‘Pandemic has accelerated energy transition in favour of gas’

Maurizio Coratella, is the Chief Operating Officer of Saipem E&C Onshore Division. In this interview with FEMI ADEKOYA, he talks about the recent EPC contracts on the NLNG Train 7 and how the project would be a game-changer for Nigeria in the gas space, especially LNG.

There have been efforts at implementing an energy transition plan over the years, especially for local consumption. Do you think the Train 7 project will aid the realization of this plan?
The NLNG Train 7 project will increase the productive capacity of the country and will be a feed source for energy transition initiatives worldwide. The project will involve the production of approximately eight million tonnes per year (Mtpa). As such, Train 7 will be a significant contributor to the energy transition in global markets as well as to domestic consumption.

For us, it is important to contribute to the economic growth of the countries we are present in. We see some gas-related projects in regions like Africa, more resilient over time.

The energy balance was disrupted in the course of the lockdown initiated by many countries, forcing prices to tank. With new energy sources competing for attention, do you think LNG can kill oil?

The entire industry is now reacting and adjusting to this global crisis. Oil companies, for example, are undergoing a drastic revision of future investment plans and rationalization measures to cope with such new conditions. The slump in demand will likely endure beyond the pandemic or it may even become a new norm. We do see that the pandemic has accelerated an already on-going trend: energy transition in favour of gas in the energy mix, especially LNG. LNG has detached the gas from the ‘pipe dependence’ enabling gas to compete with oil often at more competitive price in terms of energy ($/Mbtu) while being more environmentally sustainable.

Saipem’s share of the EPC contracts with Nigeria LNG Ltd. for the Nigeria LNG Train 7 is approximated to be about $2.7 billion. With many IOCs reviewing their investments post-COVID, what is your company’s strategy for implementing this project?
In response to the health crisis, oil and gas companies are reviewing their portfolios and cutting 2020 CAPEX spending, so some projects like the Rovuma LNG in Mozambique, are seeing their final investment decision (FID) or their award delayed. The Nigeria LNG Train 7 instead has full commitment to proceed, and we have a solid base for tackling the uncertainty in this particular and difficult moment.

Saipem and its partners have been working on the project since 2018 (as we have been engaged in the Front End Engineering activities), and we have developed a robust execution strategy to grant a first-class delivery. Smooth and seamless transfer from tendering to execution is also supported by the continuity of the project team since 2018, as well as the organization of the Milan and Lagos project offices. All main long lead items have been already negotiated and secured – the project is in excellent shape and our teams are extremely motivated.

The Federal Government gave a timeline of 2025 for the completion of the project. Do you think this timeline is feasible?
We are working to respect the timeline established by the Government.

How much of local content are you hoping to deploy in making this project come to reality?
A project like Train 7 will create huge opportunities for training, transfer of technology and know-how, and employment, which we are very well experienced in delivering. On top of this, our company has extensive in-country experience and will maximize the local supply chain, meeting or exceeding the expectations and ambitions of local authorities and communities. This project is part of our continued commitment to support the development of long-term investments and partner with local companies to create added value to Nigeria’s economy in line with our Sustainability and Energy Transition strategy.

Stefano Cao was quoted to have said that the award of the Train 7 contract “contributes to increasing the portion of non-oil-related backlog and confirms the overcoming of the link between Saipem’s share value and oil price.” Would you say that the coronavirus pandemic has spurred your firm to deepen its non-oil strategy and explore plans to further hedge low prices?
Even before the coronavirus pandemic, the company started pursuing a non-oil strategy. Currently, around 70% of the company’s backlog is non-oil related. Our strategy for the energy transition has enabled us to establish solid assets and navigate through the pandemic with no significant short-term debt maturing. The uncertainty around COVID-19 has led to a revision of future investment plans, however, over time Saipem has developed resilience and “adaptability” to uncertainty and fast-changing scenarios also thanks to a new business model and to the diversification of the businesses, the geography and the client base. We are no longer an oil & gas service contractor but rather a “Global Solutions Provider”; we provide innovative solutions in several industries, spanning from energy to infrastructure.

What does the Train 7 mean for Saipem, especially as regards its investments in Nigeria and other African countries? Your company was equally selected for Egypt’s first polybutadiene plant.

Considering Nigeria’s extensive gas reserves, I do hope that NLNG Train 7 in Bonny Island will be the first of further additional LNG trains in Bonny Island. A large-scale project like this is very strategic for us as it is related to LNG. Enabling the energy transition is a priority for our company, and we consider natural gas has a key role in supporting this transition to a low carbon future. Our ambition is to set the standards for LNG projects in Nigeria and beyond.

We have been present in Nigeria for over 50 years, and have a long-term presence in other African countries. Africa has the potential to emerge as the first continent basing its development on natural gas and renewables. For instance, in Mozambique, we were awarded a $6billion deal to construct Total’s LNG project. As you mentioned, we were also selected to build Egypt’s first polybutadiene plant. Polybutadiene is a synthetic rubber used in the manufacture of car tyres, which consumes 70 per cent of global production.

As a company, we want to continue to position ourselves as a leading solutions and energy infrastructure provider for key projects in Africa supporting the continent’s sustainable development.