Jadesimi: LADOL’s Integration Facility for Egina FPSO is Ready
The Managing Director of Lagos Deep Offshore Logistics Base, Dr. Amy Jadesimi, in this interview with Chika Amanze-Nwachuku, Ejiofor Alike and Abiodun Eromosele, revealed that the facility built by her company for the integration of Total Upstream’s Floating Production Storage Offloading vessel for the $16 billion Egina deepwater field is ready, ahead of the March 2017 scheduled date for the arrival of the $3.3billion offshore vessel from South Korea. She also called for the full implementation of the Nigerian Content Law. Excerpts:
LADOL had started executing several projects mainly on the logistics side before the Nigerian Content Law was enacted in 2010. Having seen the implementation of this law in these past few years, do you think it has achieved the aim of the indigenous operators like LADOL?
Thank you. Many of you know that there was a battle to build fabrication and integration facility in LADOL. That facility actually encountered a lot of resistance from many stakeholders who did not believe that it is possible to build and operate such facility in Nigeria. Remember that from the Nigerian Content perspective, this facility is a game changer and is on course to create about 50,000 jobs directly and indirectly. So, it changes the way oil and gas business is done in Nigeria. It means that what the industry has been fabricating outside Nigeria will now be fabricated inside Nigeria. The facility has the largest crane capacity in the whole of Africa. So, even people in faraway South Africa will be sending vessels and orders to Nigeria for assembling and fabrication. Given the positive impact this facility will have on Nigeria, it is not surprising that key stakeholders in the private sector, mainly Total and LADOL insisted that the facility has to be done and secondly, we have the support of the law. The local content law was instrumental. Now, the law has enabled us to build this facility. What do we need to be done going forward? We need to make sure that our capacity is utilised and that more capacity is built. So, now that the law has been tested by the project in LADOL and it has passed that test, I think the next thing is to go to full implementation. Full implementation means two things. It means we, Nigerians have to continue investing; we still have lots of work to do. Even as LADOL – for us to have more investments; for us to integrate, we need more fabrication – we need Aveon, Nigerdock , Dorman Long– all these other yards. We need them to do more fabrication; we need them to build more capacity so that all our investments in all the heavy cranes can be realised. There is no point having integration yard and there is nothing to integrate. So, what we are advocating for now is full implementation of the law. We have been tested; we passed the test; the facility has been built. We have proven that we can do capacity development; we have proven that we can build all the well-heads fabrication. Now, we need to do more. What we are looking at now is: first and foremost, collaboration between private sector actors. We have to stop trying to kill each other to pick the crumbs on the table because that is what we have been doing. The Nigerian Content has been languishing at about 10 per cent. So, what are we fighting over? We need to collaborate to build capacity towards making sure that local content hits 70 per cent – 90 per cent and we need the support of the federal government and the International Oil Companies (IOCs) to help us to build that capacity by committing to use made-in-Nigeria business model. There is no point building capacity and the government and the oil companies still allow people to take jobs abroad. They have to draw a line and insist that we must have to do these jobs in Nigeria.
With most investment decisions by the oil companies on hold because of the drop in oil price, most of the other indigenous yards are complaining of paucity of jobs. How are you coping with this challenge in view of the fact that a lot of money was committed to develop your capacity and capability with the hope that jobs will be secured to pay back the loan used in upgrading these facilities?
The drop in oil price is an opportunity. What we have been doing in Nigeria in the past is that we acted as agents. We were selling our time. We have not been creating jobs; we have not been creating value. We have been outsourcing jobs. So, when we now look at how made-in-Nigeria has been done in the past – made-in-Nigeria actually means procured from Nigeria but made in Singapore. That was what we were doing. What we have to do now is that we should use the drop in oil price as an opportunity to change the business model. Now, we should be looking at how local content works in other countries. If you look at the world; in Brazil, the cost of doing fabrication, engineering logistics is higher than the cost of doing it in Nigeria. Why? It is because of local content. It is the same thing in America, the same thing in Norway and South Korea. Why is Nigeria spending twice as much to outsource services? Clearly, the problem is not local content; the problem is that we are outsourcing because in countries where local content works, their prices are lower. So, our prices are higher because we don’t have enough capacity in-country. So, this low oil price environment is an opportunity for us to change the way we are doing business. What do I mean by that? It means we have to invest. As a matter of fact, if you ask any economist, the person will tell you that the low oil price is the time to invest. When the oil price is high, the cost of investment is also high. So, now is the time for us to invest so that we can reap the benefits when the price goes up. As a matter of fact, these key facilities in Nigeria- they actually have real local content offer. By this I mean that any facility owned by Nigerians who have invested their own money is already producing benefits. So, our logistics cost for production is 50 per cent of the cost present in the market because you can do everything in LADOL. So, LADOL is one-stop shop. Even in our fabrication, by the time we do the next project, the Nigerians we are training means that our cost will be lower. There is no magic in these things. If you are using Nigerian workers, it is cheaper than using foreign workers. So, why are people not using Nigerians? The number one reason why they are not using Nigerians is because the work is not done in Nigeria. The fact that Nigerians are used in LADOL means that we are already domesticating that cost-savings. So, low oil price is an opportunity; it is an opportunity for us to develop capacity; developing capacity means we have real local content. That is what happens in every other country in the world where local content lowers the cost of doing business. This is something that everybody should support.
There is this insinuation by some other indigenous yards that while others invest in developing their facilities and manpower before they bid for contracts, LADOL usual ask for contract first before building the facility for the execution of such contract. How do you clarify your position on this issue?
To be honest, I am very surprised and shocked. That is the first time anybody will ever say that to me. We had spent about $20 million before we even got the long term lease for our place. We had to demonstrate that capacity. We had spent about $100 million before we go our first contract. Even now with the $500 million, we are spending, our shareholders have not made returns; our shareholders will not make a return for another 10 years. The predominant mode of financing for our so-called capacity had been through government. So, when we say that we are private investors, it is actually a very important point to appreciate. This is the first single largest 100 percent private development of a port facility in Nigeria and I say that because this is the way forward. If LADOL can do it, then anybody can do it. But that anybody should be a Nigerian. Why? Because no other nationality is going to sit down for 20 years and wait to get their money back. I can put food on my table and I have house and I have cars to go to work everyday- I will be managing. I don’t have a problem and I only have one country. But if you are a foreigner, where will you come here and sit down for 20 years and wait to make your money back. It would not happen and that is why we have not seen private sector investment. More Nigerians need to be given the opportunity and encouragement to do what LADOL has done because that is the way forward. I don’t have issue with anybody who has been collecting money from the government. That was a good business plan for yesterday and that was the business plan that enriched a lot of people. But that was yesterday’s plan and that yesterday’s plan has left us at 10 per cent local content. Today’s plan is different; today’s plan is private indigenous investment driving capacity; making Nigeria the hub of West Africa and creating hundreds of thousands of jobs. And just like LADOL, these private indigenous investors need to be prepared to invest ahead of the market. In order for them to do that, government needs to encourage them. Many people have talked about a level-playing field. A level playing field is the minimum requirement to attract private investment. But I will say that a level playing field is something that is already guaranteed by the law. So, all we want the government to do is to enforce the law. We want the government to encourage private investment; we are actually promoting examples of success stories. Any private investors that are going to import local content – they are going to import capital and we as Nigerians – if you invest this money, you know that you are not going to make your money back for five – 10 years, you are going to make sure you survive because ours is the local content that is going to be patronised. So, I think it is important that we have private investment driving this capacity. There is no more money in government and government should even stop giving people money; that creates problems. Government should not give people money. The government should give people encouragement by making sure that people know that this is your position in government. We highlight success story; and you encourage the people by making them know that they will be patronised if they make the investment. That is what we want.
After you settled out-of-court with Samsung Heavy Industries (SHI) Nigeria Limited, over the Egina project, you established a new partnership called SHI-MCI Free Zone Enterprise to build Africa’s first FPSO integration facility in LADOL free zone in Lagos and your target to complete the project was 18 months. The 18 months has elapsed since work started but the project is not yet completed. What are your challenges?
There is actually no delay. So, what actually happened was that within 12 months of the commencement of the project, the fabrication side was completed. We actually started using the facility in 12 months. The FPSO is coming next year and we are now waiting for the FPSO to come. But in the meantime, we are carrying on with the fabrication. So, there are two aspects to this: the first aspect is building the yard and it is very important for your readers and the international community to understand that capacity development is not a problem. Capacity development is the first obstacle that people put in the path of Nigeria towards developing this country. The first thing they say was that there was no capacity. They say that building capacity will take too long; that building capacity will cost too much; and that even if you build the capacity, you can’t do anything here because you know that you are a Nigerian. All of those fallacies have been dispelled by what we have achieved in LADOL. Building the capacity will bring expectations. We were ready before anybody thought it would be ready and we had already started operation. So, it is one of the largest FPSO in the world. We have trained Nigerians. We have hundreds of Nigerians with over 10 years of experience. We need to do more human capital development. That is our next focus. But we need to prove that we have lots of Nigerians on ground to get the project started. And going forward, there is no way anybody can say that capacity development is the stumbling block in any future project. In fact, capacity development is the key for us to establish industries in Nigeria. But the example set by LADOL shows that capacity development is happening independent of project. This goes back to what I have said about starting private investment. What we are going to see is that hopefully, the LADOL example will attract people to build capacity independently and to build capacity for a range of different areas. So, we have facilities that can do topside fabrication and integration. We need more fabrication- one of the big stumbling blocks; one of the big costs is engineering. Another big area is procurement. Right now, we have many Nigerian companies as agents and this makes Nigeria very expensive. That is not local content. Local content means you as a Nigerian, has a facility and that facility will do not just procurement; it will do assembling; it will do fabrication and it will do maintenance. Yes, you have a foreign partner because we are still young; we are still developing. A lot of people don’t even understand what happens now; what happens now is that foreign companies will talk to each other, and they go find Nigerian to sign local content paper. That has to stop because a lot of these conversations happen outside Nigeria. If we don’t have local capacity, how can we join these conversations? We are not included in these conversations because we don’t have capacity. If we can show that we are willing to invest; yes, I have capacity; these are my staff and over the next five years, these people are going to be trained. If they can do it in the UK, Norway and Brazil, then we can do it in Nigeria. Local content is not just procurement; it will do integration; it will do maintenance – it is a value chain.
You are building this multi-billion dollar facility for integration of Total’s Egina FPSO, and no FPSO has ever been integrated in Nigeria. So, after Egina, what happens to your facility?
There is a lot to be done in this yard. One is oil and gas focus. The other one is more diverse. The one in LADOL is not one-sector facility. LADOL is an industrial base. So, that same capacity I talked about – the largest crane capacity in Africa – we can use it for assembling bridges; we can use it for assembling aeroplane spare parts; we can use it for fabrication; we can use it for rail; we can use it for aviation. So, what we have is an industrial complex, which can do fabrication and assembling. So, we are not just working for oil and gas companies; we are talking to companies who are interested in building into the Nigerian consumer market and companies interested in building general infrastructure. Specifically, what I mean is that we are also talking to diverse telecommunication companies in LADOL. So, even with the facilities we have built; we have not developed 25 per cent of the free zone, which means that there is a lot of space available for other people to come in and we want those other companies to come from a diverse range of industries. As long as there is industrial focus, which is about building industries in Nigeria, our role in LADOL is to provide them with an environment where the only thing they need to focus on is their business. We have power supply; we have training schools, we have all the logistics support. So, if your company wants to assemble mobile phones because we have the largest mobile phone in West Africa. If you are sitting in Japan and you want to assemble mobile phones in Nigeria but you feel that you can’t come into Nigeria because of bureaucracy – because you can’t import your materials; because there is no manpower; because the roads are bad; because there is no electricity- all these issues are handled in LADOL. So, we give these companies the soft landing. Even without this soft landing- I have to keep on emphasizing this: no company will come from Japan and assemble mobile phones if we don’t have a Nigerian who is going to invest money. They are not looking for Nigerians just be their partners; they want Nigerians as stakeholders who will add value and say okay, we have this ideal location but we need credible Nigerian partner. So, we are creating opportunities for other Nigerians to now get into partnership that will help and industrialise Nigeria. By addressing these infrastructural issues and stumbling blocks, which made Nigeria a no-go area in the past, we will make it easy for Nigerians to get those technical partners to help them set up these facilities in–country.
The Egina FPSO will arrive Nigeria from South Korea in March or April 2017 for the integration in your facility before it sails offshore to the deepwater field. Do you think your facility will be ready at the time to receive the FPSO for integration?
The facility is already ready. That is never a limiting factor.
Your target to build the facility according to the terms of the partnership you signed with Samsung was $300 million. Are you still on this budget or has the cost escalated in view of the current volatility in the industry?
We are actually expecting to come below the $300 million budget. That was why I said that there are many fallacies that people believe about capacity development in Nigeria. One of these is that you will spend above the budget and you will be behind the schedule. But we are coming ahead of schedule and we are trying to come below the budget.
While you are building this facility, there is an allegation that you violated a court order given by a Federal High Court sitting in Lagos in Suit No. FHC/L/CS/1768/2014, which was said to have granted interlocutory injunction against Samsung, Total Upstream Nigeria Limited and others, restraining all of you from continuing or taking any further action or steps towards the execution of any project associated with the Egina project, pending the determination of the substantive suit. Are you not aware of such order or has it been vacated?
We are not part of that court action. We only heard about it through the sidelines. As far we are concerned, there was no court order that said that we as LADOL should not invest and build facility in our yard. So, that is what we have been doing.
Apart from this Egina FPSO, what other projects or milestones have you recorded in recent years?
One of the things we are working on, which we are proud of is that we give support to Folawiyo in Ajie Field. Many of you read in the papers that Ajie is the largest oil field in Lagos. It is probably among the largest 100 per cent Nigerian-owned oil field. We are very proud that they chose LADOL. They did not choose LADOL primarily because of nationalistic reasons. We actually demonstrated to them that we can add value to their money because I am sure that over the decade past when they have been developing this field, as Nigerians themselves, they encountered a lot of problems. So, they did not want to take any risk. They had to be 100 per cent sure that LADOL has the capability to support their project and they would not want to spend extra money if they knew they were not going to get that value. Being in Lagos here, of course, it makes sense for them to get their support from Lagos. Supporting that project is something that we are very proud of.
In what ways can the federal government address the issue of paucity of jobs in the industry so as to ensure that you don’t lay off manpower after spending resources in training them?
I think it is comes back to two things. The first is collaboration. Even in the private sector, we didn’t help ourselves. People in the private sector – may be, your friend is the Group Managing Director of NNPC or the Group General Manager of NAPIMS and you feel like a big man. So, you get the job but when your friend loses his job as the GMD, you also will lose the contract. That is not how to do business. When you are getting a job because your friend is GMD, you will not offer good quality. You will not! The jobs the IOCs are giving now are value-driven because they have this experience where they were forced to use certain companies and the companies did not deliver because they did not get the jobs because of their competence but because their friend was the GMD. Of course these IOCs were worried about doing these jobs in Nigeria. From the private sector side, when they get the job, they maximise the price because they are not sure when they will get another job. They are not sure of getting another job in the next 10 years. So, they maximise the cost so that they can survive for the next 10 years. So, what can the government do? The government can be the mediator. Government can be fair; government can be transparent; government can show the way to go. Government has to set the tone and that tone has to be ‘ guys, you guys are the private sector; you need to work together to build capacity and you need to make sure that if you get a job, you will meet the quality and schedule and pricing standard of that job. If you don’t meet that standard, you are going to be punished’. The government should also tell the international oil companies that the law says that they must use local capacity and they must use local capacity. So, the government can be the glue that holds everyone together and holds everyone accountable. So, what is very important to us is that government should take a very clear position to create enabling environment for more private sector investment; enabling environment for more international companies to partner local companies by making it clearly that they are going to hold everybody accountable. If LADOL doesn’t perform, hold me accountable. If a company takes a job outside, the company should be held accountable. That is what the government should do and that will ensure that everybody has enough work to build and deliver overtime. What we are doing is not rocket science. Every country in the world that has successfully built their oil and gas sector did the same thing. So, for God’s sake, what are we debating? It was the same thing we were debating in the 1970s and 1980s. So, we have to focus on the companies that have invested and have capacity. How can we make sure that that capacity is utilised? How can we make sure that those companies will do a good job? The law we have is enough for us. It is just a question of the will. If the government has the will; if all the stakeholders have the will to sit round the table and collaborate. I think in the current environment, the will is there. Other people have a different view; they don’t have a choice. We don’t have money anymore to be throwing around and be giving people free money and letting people hold us down. We don’t have the time for that. So, this is what we believe and we want Nigeria to grow because we don’t have a choice. We are all in the same boat. So, we have to start going in the same direction. I think for government, as difficult as the current environment is; it is also an opportunity because for the first time I am seeing all the stakeholders – big and small; powerful and weak affected and all of them, are willing to collaborate. That is a big thing – for some big men to now say okay, let us work with other people as opposed to a few years ago when those people would not agree to collaborate. So, we have a window of opportunity where everybody is actually willing to work together and government is the glue that can bring us all together and show us the direction.
You are operating in a sector that is highly competitive; can you tell us some of those things that place your firm above its competitors?
Firstly I will say the competition we have is political not operational. Let me clarify what I mean; in a developed market where you have a lot of capacity, and let’s say company A wants to do 10,000 tons of fabrications, they come to Nigeria and see that we have capacity for 20,000 tons, that is competition. In Nigeria, we have a situation where a company comes and says it wants to do 10,000 tons, the capacity in Nigeria is just 1,500 tons and you have three companies that are all fighting for this 1,500, which none of them can do on their own. So one company wins using politics, that company does 500 or 250 and the rest goes outside. And the company A now looks at Nigeria as unserious. We have oil and gas reserves, we have 180 million people and we can only do 1,500 tons. Another thing is that it is expensive to do business here and nobody wants to do business with unserious and expensive country. This issue of competition is not real because we don’t have enough capacity; where we should be competing is between Nigeria and the rest of the world. So the price of doing business in Nigeria has to come down, for the price to come down, we have to build capacity; to build capacity, all the stakeholders need to collaborate. So the political competition is because up until now, we have a situation where a lot of billionaires in this country don’t have assets. If you are a billionaire and you have no assets, that means you are making your money in essence through the exports of jobs one way or the other; what that means is that your business model is not aligned with LADOL’s business model. So if you are a company that is making money by taking money from government, by exporting jobs, you will now see LADOL as a problem; political problem.
You are a medical doctor; coming from a different background, could you share your experience with us; how you’ve been able to manage this company and taken it to this topmost height. Also, where do you hope to see LADOL in the next five years?
The success of LADOL lies in two things: One is we have a very clear vision and mission, which was set by our chairman way back in 2001 when he started this. He wanted to build an industrial free zone that will help make Nigeria the hub for West Africa. So when you have clear vision and mission, it helps you get through the tough times. Secondly, it’s team work; I have committed staff, I have a team of experts, everyday, each of us is challenged to go beyond our expertise to work longer hours, and do all kinds of things. As you can imagine, building an industrial village, the challenge are numerous and unpredictable. But what we always try to do is deliver an excellent service.
My training has also been very helpful most times. I think it is important to emphasise this.
After doing medicine, I worked with Goldman Sachs. That was where I picked up my finance skills because I managed a wide range of companies. I also went to business school and I did a short stint in private equity. So my education; my background, all those years of hard work are what have enabled me to get through these years and hopefully to lead in the way that has resulted in positive outcomes.
I think that young people today should not be fooled, there is no easy way to be successful, it is hard work. You have to work hard, you have to focus on your education; get as much experience as possible, before you go out on your own, then build a strong team around you, have a clear vision. As a woman, there are many challenges and complications. I always mention that I actually, I have experienced more racism in Nigeria than I did outside; because, especially 10 years ago, it is a lot better now. But definitely, maybe 10 years ago, you meet an expert here and they have a very low opinion of Nigerians so they treat you somehow. When you are a woman and you walk in a roam, it is somehow times 10. So we in Nigerians even in our own country as Nigerians, as female Nigerians, we have a perception issues. So as a Nigerian and as a female Nigerian, the only way to deal with that is to know what you are talking about. You have to go to whatever situation you are in fully equipped to deal with that situation, so whoever you are talking with whether he is a Nigerian or a foreigner, they know that you know what you are talking about. They know you came in with an objective, you know what your object is, you know that business, and you are ready to negotiate as an equal. There are many ways you can get that message across; I have to say as a woman, it is better not to be too aggressive because people accuse us a lot. When a man is angry, a woman is emotional, we never get past that. A woman can never show emotion, we have to be careful; we are not yet in the world where a woman can lose her temper, everybody will start apologising and be scared. As women, we really have to be mindful of things that distract from our power. If you want to have power in a situation as a woman, be professional, dress for your job, know your personality, you know where you are going, you know who you are dealing with, you don’t even have to be distracted.
I think there are definitely things the women can do differently; there are definitely advantages of having a diverse management with women in it. There are many studies now; there are many companies that have shown that if you have women in leadership roles, actually, it increases your profit.
If you look at Silicon Valley, they recently did a study to look at successful Startups and if the Startup is stated by women, it is 60 per cent more likely to be sustainable, so it is not that you see women making billions of dollars, but if you have a 100 companies and you have a woman leader, there’s 60 percent more chance the company will be there in five years. So woman add a lot of value and I don’t believe Nigeria can reach G20 without empowering and educating women, so every company, every government should take that very seriously but we women also have to accept the reality, we have to keep working harder.
In the next five years, we want to have fully developed this industrial village; we want to have a cluster of companies. We are appealing to any Nigerians who are interested in industrialising, if they have international partners, if they don’t have international partners, we want to fill LADOL with a range of companies who are manufacturing, who are doing engineering, so the infrastructure we have built is fully utilised.