SNEPCO tasks stakeholders on cost competitiveness

The Managing Director, Shell Nigeria Exploration and Production Company, SNEPCo, Bayo Ojulari, has urged the Federal Government to pass the Petroleum Industry Bill (PIB), and address cost competitiveness challenges to aid investments flow into the oil and gas sector

Just as Egina that was built by anotheroil major, Total, Ojulari noted that Bonga southwest Akparo is expected to pave the way for other projects in Nigeria’s oil industry, while surpassing the former’s local content record to achieve 80% Nigerian content.

While the Total Egina project achieved 77% but Bonga aims for 80%, with the idea being to build on the successes that have been achieved.

He said this is a collaborative journey being governed by the Department of Petroleum Resources (DPR), Nigerian Content Development Monitoring Board (NCDMB), and the Nigerian National Petroleum Corporation (NNPC). He added that successes of the floating production storage and offloading (FPSO) vessel must be sustained.

Showcasing the Bonga South-west Akparo at the ongoing, Nigeria Oil and Gas Conference (NOG19), Ojulari, made it known that projects should be done in-country such that it will be cost-friendly and competitive.
“Projects should be competitive and if they are expensive due to different local conditions, it will be difficult to attract investments in Nigeria,” he said.

According to Ojulari, having competitive project will give room for others to thrive instead of being stagnant, adding that delay in the Bonga project has led to capital flight with billions of dollars lost.

He noted that if Nigeria wants to attract capital to the country through investments, only collaboration can earn that right.

He therefore disclosed that a new tender for the project has gone out since 2017, while Shell commenced a negotiation of Production Sharing Contract (PSC) terms after almost 10 years of stagnation.

But early 2019, SNEPCo signed a term with NNPC, which was done together with other International Oil Companies (IOCs), that have interest in the project. Stakeholders resolved dispute by agreeing on principles in which a new PSC will be put in place, while unlocking the Deepwater in Nigeria.

He revealed that expectation of stakeholders is to sign a dispute resolution agreement in 2019, while the new PSC is being signed as well, which will make Nigeria’s Deepwater to be active in future.

The fiscal condition of the Bonga project is significant for its success. 

A bill is at the National Assembly on adjustment of PSC in terms of royalty. Deliberations are ongoing between stakeholders and law makers and the outcome will rather make or mar the project.

Ojulari stated thus, “If the discussion goes in the wrong way, Bonga South-west and all the other seven FPSOs that are lined up to be developed in Nigeria will be frozen for some time. So, it is important that at the public hearing, we all stay alert and we don’t blame the regulators by just staying in our offices and complaining, we all need to join the debate.”

He emphasized that the basic economics of Exploration and Production, E&P, has to do with competitive pricing and it is not difficult to know what is possible and impossible. Therefore, if royalty is pegged at 50%, it will hamper the project.

For impact of the Bonga project, Ojulari was of the view that Nigeria should maintain continuity. 
Besides, impact of FPSO projects is enormous leading to more than 1200 direct employment with 5000 indirect employment during four years of project execution.

Significantly, the SNEPCo boss disclosed that in terms of fabrication capacity, about 45000 metric tons of fabrications are to be executed in-country.

He bemoaned the fact that some fabrication yards in the country are empty because people have built capacities that were not utilized. Projects should be ongoing so that capacities that are developed will be sustained. 

He advised that yards with huge investments that are idle should be utilised, adding that the only way FPSO projects can be sustainable is through a virile fiscal policy, while bills passed by legislators should be investor-friendly. 

“On my count, I expect six other FPSOs behind Bonga South-west. Just imagine an environment where there are six FPSOs, and there is continuity of work and activities, it is going to be a different place,” he added.
The dream of the Bonga project can only exist if there is confidence with thorough commercial terms and effective fiscal policy agreed by relevant regulators that will engender competition owing to reasonable cost of the project, as contractors have supported it on the grounds that the commercial frame work will be resolved.