Falling oil price may not affect Nigeria’s $3.8bn Egina FPSO project – LADOL boss

The global downturn in the price of crude oil that has started taking its toll on key sectors of the economy, may not have adverse effect on the country’s Egina oil platform project valued at $3.8 billion, said Amy Jadesimi, managing director, Lagos Deep Offshore Logistics base (LADOL).

The project, which was awarded by Total Oil conglomerate to Samsung Heavy Industries and LADOL, as the local content partner, involves integrating a Floating, Production, Storage and Offloading (FPSO) rig known as Egina FPSO platform at the LADOL base in Lagos.

Acknowledging the fact that fall in oil price portends worry for the Nigerian economy, Jadesimi assured that the Nigeria’s fledging logistics sector may not be affected, saying “in terms of our business and local content, the falling oil prices actually play in our favour. This is because LADOL and other new entrants in the market are creating value, lowering costs and making it easier for foreign companies to do business in Nigeria by lowering their costs and increasing the efficiency of their operations.”

Logistics support bases are small industrial villages with full services offering that significantly lowers the cost of businesses in the oil and gas sectors, especially in both logistics and fabrication.

“LADOL through its current project have created 5,000 direct and about 50,000 indirect jobs. The investment in our free zone is up to $450 million. Going forward, the investment that would be attracted not just to LADOL but related facilities is estimated at $10 billion range, which comes back to capacity development,” the LADOL boss said.

Given the global oil price fall, she pointed out that oil companies were going to be looking very carefully at which projects to continue with or scrap, saying “when they are looking at the West African market, it would be difficult to ignore Nigeria. Now, we have a big project coming up for Shell, Bonga South-West that many people have been watching and counting on. The company is supposed to spend $40 billion in Nigeria over the next decade.”

On the recent announcement of project cancellation by Shell, Jadesimi said fears should not be entertained that the oil conglomerate might extend such project cuts to Nigeria due to oil price fall, as “Shell is committed to Nigeria, and its oil reserves in Nigeria make up a significant proportion of the company’s total reserves. And now that Shell has divested some of their onshore assets, development of Bonga becomes more important.”

The situation, she said, portend positive for local content in Nigeria because such huge upcoming projects are under significant price and cost pressure. “So, for those companies to continue to go ahead with these projects, we have to continue to lower our costs and increase efficiency. That is why LADOL and many other local content companies are making investments in infrastructure and service provisions to enable oil companies continue their work in Nigeria,” she said.

Funds for ongoing projects in LADOL, such as the Egina FPSO and vessel fabrication for LNG, have been budgeted and committed years ago, thus we do not think such will be affected by the falling crude oil price, she said.

“We have to worry about the future and diversify the economy because the opportunity is now. We need to invest more in agriculture and other sectors of the economy. That is why LADOL is not just about serving the oil and gas industry alone, but sectors like maritime and manufacturing sector. We are looking out for people who want to bring in fertiliser plants as and those, who want the kind of facility we provide to set up their industries,” she said.

On the impact of logistics bases to the economy, she said ventures as logistics base, were one of the veritable means of eradicating poverty through jobs creation. “One of the biggest things we have done is to show that Nigerians can do it. We have shown that Nigerians can run an industrialised free zone that offer services for the maritime including oil and gas sector,” the managing director of Nigeria’s fully indigenously owned logistics yard, said.