Okwuosa: AKK Pipeline Needs No Government Support to be Viable

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Emeka Okwuosa

The Chairman of Oilserv Limited, Mr. Emeka Okwuosa, in this interview with journalists on the sidelines of the flag-off of the $2.8 billion Ajaokuta-Kaduna-Kano (AKK) Gas Pipeline in Ajaokuta, Kogi State recently, highlighted the economic potential of the facility and the readiness of his company to deliver the project on schedule, among others. Peter Uzoho brings the excerpts:

Can you tell us how ready you are in delivering this project?

We are ready for it; in fact, what we are carrying out today is official flag-off which is the groundbreaking ceremony. But as you can see over there, we are ready, we are already working, and we are laying the lines. Oilserv is an indigenous company, and like the question the previous person also asked, we are 100 per cent indigenous, currently employing more than 600 staff. With this AKK we probably will go to between 1,500 and 2,000 at the peak of the personnel matrix. But the fact remains that we are ready. This is not the first project. We are commissioning the OB3 gas project which is actually slightly larger than this in terms diameter -48inch diameter. So we have the experience, we have the personnel, we have the equipment and we are capable and we would deliver this project.

Are you thinking of the indigenes in your employment?
Yes, like I said, we will crank up our employment by more than 1,000 and the major part of this 1,000 will be indigenes of the areas where we pass. We have a clear programme to develop the areas where we build pipelines.

What will you be saying to the Nigerian government for patronising an indigenous company to carry out such a big project?

First of all, I will give thanks to President Muhammadu Buhari. Clearly he has been at the forefront of driving progress in the oil and gas industry. As you may be aware, which a lot of people may not, he built most of the infrastructure we had in the 70s when he was the Federal Commissioner for Petroleum Resources. Most of these refineries you see today were built when he was there within a few years. When he came to power in 2015 he made this a cardinal project. This project has been on the drawing board since 2008, 2009, he made it happen. What it shows clearly is the dedication he has to the development of local content and local capacity. Oilserv is an example of that, and Oilserv shows clearly that the government means what they said. We have been operating before the local content law came into being but we have also continued to build capacity including building capacity beyond Oilserv by empowering other contractors to grow. So we constitute a team with the federal government in this regard.

The whole scope of this project has some partnership. How are you coordinating and cooperating with other partners to ensure smooth process and execution within the time limit?

Yes, we have partners, which is why I said earlier, it is a consortium arrangement and this consortium arrangement has a Chinese company called CFHEC. You may be aware that this project also is not funded directly by the government. This project is funded using facilities or loan that is obtained for this project. This project is a project that is commercially viable. It’s a project that the loan can be taken care of by the commercial nature of the project. So in lieu of that we have injected a Chinese partner to meet the Chinese content requirement. But Oilserv is the primary EPC Company. Our experience is what we also help to drive this process a lot. We also have Oando in the consortium and Oando is a consortium partner, they are not an EPC company but we have worked together for a long time in other projects where Oilserv is the EPC company.

You said this project is commercially viable. What is the viability and how do you intend to pay back the loan since the project is going to be running on a loan?

Like I said, this is fully viable. The facility being taken is meant to be repaid in 15 years. But this project can pay itself in less than 10 years because this is a commercial venture. When you pipe this gas, you have gas flowing through, will go to industries, go to power plants. There are tariffs to be paid to even transport this gas. If you understand the mechanism of gas transportation, for every cubic metre of gas that passes by there is an amount that is paid by those who use it. In addition to that, gas itself that passes by would have to be paid for to be used. So this is a commercially viable project. It is not the kind of a project that government has to support for it to be viable.

Are you having any fears at all that might hinder this project?

I won’t say I have fears or I don’t have fears. Every project comes with its challenges. There are challenges to build a project like this in virgin forest, to go through rivers, to go through rocks, to deal with security issues. These are challenges but I don’t have fears because we have the knowledge and the experience to deal with it. We are very ready to deliver the project and deliver the project on time.

Can you tell us exactly, the current state of the project?

The AKK project, let’s put it in perspective. First of all, I want to use this opportunity to thank President Muhammadu Buhari, for making all the efforts to make sure that we got to where we are today. The Nigeria Gas Master Plan has been on the table for close to 20 years now and it has been built in different stages. AKK which is Ajaokuta-Kaduna-Kano pipeline is one section of the entire gas master plan but a very important section. You may not believe it, the process of tendering and awarding or trying to execute this project started more than 10 years ago but when President Muhammadu Buhari came into power in 2015, he accelerated the process and made it to be possible today. So the current situation today is: we commenced work on it already, we are far gone in the engineering design, we have already started construction activities and this project is meant to be delivered in two years’ time and it is going to be delivered on schedule.

Now, there are concerns on the possibility of delivering this project within a space of two years just like you mentioned. Some believe that it is too ambitious due to the security concerns and attacks on pipelines. What security measures have you put in place to mitigate risks during and after construction?

First, let me put it again in proper perspective. The first thing to know about projects like this is that this project has been conceived and then modeled properly. NNPC is in charge of this project and they are controlling this project’s process. The NNPC headed by Mele Kolo Kyari has done a great work in making sure that the proper processes are put in place. The way it is structured is this: we are the contractors, we are building the first segment that will start from Ajaokuta and then end up between Abuja and Kaduna; and then another contractor will take it from there, all the way to Kano. And for us to get to that process there is a process plan and a proper project execution process which involves the contractor, it involves the client which is the NNPC, it involves a project management company that is well tested. So, basically there are processes put in place. The concerns we hear are cogent concerns. Of course we have security problems, it has to deal with community issues but these are normal.

They are normal to a company like Oilserv. Oilserv has built pipelines since 1995 and as we progress on this process of our discussion, I will avail you of our wide range of experience. With this experience and knowledge and proper schedule of work which has been risked entirely to the extent that we know what the resources that will be required, we know what the issues that will come up like security. We are engaging with the community adequately and making sure that we take all the necessary precautions. But beyond that, what is important is to prepare and then be able to schedule properly and then of course have all the resources to meet the process. We are confident that this project will be delivered. This is a project that is being done professionally and we are following all the international standards.

I’m sure you know that Nigeria also has had some gas pipeline projects that should have been completed before the AKK project but have left hanging till date. What is the confidence that you have that this project won’t suffer such setbacks?

I’m pretty confident that this project will not suffer what you term to be the delays that occurred. But let’s face the fact. Anywhere in the world, you plan for projects; you execute, you hardly will execute in a way that reflects 100 per cent the plan because you will encounter issues; but you deal with these issues. Some of these projects you are mentioning have been hampered because of funding; have been hampered because of environmental issues and all that. All these have been taken into account in designing and planning for AKK. We may wish also to know that Oilserv as a company has come a long way since our inception in 1995. We have built almost all the gas pipeline supply systems to the power plants, the one to Ihwovho in Edo State, Gbarain in Bayelsa, Egbema in Rivers, you can name all of them; Alaoji and Osisioma in Abia State, Calabar in Cross River. I mean we built numerous pipelines and we have kept to schedules and budgets. So for us Oilserv, we plan to deliver this project.

The fear of investors in this case is the policy sustainability. How would you react to that?

Let me again put this into perspective ones more because it is good for Nigerians to understand how this is structured. AKK is part of the Nigerian Gas Master Plan, and the gas master plan, the very first phase that was built started from Escravos, went through Benin and went to Lagos, that was built a long time ago. But since then a second look has been also built to feed more gas to Lagos. Then you have the OB3 Gas Pipeline which is the interconnector between East and West, in order to be able to move gas both ways. And then, you have the South to North pipeline of which AKK is part. Actually, this pipeline will start entirely from QIT which is Qua Iboe Terminal (ExxonMobil terminal in Akwa Ibom State) and pass all the way through Obigbo in Rivers State and then get all the way to Umuahia in Abia to Enugu to Ajaokuta and then all the way to Kano. Now this section of the pipeline is important because this will feed the moribund industries in the north, especially the ones in Kaduna and Kano, and then of course the power plants that are envisaged to be built in Abuja, in Kano and Kaduna.

So it is very feasible and once this is in place it makes a commercial sense then to build the QIT to Ajaokuta in order to give it more feed. So this is a project that has tremendous impact in the economy of the country, tremendous impact in the exploration and production of gas. You may wish also to know that as we speak Nigeria has about 200 trillion cubic feet of gas but some of this gas is being flared. Some of this gas have been drilled and capped because there is no place to take this gas to. This will enable the gas Nigeria has to be commercialized, and one way that Nigeria can industrialise is to use abundant energy we have which is gas; and gas is a cleaner form of energy than oil of any form. So that’s the perspective.