings by switching to LADOL’s services in Lagos.
Hitherto, most of the oil majors currently rely for much of their engineering support on facilities in the Niger Delta, where oil was first discovered, but Jadesimi says her Lagos hub is specifically configured to support a new generation of drilling projects in fields far out to sea.
“We’re specifically designed for supporting these offshore fields,” says Jadesimi. “It’s a very specialized niche area, but that’s where we focused our investment.”
Like other Nigerian energy investors, she is hoping the new administration of President Muhammadu Buhari will encourage greater Nigerian participation in the energy industry by ensuring strict implementation of the Local Content Act.
The next big challenge for Nigerian energy companies, Jadesimi believes, is to collaborate more with each other. “Now that some of us have started investing, we need to work together more,” she says. “We need to strategize and make sure we’re focusing our investment on areas that are going to reap the biggest reward, both in terms of profitability for our shareholders and job creation for Nigeria.”