The Amukpe-Escravos pipeline as a game changer
Assets stock in Nigeria’s oil and gas industry is set for significant upgrade as Pan Ocean Oil Corporation’s ultra-modern Amukpe-Escravos Pipeline comes on-stream in 2019. Pan Ocean Oil Corporation is the first indigenous oil and gas exploration and production company to enter into joint venture operations with the Nigerian National Petroleum Corporation (NNPC).
A national asset, the new pipeline is strategic to the economy as it will ease the burden of transporting crude oil down the circa 67-kilometre corridor from Amukpe to Escravos, for export.
However, there are other reasons why it is novel. First, the pipeline project was inspired by leading indigenous oil and gas sector player, Pan Ocean Corporation (in conjunction with the Nigerian National Petroleum Corporation), under the visionary leadership of Festus Fadeyi.
Secondly, the project was financed by a consortium of indigenous banks, led by Polaris Bank (Formerly Skye Bank Plc). A third reason is that Nigerian engineering companies put the pipeline in place.
Because of these reasons, the Amukpe-Escravos Pipeline is considered by industry experts as a posterchild of the Nigerian Oil and Gas Industry Content Development Act of 2010. As it stands as testimony to what is possible if policymakers and private sector operators collaborate.
But some have wondered why it took eight (8) years to complete the project. To those who know the oil and gas industry well, it is obvious that a project of this magnitude takes time to complete. Also, the unpleasant vagaries of oil price put tremendous pressure on major all oil and gas industry projects in the last four years.
Therefore, what is important as at today, is that with the addition of the new pipeline, assets in the oil and gas sector now looks more ‘Nigerian’ than at any time in history, as Nigerian companies are taking up roles, and owning assets that were once off limit.
The local content act has three objectives. It aims to give independent Nigerian operators first consideration in the award of oil blocks, oil field licenses, oil lifting licenses and all projects for which contract is to be awarded in the oil and gas industry subject to the fulfilment of specified conditions.
The law also specifies that there shall be exclusive consideration of indigenous service companies which demonstrate ownership of equipment, Nigerian personnel and capacity to execute work to bid on land and swamp operating areas for contracts and services.
Furthermore, that law states that compliance with its provisions shall be a major criterion for award of licenses, permits and any other interest in bidding for oil exploration, production, transportation and development in the industry. Pan Ocean’s 67-kilometre Amukpe-Escravos pipeline meets all of these provisions.
As an asset that has national strategic importance, it will ease the pressure on the 87-kilometre Trans-Forcados Pipeline, which is over four decades old and prone to disruptions and attacks. Trans-Forcados Pipeline was shut down for 305 days in 2016, and more than 182 days in 2017.
A major advantage of Pan Ocean’s pipeline is that unlike the Trans-Forcados Pipeline, which is largely on the surface and therefore prone to attacks, the Amukpe-Escravos pipeline is safely buried underground. It is a 20-inch, 160 000bpd capacity pipeline put in place using Horizontal Directional Drilling.
Though it was designed to convey Pan Ocean’s crude, the idea is to also accommodate other neighbouring crude oil producers (injectors) on tariff, this is what really makes the difference. Which crude producer or exporter will not cheer at the idea of using an asset that is more reliable and has less impact on the environment?
Indeed, the Nigerian Oil and Gas Industry Content Development Act has made more Nigerian companies step up to the podium. As more companies key into its opportunities, the economy will be better off.
Adamu Olatunde
Adamu Olatunde is a Lagos based energy sector analyst