The in-country integration of the $3.3 billion Egina Floating Production Storage Offloading (FPSO) has been described by many as a breakthrough project in Nigeria’s oil and gas sector and a celebration of the country’s local content capacity. Nigerdock FZE, a subsidiary of Jagal Energy, located in Snake Island Integrated Free Zone, Lagos, was able to deliver about 7,500 tonnes of the FPSO appurtenances, the highest amount of fabrication by any yard on the Egina contract. The company is famous as home to an offshore fabrication facility as well as the largest shipyard in West Africa. Nigerdock’s Managing Director/CEO, Mr. Pade Durotoye, reveals to Kunle Aderinokun the company’s role in the topside fabrication of the Egina FPSO and its local content drive, which saw it engage over 5,000 Nigerians in the mega project. Durotoye also shares his immediate and long-term plan to reposition the company as a partner of choice in the oil and gas service industry
As the new CEO of Nigerdock, what is your short-term and long-term vision for the company?
In 2014, the oil industry went into oil price and activity slump and we are just beginning to recover. All the service companies in the industry right now are still going through a very difficult period. There is still not enough activity. Therefore, my primary responsibility in the short-term is to focus on winning new contracts and increasing profitability while ensuring whatever assets and contracts we already have are fully leveraged.
I must uphold Nigerdock’s operational excellence and protect the safety of our people, communities and environment. Even though the situation is tough, people have to be motivated. My plans in the short-term are thus very tactical. Making sure that we deliver on our promises, keeping the company as strong as it should be and keeping our clients delighted. And finally, ensuring that we remain competitive.
In the long-term, we need to reposition Nigerdock. Nigerdock started out as a shipyard, and very quickly in 2007, we became a fabrication leader. Before then, nearly all the topsides and jackets in the country and offshore were imported, largely from Asia and the US. The Koreans did a lot of work and the leadership of Nigerdock at the time decided that it was time for us as a company to step into that arena. This was way before Nigerian content became fashionable.
In the long run, our goal is to change Nigerdock to a production systems company, not just the fabrication of topsides, but also their maintenance, upkeep, modification designs and reconfiguration. Whatever production systems help our clients remain optimum in their cost and in their efficiency, we will seek to bring to them. Historically, the clients will decide on the designs of the platforms, lob them over the wall to the fabrication industry and we will build it for them. Now we are saying, let’s integrate a little bit better with you, let’s understand what your objectives are and let us help you with our own skills, not just as a fabrication company, but as an engineering company, to proffer solutions to industry challenges in the most cost-effective manner, using the capacity of the Nigerian environment, Nigerian talents and the Nigerian industry to your advantage. For Nigerdock, it is really about transformation. We want to be a closer partner to our clients, aligned to their key objectives and in a measured way, sharing in some of their risk, all the while continuing to fly the flag of an indigenous company. We were the first to set the tone of the in-country fabrication capabilities. Now, a lot of other Nigerian companies have come up and very competently entered the market. We are very proud to be pioneers, but it is time to redefine the game.
Are there plans to expand and diversify your operations, specifically Nigerdock exploring other industries?
The answer is both yes and no. No, because we are already diversified, but not enough people are aware of that. In addition to the shipyard which is still the core of our business and offshore fabrication, we have the logistics and supply base business. The range of services we currently offer include full integrated engineering, procurement and construction (EPC), or stand-alone engineering, procurement management, onshore and offshore fabrication, brown field modifications, fabric maintenance, asset maintenance management, ship repair, marine services and associated base support services. So we are already diversified. What we need is to broaden our client reach beyond oil & gas by leveraging more of our existing infrastructure.
Furthermore, Snake Island Integrated Free Zone has full port status similar to any cargo port, which allows us handle international marine traffic direct to Nigerdock. The Free Zone has customs, port health, immigration and all the full requirements to import into Nigeria and clear goods faster and better. If fully functional, this will ease the traffic at other terminals, where vessels have to stay offshore and wait for a rotation number. As a result, we are able to bring significant cost savings to our clients. Those are the things that we want to do. We already have the resources, we have the investments, we have the materials, the talent, the balance sheet, we just need to leverage all of these.
With over $500 million invested in Nigerdock post-privatisation, the capacity is there, the fabrication yard and the equipment. We now have to bring this to our clients in the new configuration that helps them to reduce their overall cost.
How will you assess Nigerdock before and after privatisation?
Well, I can only tell you from stories I heard because privatization was done from 2001 to 2003, long before I got here. Prior to that, Nigerdock was largely a shipyard, a very good one. There are many people I have met who talk about remembering the Nigerdock of old, it was a good shipyard and also attempted some ship building. But the transformation since privatisation went beyond the diversification of the business; it went into the transformation of the corporate mindset, of training, and development of talent of service delivery focus, of efficiency, those things have come post-privatisation. The focus on safety, the focus on customer satisfaction, the focus of profitability, those are the other things that came after the privatisation. Those are the things that primarily differentiate the two eras.
What are the value propositions that differentiate Nigerdock in the industry?
First and foremost is our capacity. We are by far the most resourced fabrication yard in Nigeria. We have the size to pull off fabrication of up to 25,000 tonnes annually. We are also integrated on an Island, which is self-contained and secured. We have all the key resources to not just in-load equipment and material cheaply, but off-load completed work. We also have apartments and bungalows, where we can accommodate up to 500 people on the island. There is nobody else that can do that. We have the shipyard with our floating and dry docks, nobody else has that. What we can provide as Nigerdock in and of itself on the Island, is already unique, then you have to layer on the Jagal Energy angle and the very successful relationships that Jagal has been able to build with world class companies such as Subsea 7. Jagal and Subsea 7 jointly own a company called Nigerstar 7, a leading indigenous EPCI company that is focused on engineering, transportation, installation and project management of subsea to surface systems. Nigerdock is closely collaborating with Nigerstar 7 and a few other companies, and this is another significant differentiator. It puts us in a value chain that is very unique, that allows us to deliver our solutions to our clients in a very safe, cost-effective and project assured way. That is what makes us unique; there is no configuration like that in the industry today.
Before the Egina FPSO, nobody thought a project of that magnitude could be done in Nigeria. How were you able to pull it off?
Well, it is not true that nobody thought we couldn’t, we’ve always had the capacity to carry out the project. For example, as far back as 2009, Nigerdock fabricated 7,500 tonnes of topside modules for the Usan FPSO. We have also had experience on four other FPSOs. What was done with the Egina FPSO that was novel was the in-country integration. What is really fascinating about the whole Nigerian content push is that there are many things we always had intellectual capacity to execute in-country, but didn’t have the will, as a people, to insist it should be done. And so, the real success story of the Egina FPSO integration and all the fabrication that was done is largely the success of willpower and determination. It is not that the capacity was not there, but now we have the will to say it must be done in-country.
The second thing we need to know is that we will continue to partner with international companies. The Egina integration was done by Samsung Heavy Industries on Ladol’s site. Sometimes we need to provide that distinction that it was really a Samsung contract using Nigerian talent, using equipment that has been invested in Nigeria on Ladol to create the capacity. So, now that the willpower has been imposed on the system, the investments have been made, you will continue to see the next steps, and the next steps and the next steps. These are extremely complex and expensive projects. They are very dangerous if you get it wrong. We need to be careful as we pace ourselves as an industry, but clearly there is no going back.
What role did Nigerdock play in the Egina project?
FPSO construction and integration is a very complex project and there are many bits and pieces to it. We were fortunate to be one of the contractors that provided certain aspects of the construction of the Egina FPSO. We built about 7,500 tonnes of what we call the appurtenances, these are the helideck, riser porches, bumpers, various aspects of that FPSO which were shipped to the Samsung yard in Korea and Nigeria for installation and integration on the FPSO. The 7,500 tonnes performed by Nigerdock for the Egina FPSO was the highest amount of fabrication by any yard on the Egina contract in Nigeria.
Nigerdock has historically taken a very low-profile approach to touting our achievements. We are very professional; we just want to get things done safely. So, we didn’t blow our horn even though a substantial amount of construction and fabrication was done in Nigerdock. Very few people know that. We have however realised that it is also important that we tell our success story, not in a way that is self-serving, but in a way that acknowledges the contributions of the 5,000 plus Nigerians who worked on that project. What they did was world class. The capacity that they developed was world class. The safety environment and their safety result were world class. So, it is because of those people that we are telling the story, not because we want any other glory, but because we need to recognise the contributions of those people and their families to the Nigerian economy. It is significant.
What were the challenges faced in fabricating the Egina FPSO?
Safety and operational excellence were top priorities. Ensuring our people were trained and ready to perform. Maintaining the programme to the client’s deadlines as we were part of a complex supply chain of contractors and service providers on a massive project. We were doing all these things, lifting equipment, rigging, scaffolding, welding at heights, welding at angles, all the while ensuring that nobody got hurt. Those were the standard challenges, but that is our business. That is what we do and that is why we are a preferred contractor to the oil and gas industry.
How is Nigerdock contributing towards making Nigeria the hub of innovation in oil and gas services in Africa?
Being the hub of innovation in Africa is good, but it is really more important that we are innovating for ourselves as a country. The oil price environment has changed, we need to focus on sustainably reducing cost and increasing efficiency. We need to focus on the amount of work that is done in-country and that is where Nigerdock is leading the charge. We need to continue to grow Nigerian talents, develop our capacity, and our ability to deliver, to show and give the people who own the assets that we work on the confidence that work can be done here.
In what way is Nigerdock contributing towards local content development in Nigeria in its sector?
Nigerdock is recognised in the industry as the “Nigerian Content Champion”. We have an industrial training arm, the Nigerdock Training and Development Academy, that is committed to providing the highest quality needs-based training obtainable in our industry. One of the things that we like to talk about is the number of Nigerians we have trained. We have trained over 6,000 people. In the past, we have concentrated a lot on technicians but, now we are working on building the capacity of those at the management cadre. Personally, I have some very talented young managers and leaders that I mentor. We are not just talking about the ability to weld and do things that are complex, but we are also talking about the ability to manage the people that weld, manage the technical, manage the financial, manage the supply change, manage the safety. This is our next horizon.
Apart from training Nigerians, what other things are you doing to contribute to the development of local content?
Typically, when you are talking about building Nigerian content, you will be speaking from two angles; one is bringing in equipment capacity into the country, the other is developing the human capacity. We have done both. We now have enough capacity to take on different kinds of projects.
Can Nigeria achieve 100 per cent local content participation in oil and gas projects?
One hundred percent local content may not be a desirable target. There is no country in the world that has 100 per cent local content, not the UK, not the US. For example, we still don’t have a steel industry here, and as long as we are still importing steel, we cannot speak of 100 per cent. There are special steels, not just the raw pig iron or the standard steel, but you also have special alloys and coatings, corrosion resistant alloys, made of material that naturally don’t exist here. I don’t think it is possible for any country to be 100 per cent local content compliant. That should not be our immediate target. While significant progress has been made on Nigeria content, there is still room to do more, much more. As oil prices recover and investments resume in the sector, whatever can be efficiently and effectively done in country must be done here, no stories. That is what we should be pursuing.
As an oil and gas expert, what do you think of the oil sector and the Nigerian economy in general?
I have always said to people that Nigeria is a land of promise, and this is particularly true of our oil and gas sector. We are currently producing about 2 million barrels of oil per day, and we have been at that point for way too long. Our production to reserve life ratio is too far from optimum. Our production should be at least 3 million to 4 million barrels per day, for us to be able to impact the economy the way we should.
That is what the leadership of the country and the industry should be focusing on. How do we get to the point where we remove all the bottlenecks that impede production? We have been blessed by nature with the reserves in the ground. Not producing as much as we should be is completely our fault.
The primary reason we are constrained is the way the industry works. The government is not just an owner of the resource, taking the royalties and the taxes, but also an investor. That era has passed and is no longer necessary. Government is not able to devote the investment dollars required by the industry to grow, because of competing needs of education, health, security, power, defence, and even subsidy. This has impeded the growth of the industry and in a perverse way, even reduced its overall benefit to the Nigerian people. What we need is how to get funding to unlock the potential of the industry beyond what government is able to afford. I have to commend the current leadership at the Ministry of Petroleum Resources and the Nigerian National Petroleum Corporation (NNPC) on making giant strides in what we call alternative funding in the industry. But more needs to be done with increasing urgency and we need to continue to push that agenda, to get capital to come into Nigeria.
And of course, to make that work, we need to keep Nigeria as an attractive investment destination for capital around the world. One of the benefits of globalisation is that capital has been freed to go to where it will have its best impact. Capital wants to come here, we just have to make it welcome and comfortable.
A key part to that is contract sanctity. Our industry and business leaders must understand what it means to get into partnerships and relationships with foreign companies. When you secure funding from an individual or a company, you must abide by all clauses in the signed agreements.
Investment is not a gift, the investor must recover the capital and make the target returns if you want them to come back and do some more. We have to be trustworthy partners to become an investment destination. What we need to do to free this industry up to meet its potential is actually very simple. We don’t need to change any laws, we just need to change our mindset and disposition as a people, and we will get there.
Dry-docking costs shipping companies a lot of money because they are done outside the country, what are you doing to reverse this?
It is not true. I have seen that story going around that all dry-docking is done outside the country. No, there is a bit of dry-docking done outside the country, but we have dry-docking capacity in Nigeria. Nigerdock has the biggest capacity in Nigeria and we have a graven dock that is 200 metres long.
So, it means that ships that are up to 200 metres can be dry-docked in Nigeria. We also have a floating dock of about 150 metres. And there are many other good docks in the country. And the costs are very competitive. People approach us and compare the cost of dry-docking with Nigerdock and other West African destinations and over and over again, they choose us. We have been able to adjust our cost structure in a way that makes us a partner of choice.
A few months ago, when the MD of Nigerian Ports Authority was here, Nigerdock talked about the monopoly in oil and gas logistics, some believe this has greatly affected the company, can you tell me what the situation is now?
There are other companies in our space that have a very dominant position. What we have seen is that government has moved actively to increase competition by bringing down certain structures that made competition very difficult. A lot of work has been done in increasing the competition on the supply and logistics capacity.
The laws to allow the competition were always there. But certain agreements that had been reached, or perceived to have been reached in the past, made the clients think that they had to do business in a particular way. But there is a lot more light that has been shed on that structure now.
We are getting businesses that we didn’t get earlier. This year alone, we have recorded many firsts with our clients on projects that this time last year were potentially inconceivable. We are now able to deliver services to our clients that we have always been able to render, a lot more competitively than a lot of these other options they had. A lot easier to handle, to deliver logistics and supply services to them that they did not even believe was possible, at prices they didn’t even believe was possible. Yes, a lot of work has been done, a lot of progress has been made in that area.
Could you please tell us some of the biggest projects that Nigerdock has successfully delivered?
In retrospect, we’ll say the Egina project and what we were able to build in support of the construction of the FPSO. But then, we have also worked for all our other clients. For Exxon Mobil, we built the Satellite Fields Development Phase 1 topsides, jackets, appurtenances; for Total, we did the Ofon jackets, bridges, topsides and the accommodation; for Chevron we did the topside jacket for the Sonam Non-associated Gas wellhead platform. All these are large fabrication projects that we have done over the years from 2006/2007 all the way up to 2016.
Nigerdock recently announced that it got an ISO certification. What are the business implications of this latest qualification?
I think there was a slight misunderstanding in the way it was reported. It was a re-certification. The stringency of the standard was changed, so we went for a re-certification at a new and higher level. We have always had our ISO certification, but we have now got it at higher and newer standards.
Attracting investments into Nigeria remain a serious challenge because of the high-level risk involved, what can be done to improve FDI inflow in your industry?
There are investors and funds that are looking to deploy capital to emerging markets. When you look at the size and potential of Nigeria as a market, our natural configuration as the champion of Africa has already positioned us to attract capital. We must understand what needs to happen for this attraction to be consummated.
Investors need assurance that when capital goes in, it can come back out. That when you sign a contract with them, the investors don’t have to fret about unagreed changes, the laws don’t change, the taxes don’t change, nothing that was bought in the name of the shareholder is appropriated in the name of somebody else, the government or a party. There are no punitive taxes, no retroactive levies and hidden charges; there is no change in the perspective of the owner. People must be able to make calculated judgments about how much they are investing and their risk weighted expected returns. And as long as you respect the global standards of contract sanctity and capital control, there will be FDIs.
Who are your competitors in the industry, it appears Ladol is doing the same kind of business that you do?
There is a misconception about Ladol. They are mainly a landlord and free zone like Snake Island Integrated Free Zone, and do support base services, which is where we compete. Nigerdock is a diverse services operator. We have a shipyard and operate a fabrication yard, while they lease land to Samsung, who own and operate a fabrication facility. We have a training academy and offer other services, which they don’t have.
However, in the area of logistics and supply, and free zone, we offer competing services. When I look at Ladol, I admire them for what they do. I admire a lot of my competitors as well, so it is not as if it is only the people I don’t compete with that I admire.
A lot of work has been done by Nigerian companies being able to operate at world-class levels. I am extremely proud of our technical entrepreneurs and professionals in the oil and gas industry and what they have been able to achieve. I recognise the contributions of companies like Shell, Schlumberger, Total, Exxon Mobil, who through their expatriation practices, have taken Nigerian talent and exposed them around the world. This is what we are benefitting from now. For this we are very grateful.
Give us a little background about you?
I studied Electrical Electronics Engineering at the prestigious University of Ife. At the time I graduated in 1987, it had not yet been renamed Obafemi Awolowo University and some of us still insist on calling it the University of Ife. I joined the Oil industry immediately after graduation, working with Schlumberger Wireline & Testing. Immediately after my first year, I was transferred to Italy, and then to Congo before returning to Nigeria four years later. I was in Nigeria for two years, subsequently relocated to Europe again and then, to a host of other countries on assignments. I left Schlumberger to join Ocean and Oil Holdings, then Oando PLC’s core investor.
I was with Oando for 12 years, from 2006 to 2018. During this period, I practically held only two jobs, but because the company evolved significantly, it looked like a lot of jobs. My first job was as the CEO of Oceans and Oil Holdings and the second was as the CEO of Oando Exploration and Production Limited which later became Oando Energy Resources. I left Oando in March 2018 and joined Nigerdock as CEO in May.