Engineering Breakthroughs in Nigeria – Investments and Sustainability

By Godspower Ike

The oil and gas industry has recorded significant growth in almost all segments of the industry, since oil and gas was discovered in Oloibiri, in the 1950s. This growth was in exploration, production, marketing and servicing among others.

Over the last decade, indigenous players have gradually displayed adequate capacity to drive growth in the sector and they have recorded significant engineering breakthroughs and also in the deployment of advanced technology. Today, with the introduction of the local content Act, a number of the companies have undertaken projects that, hitherto, were the exclusive preserve of foreign companies. Some of the indigenous companies are now major players in critical sectors of the oil industry.

This has led to an increase in the number of engineering feats by local companies. These local companies now fabricate components of oil vessels; carry out high technology drilling activities and also oil and gas exploration. This, therefore, has brought about the need to highlight some of the feats Nigerian companies have achieved in the area of engineering, investments in this area and challenges that might hinder its sustainability.

A large number of indigenous companies‎ are gradually positioning themselves as significant players in the global economic landscape, as they have in the last couple of years, recorded significant engineering breakthroughs in Nigeria, especially in critical sectors of the economy, like the oil and gas sector.

This was in spite of the tough operating environment ‎which has threatened the survival of these companies.

These companies had over the years, shown trust and commitment to the Nigerian economy by making significant investments in their operations and had laid down plans and structures to ensure their sustainability.

In the light of this, the Nigerian Content Development and Monitoring Board, NCDMB, had declared that Nigeria has recorded some measure of success over the years. It stated that engineering in the oil & gas industry is now done 90 per cent in country, while fabrication of all the field development facilities now has 50 per cent of the tonnage done in Nigeria.

It, however, noted that there is scope for improvement in manufacturing which is where the knowledge and technology resides.

Specifically, since the commencement of the Local Content Initiative, significant breakthroughs has been recorded in petroleum engineering activities in Nigeria and also in the fabrication of modularised crude oil separation units and Helical Submerged Arc Welded (HSAW) pipes.

Others are the building and refurbishment of Floating, Production, Storage and Offloading (FPSO) platforms, construction of large offshore oil and gas modules, offshore pipelines and offshore platforms.

In the same vein, Royal Niger Emerging Technology is establishing an Umbilical manufacturing facility at Angel Park, Badagry, in Lagos State. The facility is expected to come on stream in the next couple of weeks.

Umbilicals are described as subsea equipment composed of cables and elements which supply power and fluids as well as transmit data via fibre optics to other subsea hardware such as the Christmas tree and distribution equipment.

The Umbilical Lines contain electrical/fiber optic components, each protected with a high-density polyethylene sheath and the hydraulic systems composed of super duplex tubes or hoses.

The hydraulic system provides for hydraulic supply and chemical injection and the electrical/ fiber optic system contains the required signal power conductors for controlling the subsea Xmas trees.

The company said the plant would have the ability to take in umbilical product elements from all established umbilical manufacturers and would help manufacturers achieve full compliance with the legal requirement and provide reduced logistics cost.

The company also stated that the facility will help lower the total cost of project execution, provide jobs and technology transfer and will also ensure improved capabilities for aftermarket support on brown-field projects.

Today, indigenous companies have recorded successes in boat building, ships and vessels building, repair and refurbishment, fabrication of fully integrated decks for well-head platforms.

An indigenous company was also credited with fabricating and completing the load-out of 7,500 tons of structural components for Total’s USAN FPSO, while the same company and another, fabricated process vessels for an international oil company in Nigeria.

Also, indigenous firms have been contracted for the Turn-Around Maintenance and rehabilitation projects of Nigeria’s oil and gas facilities. Particularly, a local company was awarded the contract for the Turn-around Maintenance (TAM) of the Old and New Port Harcourt Refineries. This used to be the exclusive domain of the original manufacturers and other foreign companies.

These and many more too numerous to mention have been carried out by indigenous companies, such as in automobile assembly, heavy machinery and tractors assembly, components manufacturing, repairs, maintenance and other services.

In the area of investment, one of the champions of local content in Nigeria with focus in the oil and gas industry, Kaztec Engineering Limited, said it has offshore installation assets valued at over $300 million and onshore installations assets valued at over $80 million.

The company also stated that it has invested over $1 billion of its own funds in its various projects, especially in the development of its Snake Island yard.

Particularly, the company explained that it spent about $350 million in Phase One of the Snake Island development project, involving the setting up of the yard fabrication facility, while $300 million was spent in Phase Two, involving the pipe coating and pipe rolling mill.

In the third phase, the company said it spent $450 million for the construction of the dry dock and logistics base.

Similarly, Jagal Group, owners of Nigerdock and its subsidiary, had a couple of weeks ago, disclosed that they had invested over $1 billion on the development of the Snake Island Integrated Free Zone (SIIFZ).

According to the company, the SIIFZ had attracted direct investment to the tune of over $230 million, adding that the totality of investment in the zone today is in the region of $1 billion.

The company said the investments were made on infrastructure, technology and manpower development, among others, adding that the company had developed substantial in-country capacity for fabrication of decks, platforms, topside modules, subsea structures and other offshore infrastructure to globally recognised standards and provided deepwater support services in areas of hookup, Commissioning, Fabrication, Maintenance and Logistics to the largest offshore development such as Bonga, Agbami, ERHA and Akpo, for Shell, Chevron, ExxonMobil and Total respectively.

These and many more were offshoot of the comment by the  Federal Government that it is targeting the retention of over $10 billion in the oil and gas sector alone, out of an average annual oil and gas industry expenditure of $20 billion in the Nigerian economy compared to the current sum of less than $4 billion.

This is due to the huge foreign exchange the country is losing on a daily basis on importation, especially of goods and services that Nigerians had over the years developed the competency to manufacture and undertake respectively.

Specifically, Managing Director, Royal Niger Emerging Technology, Mr. Anthony Okolo, disclosed that failure to domicile the technology for umbilical manufacturing was the source of over $400 million worth of capital flight between 2008 and 2014.

According to him, previous industry efforts to domicile this technology have not been embraced by foreign investors and major manufacturers. “Investor apathy stems from the lack of a sector leader who is ready to sink in investment on the basis of the strength of the Nigerian oil and gas market and enabling legal environment created by the NOGICD Act,” he noted.

In addition, Nigeria, according to the Nigerian Content Development and Monitoring Board (NCDMB), had lost over $380 billion to capital flight over the last 30 years. This was prior to the introduction of the Nigeria Oil and Gas Industry Content Development Act, (NOGICD).

According to the NCDMB, the loss was aggravated by the loss of over 10 million direct and indirect jobs as well as loss of investments in the development of local fabrication yards and facilities.

The NCDMB lamented the fact that the country lost the opportunity for industrialisation through oil and gas activities and currently maintains no capacity in building drilling rigs, pipelines, valves, pumps, production platform, marine vessels, research and development, among others.

To this end, the key thrust of the NOGICD Act 2010, the NCDMB said, was to maximise utilisation of Nigerian-made goods and human resources as well as Nigerian-owned assets; link oil and gas industry to other sectors of the economy; ensure participation of indigenes and oil-producing communities in all aspects of the oil and gas business; and foster institutional collaboration. Others include job creation, training and domiciliation of capacity, technology and services and the development/upgrade of facilities and infrastructure.

In spite of all these challenges, stakeholders are of the view that indigenous companies should be commended for their resilience and determination to compete globally and contribute to Nigeria’s economic development.

Commenting on the roles played by indigenous companies in bringing about engineering breakthroughs, Mr. Ademola Olorunfemi, President of the Nigerian Society of Engineers (NSE), disclosed that Nigerian companies have continually strived to proffer logical and practical solutions to the challenges of economic development, especially in key sectors of the economy.

According to him, the solution model of the companies had been based largely on driving down capital flight, through utilisation of about 90 per cent of Nigerian content in both personnel and material resources in their production processes.

He said, “These companies, therefore, deserve recognition, encouragement and patronage for contributing to national development as the volume of investment they can plough back into the economy will be proportionally related to their Returns on Investment.”

For increased investment and sustainability, Olorunfemi, however, emphasized the need for patronage of locally companies, lamenting that Nigeria and Nigerians will rather buy foreign brands of products instead of indigenous products.

To turn this tide, he maintained that, “There is a retinue of government agencies that must be patronised by government itself in the first instance, thus creating awareness resulting to patronage by Nigerians.

“These Agencies include but are not limited to; National Agency for Science and Engineering Infrastructure (NASENI), Nigerian Building and Road Research Institute (NBRRI), Nigerian Communication Satellite Limited (NigComSat), National Centre for Agriculture Mechanisation (NCAM), to name just a few.”

He called on government at all levels and other individuals and corporate organization to encourage local manufacturing firms by ensuring patronage, especially with their proven performance.

He said, “We must therefore put it on record that it is the collective responsibility of all Nigerians, whether in government or in their private capacities to identify and encourage indigenous companies such that will create job opportunities/employments; build capacity; conserve foreign exchange, reduce poverty and as such percentage of people living in poverty and strive to attain true sovereignty as a nation.”

To encourage and deepen the commitments of indigenous firms, Mr. Chukwudi Uwakwe, General Manager, Fenog Nigeria Limited, an indigenous provider of Horizontal Directional Drilling technology in the Nigeria’s oil and gas industry, urged International Oil Companies (IOC) operating in the country to encourage local operators by considering them for more contracts and ensuring fair treatment for them.

According to him, increasing the patronage of indigenous companies that had invested so much in capacity development would buoy the local content drive of the government.

He said, “Let me use this opportunity to appeal to IOCs and the Federal Government to consider the local companies first before their foreign counterparts in the scheme of things in the industry. This is because, if we work and execute a project, the money would be used to develop Nigeria, but if foreign companies get the contract, they will only pay salaries and would take the money to their countries.”

Speaking in the same vein, Chief Executive Officer, Dorman Long Engineering Limited, Mr. Henry Okolo, noted that the long term sustainability and domiciliation in Nigeria, of the skill, materials and resources required for the operation of the oil and gas industry, as well as other critical sector, is a security imperative. He advised the Federal Government not to relent in its efforts to implement the local content policy across all the key sectors of the economy.

He said, “In Dorman Long, we believe that the subject of Nigerian Content in the oil and gas industry is a strategic issue. The benefits include accelerated economic, employment creation and technical capability that will support other industries.”

In his own view, Jean Balouga, a research assistant in the Economics Department of the University of Lagos, commended Nigerian engineering and service companies, as well as fabrication yards, stating that they have invested hundreds of millions of dollars on skill acquisition and enhancement, and capacity expansion due to the directives of the Federal Government.

He, however, noted that despite all these efforts, bottlenecks in the system still prevent meaningful fabrication work being awarded to Nigerian firms, adding that if these projects are awarded to the existing Nigerian yards not only can they demonstrate their ability to deliver to international standards of quality and safety but they also can substantially build long-term industrial capacity, provide employment and global competitiveness which is currently in the hands of the overseas yards.

Continuing, he said, “The present state of Nigeria’s needs is a clear indication that a responsible and dynamic approach to sustainable local content development needs to be adopted by government policy makers and operators to guarantee a better future for the country.

“Technological development does not occur just by chance; rather it is a product of a nation’s sound economic management, policy reengineering, good governance and a social value system that rewards hard work and creativity.

“Having a few companies committed to Nigerian content and pursuing local content programmes is not enough. Support for local content policies must be nationwide. It must be accepted by all and should become embedded in every operator’s business philosophy.”

To this end, it is general consensus that these engineering breakthroughs have helped in no small measure in putting Nigeria on the global map and is helping to project Nigerian companies as forces to be reckoned with.

It is expected that these breakthroughs would contribute immensely in growing the Nigerian economy, as it will help in conserving the country’s foreign reserves, contribute to employment generation and help in no small measure in stimulating the economy for growth and development.

As stated by most of the stakeholders, these feats can only be sustained if these firms are encouraged and supported by government at all levels and multinational companies. Government should ensure that these companies enjoy the patronage of players in their various sectors, while ensuring that incentives are put in place that will assist these companies.

A critical incentive would be the creation of an enabling environment for the businesses to thrive. It would also involve fixing the country’s infrastructural challenges and removing bottlenecks to an efficient and effective operating environment.