On August 27, 2018 Total’s Egina FPSO sailed from the LADOL shipyard in Lagos. It will be moored 200km off the coast of in 1,500mn of water where it will produce 200,000 bpd of oil. The Egina FPSO is a monster of a ship costing $3.8bn and its 200 kbpd of production will take Nigeria over the 2 million bpd level; a level they’ve been struggling with for years. The local shipyard work on Egina is big news in Nigeria and an encouraging sign of country’s untapped manufacturing potential. A real feel good Africa rising story.
If you’re a skeptic though you can see this extremely sophisticated and expensive ship is pretty much entirely built in South Korea and then sailed to Nigeria where some final parts are welded to the deck to pass local content rules. It seems like some final low level work is exaggerated into a feel good story for the local press. When you look at the pictures of the ship leaving South Korea and the pictures of it leaving Lagos, it’s hard to tell the difference. So, what’s the big deal? It is a big deal though. And to appreciate it you have to know how bad things got and the difficult road Nigeria’s been through to get things back on track.
In the 1990’s Shell, Total and ENI had given up trying to produce oil onshore in Nigeria. There were too many problems. Local inhabitants were upset with the oil industry and sabotaging the pipelines from the inland wells to the tanker terminals on the coast. The major pipeline for this is the infamous Transforcados. Problems with the pipelines lead to oil theft and spills. There were non-stop disagreements, lawsuits, killings, kidnappings and environmental fines. So through the 1990’s Shell, ENI and Total retreated from the Niger Delta to offshore projects. This seemed safer. Just park an FPSO 120 km off the coast, suck your oil out and send the government its’ check. Have as little interaction with the locals as possible.
Despite moving operations offshore things got worse. From 2006 to 2009 there was a literal war by the Movement for Emancipation of the Niger Delta (MEND) against the government and the oil companies. MEND was a group of rebel fighters angry their oil was being exploited and they weren’t seeing any benefit. They didn’t have jobs and their water was polluted. Think guys in speedboats with masks and machine guns. That’s MEND.
During this period employees from Baker Hughes, ENI and Chevron were killed and kidnapped regularly. Oil rigs were attacked and ships routinely pirated. In Lagos the Exxon office was converted to a highly fortified compound with a special caged walkway over a busy street so employees could go from one building to the next without leaving the security perimeter. In 2008 things got even worse when MEND militants sailed 120 km into open water and shutdown Shell’s Bonga FPSO for three weeks. It was always assumed these deep water FPSO’s far out in the ocean were safe. Now nothing was safe.
From 2009 -2013 the bombings, kidnappings and pipeline oil theft would continue, but things were going to slowly turn for the better. President Jonathan Goodluck negotiated several truce agreements with MEND which made the situation a bit more manageable. Things went from a 10 bad to an 8.
Then something else happened. Nigerian businesses saw an opportunity to buy these vacated onshore oil blocks from Shell and start small scale oil companies. With these onshore oil fields you didn’t have to find any oil, it was all there: it even had existing pipelines and infrastructure. You just had to be brave enough to deal with the local militants and successfully get your oil down a pipeline to the terminal without it being blown up or stolen. Several businesses like Seven Energy, Lekoil, and Seplat took the opportunity and started operating these onshore blocks. Now local Nigerian companies were dealing with local communities and relations improved further. An 8 bad went to a 6.
Meanwhile, in the midst of this circus a group of Nigerian investors decided it would be a good idea to create a logistics shipyard for the offshore oil industry on an abandoned island in the Apapa port near Lagos. What a great idea. Oil companies could repair their drilling rigs and FPSO’s at the Lagos Deep Offshore Logistics Base (LADOL) rather than sail all the way to Singapore. This would be a savings of 50%! The facility was completed in 2006, but it was a slow start. Surprise, surprise, in the midst of kidnappings, and killings few companies were interested in taking their ships to Lagos no matter what the savings.
Then in 2010 LADOL got a break. Nigeria passed a local content law and with it Total agreed to do some future work for its Egina project at LADOL. This was a big deal. Total was agreeing to sail its’ new multi-billion dollar baby right into Lagos for completion work by a Nigerian construction company. To put things in context at the time MEND had been escalating things further and was getting into bombs. They had just bombed a government building in Warri and also kidnapped seven Exxon workers on an oil platform. When this deal was being decided you know there were guys back in La Defense saying, “Are you freakin’ crazy! You want to send Egina to Lagos? Do you want to ever see that boat again?”
But in the end Total went ahead and I’m sure a big reason was LADOL’s Managing Director, Dr. Amy Jadesimi. Amy is a total firecracker and a huge force behind the promotion of LADOL as a logistics hub for the oil industry in West Africa. For her Egina is just the start and she wants to turn LADOL into hub for further manufacturing projects in energy, power and water desalination. She’s also a big promoter for initiatives to grow small businesses across Africa. She presented recently at the London Stock Exchange during their Inspire Africa day and made a great impression.
So coming back to the skeptics, yes, only 6 out of 18 topside modules were fabricated at LADOL and the Engina was primarily built in South Korea. Yes. But when you know the full bloody backstory and how bad it got in the 2000’s you appreciate how big a deal it is to go from kidnappings and shootouts to cooperation and construction. A very big deal. And since you know the real story, go ahead and enjoy Total’s feel good promo video on the Engina sail away. Amy isn’t in the video, but she should be.