How Lagos Midstream Jetty will positively impact the economy – Oando Plc
Across Africa, the Public Private Partnership (PPP) model has become increasingly critical as both a funding and operational mechanism for social and economic infrastructures. The World Bank established that a target of $93 billion per year is required to meet the infrastructural needs of sub-Saharan Africa. This lack of infrastructure makes it difficult for African markets to grow sustainably.
Over the years, the huge infrastructure gap in Nigeria has diminished economic growth. According to Chidi Izuwa, director general, Infrastructure Concession Regulatory Commission (ICRC), about $100 billion will be required over the next six years to bridge the infrastructural deficit gap; $60 billion would be required for the oil and gas sector; $20 billion will be required to revamp the power sector; $14 billion for roads while rail tracks will be between $8 billion to $17 billion.
Presently the value of Nigeria’s infrastructure is about 35% of Gross Domestic Product compared with 70% in larger economies. This emphasizes the need for close collaboration between the public and private sectors in developing and executing solutions that will address the significant infrastructure dearth in Nigeria.
Last week, the country witnessed yet another milestone with the actualization of another Public Private Partnership initiative, the launch of Lagos Midstream Jetty (LMJ). The jetty, West Africa’s first privately-owned midstream jetty and reception facility was borne from a need to bridge the infrastructural gap in the downstream oil sector.
The idea conceived by Oando PLC, arose from the need to increase the delivery capacity and offloading efficiency of petroleum products into marketers’ storage facilities in Apapa, Lagos. Oando successfully conceptualized, executed and completed the project in 2016 before handing over to OVH Energy after the divestment of Oando Downstream. OVH Energy is a consortium of Oando PLC Nigeria’s leading oil and gas company, Vitol Group, the world’s largest trader of energy commodities and Helios Investment Partners, the premier Africa-focused private equity firm. OVH Energy has over 350 service stations and over 500 industrial customers across Nigeria.
Speaking at the commissioning, the Wale Tinubu, chairman OVH Energy,said, “The Lagos Midstream Jetty was conceived as an innovative industry solution to the perennial challenges marketers faced in the importation of petroleum products. Over the past 30 years, marketers have spent approximately NGN1.6 Trillion ($4.5 billion) on lightering, with 90% of this spend flowing out of the country.
“Today we have delivered a first class piece of engineering that meets global standards, is the first of its kind in sub-Saharan Africa and will be of invaluable benefit to the industry and nation at large. I must thank our regulators, bankers and contractors who believed in us from the start. It is a proud moment for Oando PLC who conceived the idea and OVH who have taken up this mantle. From conception to realisation, the idea of the Lagos Midstream Jetty is now a reality and is indeed another infrastructural success for us, our nation and the continent,” said Tinubu.
Tinubu explained that marketers consistently face the very expensive discharge of products into Apapa ports which erodes their profits. Sometimes it cost oil marketers an average of $900,000 to discharge petroleum products, more than it costs to ship a cargo of products from Europe. The LMJ is designed to eliminate these challenges, as it will increase vessel delivery capacity and off-loading efficiency of petroleum products to marketers whilst eliminating lightering and demurrage charges. The new facility will also enable cost-savings within Nigeria’s downstream sector of approximately $50 million (N18.1 billion) as a result of increased receipt capacity, efficiency in product discharge and reduced vessel waiting time, ultimately eliminating demurrage and lightering requirements.
Deji Osikoya, the general manager of ASPM Limited, a subsidiary OVH Energy, said “The Lagos Midstream Jetty is an innovative infrastructure investment designed to radically transform the efficiency of Nigeria’s downstream landscape and boost Nigerian’s petroleum downstream economics. We expect the Jetty to become an extremely valuable and viable portfolio especially for marketers, reducing delays caused by infrastructural limitations in Lagos, thus improving marketers’ service delivery and profitability and reducing the financial drain on the nation’s resources.”
Oando, with a track record of successful Public Private Partnerships (PPPs) initiatives, continues to set the pace for industry peers. Through its mid-stream vehicle, Oando Gas & Power (OGP), recently divested to Helios Investment Partners and rebranded to Axxela, the company developed Nigeria’s largest gas pipeline network and championed the development and delivery of critical Independent Power Plants (IPPs) in key industrial and residential hubs.
Speaking at the event, Maitanki Baru, group managing director (GMD) of the NNPC said, “The Lagos Midstream Jetty is an encouraging example of Public Private Partnerships and proof that both the private and public sector have come to the realisation that infrastructural investment and build is a shared responsibility requiring collective leadership, learnings and innovation.”
In a show of support, government officials such as the Minister for Transportation, Rotimi Amechi; CCO, NNPC Downstream Ops, Henry Ikem Obih; Director, Vitol Africa, Pierre Barbe Vitol; Director, Helios Investment Partners, Kamal Bakrin amongst others, graced the event.
Pierre Barbe and Kamal Bakrin commended Oando PLC on initiating and executing the Jetty project, stating that the Company’s vision for the Jetty was one of the reasons they invested in Oando Downstream. They concluded by saying that they believed in the new management team (OVH Energy) and were looking forward to them turning this valuable asset into a real contributor to the sector and Nigerian economy.
This project comes as a welcome relief both to the oil sector and the entire country, considering the estimated $60 billion required to develop oil and gas infrastructures. The Jetty will unlock job opportunities, wealth creation and strengthen economic development across the country.
Commenting further, the GMD, NNPC said, “Nigeria currently has 127 jetties which have proven insufficient to service the needs of the populace. This insufficiency has led to major fuel importers discharging their products outside the shores of Nigeria, specifically at the ports in Cotonou, Benin, Niger Republic and Lome, Togo. I believe the Lagos Midstream Jetty is about to change this. We are set to witness a boost in the delivery of petroleum products to terminals around the Apapa axis and the nation at large. The jetty will effectively complement the efforts and output of existing jetties and invariably increase the number of vessel turnovers.”
Speaking on the safety and functionality of the facility Osikoya said, “The Lagos Midstream Jetty (LMJ) is fully operational, having berthed 10 vessels and discharged products totaling 255,000 metric tonnes of cargo demonstrating its potential as a functionally efficient and safe facility.”
The NNPC expressed commitment to future collaboration with the private sector and further encouraged more private companies to develop innovative solutions that not only aid the development of the country but ease the way we do business. The GMD, NNPC said. “I call on the private sector to continuously look for opportunities to partner with the public sector to enable the realisation of the country’s economic goals. The reality is public or private, we all have a role to play in developing and moving the economy forward, an economy that will benefit us all today and generations to come.”
The Federal Government is also committed to increasing spending on critical infrastructure across key sectors whilst partnering with the private sector to bridge existing gaps.
Earlier in the year, speaking on infrastructure development, Kemi Adeosun finance minister said, “We will now target 30 percent of government expenditure on infrastructure, up from 10 percent.” She noted that government was dedicated to increasing spending on critical infrastructure across key sectors, including power, rail, roads and water, which would underpin growth in priority sectors, especially Agriculture and Agro-Allied, Solid Minerals, Manufacturing, and Power.