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Cost Saving in Project Development: Shell and Total Lead the Way

“Those who deliver need new opportunities to handle new projects”

–By Yange Ikyaa

ccording to Ahmadu Kida-Musa, who is the Deputy Managing Director, Deep Water District for Total, his company’s Floating Production, Storage and Offloading (FPSO) vessels at Akpo, Usan, and Egina are among the only seven of such facilities currently deployed in Nigeria and are doing a great job in cost cutting, time saving, and operational efficiency and reliability.

Speaking at the recently concluded Nigerian International Petroleum Summit (NIPS), he noted that Egina is currently producing crude oil at the volume of 60,000 barrels per day but is expected to ramp production up to 200,000 barrels per day by March 2019.

“The FPSO has recorded zero fatality since its deployment and has achieved eight million man hours without any lost time injury (LTI),” while continuing with what he called “advancing Nigerian content to record levels.”

Emphasizing the feat achieved by Total in cost saving, Kida-Musa further explained that “$16.5 billion was budgeted for Egina but because of fast, seamless, efficient procurement, construction and commissioning in good time, the project was finished at 10 percent below its initial budget. It is expected that by 2020, Egina’s contribution will take Nigeria’s oil production capacity to 3 million barrels per day.”

The Total Deputy Managing Director, who also previously worked on the first Bonga project owned by Shell, said that the initial budget for Bonga SW, a project now in the making was $20 billion but it has now been reviewed down to $12 billion.

Bayo Ojulari, Shell Managing Director, said Bonga produced 800 million barrels of crude oil in 2018 and remains one of the best oil projects in the world in terms of value.

The Bonga FPSO, according to him, has gone through four cycles of turnaround maintenance in the past and is currently performing at the same level as it was newly launched in 2005.

Data from Shell seen by Valuechain also indicate that the giant oil facility has produced 590 billion standard cubic feet of gas since it was commissioned, which is an average of 150 million cubic feet of gas per day. This stellar performance is hinged on top class maintenance culture, quality infrastructure and a collection of the best quality workforce.

Bonga FPSO’s last turnaround maintenance in 2017 was carried out using 13 in-field vessels, including 600-bed floating accommodation vessel; 2021 material deliveries, 313 operations and maintenance scopes and 60 projects, while robots, instead of humans, were used for under water leak detection.

The turnaround maintenance spanned through 38 days of pre-shutdown and 36 days of shutdown period, with over 1,000 people spread across 10 functions and multiple disciplines and locations, including over 50 Nigerian contractor and sub-contractor companies.

The use of robotics in performing such tasks at risky or dangerous locations of hundreds or thousands of meters below the ocean increases efficiency or precision and prevents fatalities and unnecessary costs.

Valuechain findings indicate that the deployment of such hi-tech innovations in maintaining the Bonga FPSO helped in cost reduction, saving up to $42 million for Shell and extending the lifespan of the FPSO by ten years, with the capacity of Bongs FPSO to even drill new wells.

In the execution of these projects, the issue of Nigerian content has been taken more seriously more recently, as the Nigerian Content Development and Management Board (NCDMB), headed by Engr. Simbi Kesiye Wabote, is holding the IOCs operating in the Nigerian oil and gas industry to their responsibilities of carrying along local players and mainstreaming Nigerian content in their operations as defined by the nation’s constitution.

Wabote praised the Minister of Petroleum Resources, Ibe Kachikwu, for his sense of official integrity, which he said contributed immensely in saving their time and cost in delivering on the timelines set for their projects up to the commencement of production.

“Lack of external influence to do the wrong thing has been very minimal,” he said, adding further that “nobody has ever called me from the presidency or the minister’s office in the last two years. When you report me to the minister to influence my decision, he sends you back to me,” said the NCDMB helmsman.

Shell, the owner of Bonga, has many subsidiaries and Shell Petroleum Development Company (SPDC) produced Nigeria’s first commercial crude oil exports in 1958 at Oloibiri in Bayelsa State.

SPDC is the operator of a joint venture (the SPDC JV) between the government owned Nigerian National Petroleum Corporation (NNPC), with 55 percent stakes, SPDC (30%), Total E&P Nigerian Limited (10%), and the ENI subsidiary, Nigerian Agip Oil Company Limited (5%).

SPDC is focused on onshore and shallow water oil and gas production in the Niger Delta region of Nigeria.

The company’s joint assets include around 1,400 operated oil and gas wells, a network of approximately 4,000 kilometers of oil and gas pipelines and flow lines, nine gas plants and two major oil export terminals, Bonny and Forcados, as well as one power plant, Afan VI.

Then, there is Shell Nigeria Exploration and Production Company, or SNEPCo, which was incorporated in 1993 to develop Nigeria’s deep water oil and gas resources. It is a 100 percent Shell owned company and holds interests in four deep water blocks under the terms contained in a Production Sharing Contract (PSC) with the Federal Government of Nigeria and other partners.

SNEPCo operates OML 118, including the Bonga Field, with Shell interest of 55%, and OML 135, including Bolio and Doro, with Shell interest of 55%. It also has a 50 percent in OPL 245, Zabazaba/Etan, which is operated by the ENI subsidiary, Nigerian Agip Exploration Limited, and  a 43.75 percent interest in OML 133, Erha, operated by the ExxonMobil subsidiary, Esso Exploration and Production Nigeria (Deepwater) Limited.

Bonga was Nigeria’s first oil and gas project in water depths of over 1,000 metres and it increased Nigeria’s oil production capacity by 10 percent when it began production in 2005.

The Bonga FPSO vessel has a total production capacity of 225,000 barrels of oil per day and 210 million standard cubic feet of gas per day. The project helped create the first generation of Nigerian oil and gas engineers with deep water experience and it also stimulated the growth of support industries.

Economic contribution from SPDC JV partners to the Nigerian government stood at $23 billion or N5.31 trillion in the four years between 2013 and 2017, while the funds contributed by SPDC JV partners and SNEPCo to the Niger Delta Development Commission (NPDC) since the agency’s inception in 2002 is estimated at $1.9 billion or N338.12 billion.

In 2017, 94 percent of Shell Companies contracts in Nigeria were awarded to Nigerian companies, even as all Shell operated ventures in Nigeria achieved a daily production of 631,000 barrels of oil equivalent per day within the same period under review.

Shell’s Bonga Field is located 120 kilometers off the shore of Nigeria, at block OML 118 in water depths ranging from 900 to 1,245 metres. The Bonga FPSO is 300 metres long and is the height of a 12-storey building, and its deck spans an area of the size of three football fields.

The vessels capacity, after its upgrade through its latest turnaround maintenance, allowed SNEPCo to unlock new energy resources. For instance, in August 2014, production at the nearby Bonga North West field started using the instrumentality of the upgraded FPSO and contributing 40,000 barrels of oil per day at peak production.

In 2015, Bonga achieved the second best Operations Reliability Improvement Process (ORIP) calculative assessment ever in the history of Shell Group, after achieving Stage Gate 5 Operating Integrity (OI) standard and increasing reliability to 96 percent.

Gregg Ogbeifun, the Chief Executive Officer (CEO) of Stars Group and President, Ship Owners Association of Nigeria, praised the drive towards more efficiency by the International Oil Companies (IOCs) operating in Nigeria and acknowledged the opportunities such initiatives are creating for indigenous service companies to get more established, grow in technical and managerial competences, and also grow to scale.

He said his company, Stars Group, was started in 1986 with only N100 but it now has 11 vessels in its fleet as an indigenous oil servicing company, adding further that the company’s first business opportunity with its first vessel came from Total.

Ogbeifuna affirmed that “Stars Marine has now had the reputation of zero downtime or zero lost man hour in its technical operations for six consecutive years.”

The company, which is known for its services to Total’s first deepwater Floating Production, Storage and Offloading vessel at Bonga, took seven years to build and commission its first vessel but due to joint improvements in efficiency with its IOC partners, Total, and similar companies, it was able to build and commission its last vessel, the Eseyamo, within a span of one year.

However, Ogbeifun maintained that much still needs to be done in order to help the Nigerian oil and gas industry grow in all areas of expertise for more value addition to the domestic economy.

According to him, “the Nigerian Institute of marine Studies should also be supported by IOCs to enable it produce for the country a good measure of seafarers of international standard.”

Another industry player, Alfred Okoigun, whose company specializes in maintenance engineering services, also expressed similar views that his company has now been able to acquire fast crude boats that move as fast as 37 knots due to opportunities given to it by Total through its many projects, including the offshore project at Bonga.

Ifeanyi Nwagbogu, the Group Managing Director of Schlumberger, sees the oil and gas industry’s  drive for efficiency, time saving, cost cutting and increased value addition in oil exploration, production, marketing and management services as a necessity in this period of stiff and growing competition from alternative fuels or energy sources on a global scale.

According to him, “the hydrocarbon content in global energy mix is declining and we need to maximize the use and value we can make from the resource,” adding further that “the rig of the future may be completely run through artificial intelligence and robotics.”

Ahmadu Kida-Musa

Nwagbogu added that ethanol fuel blending holds huge promise for the creation of job opportunities and value addition, and that making investment in universities and developing needed skills that are increasingly becoming relevant today and may rule the future energy industry remains a necessary and urgent policy intervention.

Nigeria, Gabon and Angola were the only countries with oil in sub-Saharan Africa about 25 years ago, but over at the moment, over 25 African countries  are either producing or have found oil and prospecting still continues around the continent.

This means that Nigeria must get its management and technical capabilities right and on time to be able to effectively participate in the 21st century oil and gas industry that is becoming more and more competitive by the day.

According to Ibe Kachikwu, the Minister of State for Petroleum Resources, a lot of progress had been made in this regard since his assumption of office in the year 2015.

“The time it took to process and approve projects when we came into office in 2015 was 24 months on average but we have moved that lag period down to six months currently. We are also tracking the movement of our crude oil barrel to barrel from production to the market. We know where each molecule is going and we are now able to tell you exactly what the production and sales volume is on a day to day basis,” he said.

As a result of this predictability, oil producing companies are eagerly waiting for new opportunities to acquire licenses for oil blocs and the government now has the courage to speedily approve the renewal of pre-existing licenses even ahead of a previously scheduled deadline.

The minister affirmed that “between $1.3 million and $1.5 million has been generated from early licensing and it is still continuing. It took two to three years going through the process to renew such licenses but it is now taking an average of four months. Timely decisions have also saved Nigeria $1.5 billion on JV cash calls and arrears, up from $6.5 billion to $4 billion annually.”