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Controversy Trails Directive On Oil, Gas Cargo Diversion, LADOL Relocation

By David Ogah
07 June 2015   |   3:00 am
CONTROVERSY, that could worsen incident of diversion of Nigeria bound cargoes to the ports in neigbhouring countries, is brewing as a result of directive that oil and gas cargoes should, henceforth, be discharged only at Onne, Warri and Calabar ports, and the directive to relocate the $500 million fabrication project in Lagos to Agge, Bayelsa…
FPSO Vessel

FPSO Vessel

CONTROVERSY, that could worsen incident of diversion of Nigeria bound cargoes to the ports in neigbhouring countries, is brewing as a result of directive that oil and gas cargoes should, henceforth, be discharged only at Onne, Warri and Calabar ports, and the directive to relocate the $500 million fabrication project in Lagos to Agge, Bayelsa State.

While many of the stakeholders are of the opinion that the directive could create a monopolistic situation in the port sector, others are threatening to divert related cargoes to ports in neighbouring countries, a situation that will deprive Nigeria of much needed revenue.

Those who expressed fear of monopoly of port services, as a result of the directives, said since the ports at Warri and Calabar are idle as a result of their shallow channels, the only port left to discharge the specified cargoes is Onne port. This, they said could create a monopoly of port services, as only one port is left to provide the service.

They said to avoid monopoly of Port services; the Calabar and Warri port channels should be dredged to encourage vessels of any size to call at the ports, so as not to create monopoly for Onne port.

According to them, cargoes meant for even Port Harcourt port, Warri and Calabar ports are being diverted to Onne ,near Port Harcourt, by the Nigerian Ports Authority on the strength of the directive.

On the relocation of the Egina project from LADOL fabrication yard in Lagos to Agge in Bayelsa, the stakeholders said neither the Federal Government nor the Nigerian Ports Authority has a right to ask the company or the project to relocate to Bayelsa.

The Nigerian Ports Authority (NPA) had on April 27, 2015, directed LADOL Integrated Logistic FZE to relocate its FPSO project to Agge, where its claimed to have provided facilities for such operations.

The letter, titled: “Joint Venture Partnership with Samsung Heavy Industries for USD $500 million Development of a fabrication and integration yards for Egina and future projects” was signed by the General Manager in charge of capital projects, Mr. A.R Mohammed, an engineer.

The letter addressed to LADOL’s Managing Director, reads in parts: “Please be informed that Mr. President has vide Press/99/MT/212 of April 20th, 2015 approved that the FPSO project can be relocated to Agge Bayelsa State, where the facilities to handle such operations are developed. In addition, the project can be conveniently located at any dedicated oil and Gas Terminal.”

The second letter titled “Discharge of oil and Gas related cargoes” directed that vessels carrying oil and gas cargoes should first go to the appropriate NPA concessioned terminal to be cleared by customs and other relevant authorities, including terminal operators and shipping lines, and pay necessary charges before proceeding to locations for final discharge.

Agge is said to be a fishing community in Ekeremo Local Government Area (LGA) of Bayelsa State. Located in the mouth of Atlantic Ocean, reports say it cannot be accessed by road. Although it is the largest community in the council area, it may not have social amenities, except electricity supplied by Agip Oil Company from a gas turbine installed for ease of operations. The company extended electricity to the rural dwellers free of charge.

The Managing Director of the Lagos Deep Offshore logistics (LADOL) Dr. Amy Jadesimi, who reacted to the relocation directive, said it was impossible for the project to be relocated, especially to Bayelsa.

“We got the two letters the same day, a day after the appointment of the new Managing Director of the Nigerian Ports Authority, Alhaji Sanusi Bayero. The letters are diversionary in content, and the stakeholders should not allow them to distract their attention from the goals of providing one of the biggest floating vessels in the world, and making Nigeria the West Africa oil and gas hub, among other laudable objectives. We do not have any problem with the NPA. NPA has office in LADOL free trade zone. It has been following our construction in the zone. By the end of 2017, we would have invested $500 million privately in the NPA facility. And so, the letter surprised me. We are asking for clarifications. The two letters they sent to us are impossibilities. I want to believe that NPA has been misled. They do not know the implication of what they are doing. Tactically and technically, it is impossible for the project to be relocated to Bayelsa”.

According to her, the financial and social implication “of this proposed relocation will be too huge to quantify. First, one needs to take cognizance of the fact that although the $3.8 billion FPSO integration is taking place at LADOL base, other companies such as Dormalong, Aveon, to mention but few, are poised to provide ancillary services”.

She said the project could attract direct employment of 5,000 workers and 50,000 indirect employments. 

“ FPSO means a floating vessel close to an oil platform, at a place where oil is stored or processed, waiting to be transferred to a tanker vessel for shipment. It is a project that will be handled by Total. When completed, it will bring a lot of multiplier effects on the national economy.  Right now, the project site is 75 percent completed.  Huge revenue accruable to government from this project along with the investments that would come with it in a short-term is put at $20bn. Apart from the job losses, revenue losses to government is also an avoidable possibility, if the relocation order is enforced”

On the limitation of oil and cargo discharge only at Onne, Warri and Calabar, she said: “It will lead to monopoly and unnecessary high cost of operation, if you have a situation where people cannot choose a port of their convenience. One company can never employ as many people as a thousand companies. Lastly, the cost will be lower because of competition. So if the circle goes in that direction and you end up with higher cost, people will go to other countries. A directive like this has an impact that is political and social in nature. It is even a financial suicide.”

The Managing Director of Starz shipping company in Port Harcourt and President of Ship Owners Association of Nigeria(SOAN), Mr. Greg Ogubefun, an engineer, said there was need for government to decentralise commercial activities and spread it “across board” in the country.

“There should be enough political will to diversify port location. The Government should realise the need to put all ports into use. The Warri and Calabar ports cannot be fully utilised because of poor facilities. If there are issues as to why their use cannot be maximized, the government should find out why and find solution to it. As a ship owner, if my activities are in Port Harcourt, my ship should come to Port Harcourt. The Onne Port was dredged for big vessels to come in and it was celebrated. The present government should go back and look at the reason why Warri and Calabar ports are not in use. They should call the contractors, who got the dredging contract to find out the challenges, which prevented then from doing the work. The records are with NPA; I mean the amount paid to contractors to dredge the channels. The contractors should be summoned to find out if they have good reason not to do the job”.

On the directive for the relocation of LADOL fabrication project to Bayelsa State, the SOAN President described it as “rubbish”.

“It is rubbish. Nobody should dream it. It is an attempt to cause confusion. I don’t even know where Agge is and I have not heard of that name before now. The Government should tell the world the kind of infrastructure and social amenities in Agge that will attract people to move into the place. They should give us a pictorial view of infrastructure, social facilities like telephone, roads, portable water etc available at Agge first.”

The president of the Council of Managing Director of Customs Licensed Agents, Lucky Amiwero, said the directive for the relocation of the Egina project was not in good fate, adding that the government and the NPA should be careful not to attract litigation.

“The NPA has no right to issue that directive. They have to look at the law that granted LADOL the use of its present location in Lagos first. They are not the owner. If LADOL is a private orgarnisation, they don’t have the right to order its relocation, unless government or NPA has a share in it. The whole thing has to do with the law; it cannot be done, using political power. We have been operating in the country for 16 years without appropriate laws. Which law gave them power to relocate a company like LADOL”, he questioned.

On the directive relating to the restriction of oil and gas cargoes to only some ports, Aminero said the NPA and the Federal Government should be careful not to attract litigation from shippers.

He said where a shipper should received his or her consignment is a matter under international law as entrenched in international conventions of which Nigeria is a signatory.

According to him, under the international convention on carriage and freight, shippers determine where cargoes should be discharged, adding that neither the government nor NPA has the right to make such decision for the shipper or the consignees.

The association of Nigeria Licensed Customs Agents (ANLCA) has threatened to divert oil and gas cargoes meant for Lagos and other ports in Nigeria to neighbouring countries, if the directions that all oil and gas vessels should henceforth go through a designated port facilities is not reversed. According to the Association, the directive would create monopoly of port services.

The National President of the Association, Prince Olayiwola Shittu, who spoke on the matter, said it was “irresponsible” on the part of government and NPA to give such directive meant to create monopoly in the port system.

“What they are doing it to create monopoly that is anti-people and not in the interest of the country. Shippers have a choice as to where to receive their cargoes. We will encourage our clients to take their cargoes across the border. NPA is now forcing ships to go to Onne, not even Port Harcourt or Warri. This is an attempt to create monopoly. Even ships meant for Warri and Calabar ports are being diverted to Onne for discharge. The NPA will not allow other port terminals to receive these cargoes, except the Onne terminal, which is highly expensive.

The Managing Director of Port and Terminal Operators Ltd(PTOL), Port Harcourt, Mrs. Lizzy Ovude narrated her ordeal when she said GMT vessel came to her Port Harcourt Port terminal with pipes and Railway slippers, she was only allowed to discharge the railway slippers before she was forced to go to Onne to discharge the pipes, even when the ship owner insisted that the pipes were meant, according to the bill of laden, for Port Harcourt port. “The ship spent almost a week at ‘my terminal and the captain was forced to go to Onne to discharge the pipes. Those are cargoes meant for Port Harcourt, that was diverted to Onne,” she lamented.

The PTOL boss said, under the port concession agreement, the Port Harcourt Terminal is supposed to receive general cargoes, including pipes, adding that there was nothing like oil and gas cargoes under the Nigerian Port operation.
“Under the NPA, we have only wet and general cargoes. During Port Concession programme of 2003, there was nothing like oil and gas cargoes. Pipes were classified as general cargo.

“The oil and gas cargo is a new nomenclature, which some people coined to create monopoly. We have been going out to market our Terminal only for them to divert ships to other ports, even with protest from shipping companies. They are creating confusion. In our concession agreement, there is nothing like oil and gas cargoes,” she said.