Reach Out

Your company is promoted as having the one-stop-shop concept. Can you elaborate on the advantages this concept brings to your company?

Intels, a subsidiary of Orlean, is Nigeria’s leader in providing logistics services to the oil and gas industry. It manages three ports in Nigeria on behalf of the government, namely Onne, Warri, and Calabar. Intels has a concession created with the government through a public-private partnership (PPP), which started in 2006. Even though the concessions only started then, PPPs were already in place between Intels and the Nigerian Ports Authority (NPA). Meaning in a way, the government utilized and promoted an existing successful working relationship. When we arrived in the early 1980s, the logistics challenge was that each company had its own base scattered widely. It was not the best solution, because each new company coming to Nigeria first had to acquire a block, then they had to face office and housing needs, as well as perform seismic activities and commence exploration. If they were able to find something commercially viable, which of course depends on the size of the field, for example, they would have required support from a shore base. Most materials required in the oil and gas industry need to be imported from Europe, the US, Asia, and Brazil. All of these materials have to go through the NPA for security and revenue reasons. The materials were coming to the port, and later transferred to a base. This begs the question of why the moment you receive your cargo at a port, you would again transfer the material, which at the end of the day incurs additional costs and increases the risk of damage. From the moment the company places an order and releases a purchase order for pipes, or any other material, it will normally take at least three to six months before the material enters Nigeria, because the factory needs to produce the material based on the specific requirements. All companies had their bases beyond the port area. Meaning, they were sending materials to the port, clearing it through customs and then transferring it to their own base. When offshore exploration began, oil-producing companies needed a jetty to load the material onto a barge or a supply vessel. However, companies were still sending materials to the port, going to the base, sending it back to the port, and going offshore. We saw the opportunity to convince NPA to give us a lease, whereupon we started pitching all of the producer companies. Eventually, we relocated inside the port to avoid extra costs, and have the opportunity to receive the material at the port and store it in a dedicated area. Then, when it is needed it can just be loaded onto the supply vessel and sent offshore. This way, you avoid double ending, and in terms of timing you are more efficient. This is what we offer with our one-stop shop concept. It did not happen overnight, but companies started relocating to the port. ExxonMobil decided to relocate to Onne for many reasons, namely because it is a free zone and has available essential services. At Onne, we have regular services from a number of shipping lines from Europe, the US, South America, and Asia. Furthermore, the reason Onne became more important is primarily its location in the middle of many of the production discoveries. The other reason is more structural. Today, Onne can have jetties of up to 12 meters at low water. In Nigeria, all the main ports are on the open sea, where you have a low and high tide with a difference of up two meters. We vary from 12 to 14 meters. This is important as the industry moves increasingly into deep-water operations with larger vessels.

Can you elaborate on the future plans for Onne oil and gas free zone?

For Phase 4A, which was completed and commissioned in 2013, we reclaimed 900 acres of land from the water. Another important investment for Onne oil and gas free zone is represented by Phase 4B, which totaled $3 billion and was made by Deep Offshore Services Nigeria Ltd. The purpose of the project is to develop a further 3 kilometers of jetties, and 3.5 kilometers of differently engineered jetties. Basically, these jetties will have longer lifespans than others, and here the depth is a mere 8 meters. Hence, there will be a dedicated area for the fabrication of infrastructure for offshore modules, jackets, and so on. Therefore, 8 meters is more than sufficient, as the material will be sent out on barges.

Can you elaborate on how the local content has affected your business and business in Nigeria as a whole?

The objective of local content is to ensure that Nigerians carry out some of these activities. We do this for several reasons: transfer of knowledge, and revenue that ultimately remains in Nigeria. We are absolutely in favor of local content, and Intels is a Nigerian company that is 90% owned by Nigerians. The local content actually considers the industry from several angles, one being the legal structure. In order to participate in bids in Nigeria, a company needs to have a certain amount of local shareholders, unless there are no companies in Nigeria providing that specific service. In that case, the Nigerian National Petroleum Corporation (NNPC) will allow certain companies to participate in the bidding process by waiver. Another angle concerns assessing what percentage of the project budget will be spent on Nigeria, or else paid to Nigerian service companies. A third aspect concerns technology, and how these companies might continuously increase their activity in Nigeria. When the Nigerian Content Development and Monitoring Board (NCDMB) approves any project, it does so not only in terms of the technical dimensions, but also the budget, and, therefore, local content is an absolutely practical law. It needs to be in place because Nigeria is the world’s eighth largest oil producer; within West Africa, Nigeria and Angola are certainly the two leading countries in terms of oil production. The problem with local content is that you need to have certain infrastructure in place in the country before it becomes feasible. The Nigerian government needs to make sure that there is sufficient infrastructure in place; otherwise, it will never work. Onne is the largest port and support base for the oil and gas industry. Yet, while there are an average of 18,000 vehicles entering and leaving every day, the road is of a poor quality. I believe local content to be both excellent and essential, but still the government should realize that it is also needed to play its part.

How is the government working to diversify the economy?

I don’t see the Nigerian government diversifying. There might be many initiatives, but they have not been implemented. The Petroleum Industry Bill is a good example. While its ratification date remains unclear, it is nonetheless of significance, especially for oil producing companies because it entails their payment of royalties and taxation. If approved, it would be of great significance for these entities. One could debate whether it is fair for Nigeria, the country that owns all of this oil, to generate further revenues. Until the law emerges, the oil producing companies will not invest, as they are to commit to multi-billion dollar projects without knowing whether in a few months their tax rates may or may not skyrocket. There are only a few projects going forward. When Nigeria complains that there are not enough foreign investors, they should look in the mirror and ask themselves the reason. All international companies, producers, or service companies are merely watching and observing the developments. It is quite normal that during an election period investments will stop, because everyone is wondering who will be the next president. Based on that, projects will change. In our case, it is easier because we are developing the ports, meaning wherever the projects will be, they will still need our services. I believe the Nigerian government should try to be a bit more consistent. If there would be a clear picture of where the government wants to go, it could only benefit Nigeria at the end of the day.

© The Business Year – September 2014