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Local content: A look at Shell’s offshore project



Local content: A look at Shell’s offshore project

After many years of shifts in Final Investments Decision (FID), Shell, in 2017, gave a green light on development of Bonga South West Aparo (BSWA) deepwater project. ADEOLA YUSUF looks at efforts to get the project and others on board to spur the growth of local content


Simbi Wabote, Executive Secretary, Nigerian Content Development and Monitoring Board (NCDMB), did not mince words on expectations of the Federal Government from the three major offshore projects on-going in Nigeria.

On Bonga South West Aparo deepwater project alone, the government, he said on the sideline of a conference in Lagos, was expecting one billion barrels of oil and an expenditure of over $10 billion.

Riding on the back of this is expectation that the project will help promote the local content development. Shell Nigeria Exploration and Production Company (SNEPCo) is the major title-holder of the project and it had not, for once, failed to make a pledge to raise local content development through the project.

A final investment decision is targeted for 2018, with first oil flowing in 2021 or 2022.

The FPSO aims to exploit around 800 million barrels of recoverable oil from an oil-in-place resource of about 3.2 billion barrels. The bulk of Bonga South West’s resources are located in OML 118 but it also extends into OMLs 132 and 140, operated by US supermajor Chevron, where it is called Aparo and the remaining partners in the field are US giant ExxonMobil, France’s Total, Italy’s Eni and South Africa’s Sasol Petroleum.



Wabote said Royal Dutch Shell is to fabricate 50 per cent topsides of the project in Nigeria.

The NCDMB boss indicated that the packages included the Floating Production Storage and Offloading (FPSO) units, subsea, installation and rigs.

Expressing optimism that the execution of the project and Zabazaba, another deepwater project, in which Shell also has a stake would grow Nigerian Content and impact the economy, he said that this would be much more than previous deepwater projects. He said the Board carried out detailed scoping of the project to ensure that the targets exceed the accomplishments achieved on Total’s Egina.

Wabote said that for Egina, six FPSO topside modules were fabricated in-country across some yards and will be integrated when the FPSO arrives at the SHIMCI yard in Lagos later this year.

This will be the first time in the history of Nigeria. Wabote also said that the entire approvals and evaluations for Zabazaba were completed in 14 months, setting a record in the industry as against the 24/36 months project cycle time that bedevilled the sector for many years and contributed to the high cost of projects.

“It has taken just 14 months since NAE approached the Board with their Nigerian Content Plan.

NAE and NCDMB worked closely and went through the standard contracting process, including invitation to tender, clarifications, technical and commercial bid evaluations and facility audits.


We completed the process and issued our final report on August 30, he had said. “This is confirmation that NCDMB does not delay projects and we can achieve the six-month contract cycle target if operators comply with set directives.

“Similarly, (SNEPCO) is set to issue bid documents this month for the supply of the FPSO vessel for the  Bonga South West Aparo (BSWA) deepwater project.

“The bid documents will set out the company’s plans for in-country fabrication of half of the topsides of the FPSO and their integration.”


South West FPSO tender

Contractors, Upstream had reported, are chasing prized deal to supply unit for revamped deep-water project off Nigeria. Supermajor Shell, the energy news agency said, would receive responses within days from contractors set to battle for a prized contract to supply a floating production, storage and offloading vessel for its revamped, deep-water Bonga South West project off Nigeria.

Industry sources said a significant number of floater fabricators had sent expression of interest documents covering a 150,000 barrel per day FPSO and must file submissions next week.

Among the players expected to reply to Shell’s approach are South Korean rivals Hyundai Heavy Industries and Samsung Heavy Industries, Chinese companies Cosco and CIMC Raffles as well as Dutch floater specialist SBM Offshore.


Upstream was also told that South Korea’s Daewoo Shipbuilding & Marine Engineering, Singaporebased SembCorp Marine, Italy’s Saipem and Malaysia’s Bumi Armada may participate, as could KBR, either as lead bidders or partners.

Shell’s base-case plan is said to comprise the award of an engineering, procurement and construction contract for a newbuild FPSO but project watchers said that the supermajor will consider a converted vessel if newbuild costs do not meet its expectations.

“The basic, basic option is a newbuild,” said a well-placed source, “but each bidder can propose an alternative (conversion) option.”

Another project watcher agreed: “Basically, Shell is going for a newbuild EPC but they are going to get indications about the (conversion) concept and if this is attractive, (Shell) will think about it.”

A third source added: “Shell has been evaluating the various options, going the newbuilds route or going conversion with lease.”


Local content remains a key factor in any Nigerian tender process with the EoI documents calling for lead companies to specify their partners and which Nigerian engineering and fabrication companies they could work with. Upstream understands that CIMC Raffles has tied up with Monobuoy Nigeria, a Lagos-based engineering concern that has a parent company from the US, while Cosco has joined forces with Technip and Abuja-headquartered Gastec.


One source also suggested CIMC may be co-operating with VME Process — a US-owned module fabricator with yards in Indonesia and Malaysia — and China Merchants Industry Holdings, owned by Hong Kong-based China Merchants Group, which is experienced in FPSO conversion work. SBM is said to have linked up with China’s COOEC but its Nigerian partner is not known.


The same is true for Hyundai and Samsung, although in previous Nigerian projects and bid processes they have worked with NigerDock and Ladol, respectively. It is not known, which companies Daewoo or SembCorp — which owns Jurong Shipyard in Singapore — would partner with if they do participate in the Bonga South West EoI.

Upstream understands that the EoI’s call for respondees to tell Shell, which yards will handle major construction and associated activities.

This EoI process is a precursor to a formal bid process, which one source suggested could start as soon as July this year.

However, the exact timing will depend on when Doris Engineering and Lagos-based Netco complete front-end engineering and design work on the FPSO. This FEED work was originally due to complete this summer but appears to have slipped into the third quarter of 2017 or even the fourth quarter.


The promise


Presenting a paper on Bonga Southwest Aparo reframed project /scope and proposed Environment Impact Assessment (EIA) plan, Raphael Afolabi of Shell, said they have updated the concept and it is now  going to run from 2018-2023 in three phases. He said, “they are expecting one billion barrels of oil from Bonga project, and would expend over $10 billion; technical works are going, while stakeholders have been very supportive.

We would come back to government.” He said the Federal Government had to reframe Bonga because of low oil price, promising that optimum Nigerian content would be applied in all cases, and go beyond this project.

Two international oil companies (IOCs) – Nigerian Agip Exploration Limited (NAE) and Shell Nigeria Exploration and Production Company (SNEPCO) – have concluded plans to fabricate and integrate over 50 per cent of the topsides of their projects’ floating, production, storage and offloading (FPSO) vessels in Nigeria.

This is targeted at expanding and deepening local content in the nation’s oil and gas industry.

According to Nigerian Content Development Board (NCDMB), the projects are the Zabazabadeepwater project being executed by NAE in partnership with SNEPCO on Oil Prospecting License (OPL) 245 and the Bonga South West Aparo (BSWA) deepwater project being developed by SNEPCO.

NCDMB disclosed in a statement that indications emerged last Friday that major contractors bidding for Zabazaba submitted competitive costs and concrete plans to fabricate and integrate over 50 percent of the FPSO topsides in-country.

It stated that the technical and commercial evaluations of bids for the Zabazaba main packages have been finalised by the NCDMB and NAE and the submissions met the aspiration of maximizing local content at the most competitive cost.


Consultation for exploration

The Federal Government has commenced consultations with stakeholders in the oil and gas sector, aimed at re-activating Shell Nigeria Exploration and Production Company Limited (SNEPCO), the Bonga oilfield.

At the bi- annual stakeholders’ engagement meeting in Abuja, Minister of State for Environment, Ibrahim Jibril, said the oilfield is very important to Nigeria, and both should implement its mandate for the sustainability of the project.

Represented by the Director of Environmental Assessment, John Alonge, he urged SNEPCO to make integrity, transparency as its watchword, in all transactions.

He stressed that there must be compliance because both have lots of issues to contend with.

According to him, Shell and the ministry must have social and technical dialogues so that both would be on the same template to move the project forward.

An Environmental Manager, Augustine Ibukun, said oil producing communities would continue to have negative impacts, adding that the multinationals should see how to open dialogue and discussions with them and work out plans to eliminate emission.


Last line

Beyond these rhetorics, Nigerians must not be shortchanged in terms of promises for local content development in the Bonga South West Aparo projects and all other projects. Shell has made its promises, the onus is now on the NCDMB to ensure strict adherence to its Acts on local content development.

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