Boosting Local Investments in Oil Sector

The recent tour of the moribund Kaztec Engineering’s fabrication yard in Lagos by the Minister of Marine and Blue Economy, Gboyega Oyetola, and the Senate Committee on Petroleum (Upstream) with a view to reactivating the valuable oil and gas asset has underscored the need to support indigenous companies to continue to invest in Nigeria and contribute to the national economy, Peter Uzoho reports  

In response to the call by many concerned industry stakeholders on the need to rescue the $1billion Kaztec Fabrication Yard, located at Ilashe, Snake Island, Lagos State, from further degradation caused by a 2015 force majeure by Addax Petroleum, the federal government and the Senate have begun the process of reactivating the facility.

Last Sunday, the Minister of Marine and Blue Economy, Mr. Gboyega Oyetola, paid a visit to the company’s fabrication yard and pledged the support of the federal government towards the revival of the oil and gas infrastructure.

Remarkably, the minister’s visit to the project site came a day after the Senate Committee on Petroleum (Upstream) led by its Chairman, Senator Eteng Williams, paid a similar visit to the location as part of the upper legislative chamber’s commitment to investigating the reasons behind the project’s shutdown, to seek solutions for reviving the facility to revitalise the Nigerian economy.

Nigeria is currently in search of Foreign Direct Investments (FDI) inflows into the country and the government desires that more Nigerian companies invest in the country to minimise capital flights occasioned by the importation of oil and gas equipment and materials from abroad. 

Conceived as a major avenue to conserve foreign exchange and create jobs for the citizens, Kaztec embarked on the building of its fabrication yard otherwise known as the Antan Project in 2012.  The project was estimated to cost about $1billion t and was planned to support the drilling of over 19 million barrels of Nigerian crude.

The project which had already gulped over $600 million and attained 70 per cent completion was expected to be a one-stop-shop for the fabrication of offshore platforms, large offshore modules, Floating Production, Storage and Offloading (FPSO) refurbishment, and new build jackets.

It was also intended to provide facilities like pipe mill, pipe coating, dry and floating dock, logistics, supply base, and skills development and satisfaction of all the project delivery needs of oil and gas companies doing business in Nigeria and provide jobs for Nigerians.

The facility was projected to generate over $33 billion values in revenues and foreign exchange savings for the federal government over 10 years, in addition to over 3,000 direct jobs and over 10,000 indirect job opportunities for Nigerians.

However, for eight years, activities at the project site had ceased owing to a force majeure declared on it in 2015 by Addax Petroleum, the project technical partner, arising from taxes and audit issues between the federal government and Addax Petroleum.

The controversial force majeure unfortunately led to massive job losses, financial and economic losses, business failures and consequential challenges that have brought the company to its present inactive status.

 Unfortunately, when the immediate-past Muhammadu Buhari-led government curiously paid Addax, a foreign company over $900 million as compensation, Kaztec never received any penny despite all the losses it suffered over a case that had nothing to do with it. 

But speaking after touring the facility and getting the necessary briefings from Kaztec officials including its Chairman, Chief Emeka Offor, and the company’s Technical Director, Mr. Mike Simpson, amongst others, the minister assured the wholly Nigerian firm that he would support it to resuscitate the yard.

He acknowledged that the company had been able to make massive investments in Nigeria despite the bottlenecks that had led to the halting of the project, saying the government would review all the concerns raised by the company with a view to resolving the issues and reactivating the fabrication yard.

Oyetola said: “I want to assure you that we are going to support you in this project. You’ve spent so much and invested so much as a Nigerian. That’s the kind of thing we want to see happening in our country. So, whatever bottlenecks, or issues can be resolved.

 “We will look at all these issues holistically to support you. We want to encourage Nigerians to be able to invest in Nigeria. That’s part of the Renewed Hope agenda of the president, and the fact that the ministry is created for the marine and blue economy, which is part of what you are doing here.

“You can be too sure you have my support in channelling your proposals, your observations, the constraints that have not allowed you to be able to actualise your dream of keeping this project on course.”

The minister, who described the project as a win-win situation for all, commended Kaztec for having so much capital tied down in the project for many years and still remained unrelenting.

He added: “I think that we should commend you. We will support you in any way that we can. I thank the management for the commitment and passion to stay on the job. And we are trying to ensure that we have opportunities like this that will create jobs for our teeming youths. So, it sits as part of the eight pillars of the administration.

“Job creation is part of it. And with the kind of jobs you are talking about, it will at least take some of our youths off the streets, and that’s what is important.

“That’s something that we should be encouraging. I only need to know where the government can come in. This is part of the investment opportunities in the Nigerian economy. So, we commend Emeka Offor, you have been doing so much here.”

Earlier, while briefing the minister, Offor expressed his excitement with the visit, saying “I’m happy that the honourable minister is here to see things for yourself.

“We brought you here to see the level of investment here and then the hardship the organisation has gone through due to non-patronage as a result of the force majeure caused by Addax and the Nigerian government based on tax issues that we were not part of part of.”

Offor said Kaztec had already invested more than $600 million into the project, declaring the company’s faith in the current government as they had seen some massive changes.

He expressed his happiness that the government of the day understands the investments the company had made in the project.  

According to him, thousands of direct and indirect jobs could be created from the fabrication yard not to talk of other benefits to the economy if it became functional.

Offor maintained that the project will also help in foreign exchange accretion, especially at this period.

He further explained: “What we have done here is to conserve the foreign exchange by loading assets out from here without bringing assets from abroad, because when the IOCs are bringing these assets, if they are coming from the Far East or Asia or the US, and it takes a minimum of 45 to 60 days.

“And some of these assets are charged $1 million to $2 million a day, depending on the size of the equipment, and you can imagine if you are paying $1 million a day, times 60 coming and times 60 going and this affects us negatively.

“So, the model we have done here will stop all those wastages.  And we are happy to be patronised. We want to be challenged. We want to make sure that we go back to the intention and manner of this project. The objective of setting up this place was to help Nigeria.”

Similarly, the Senate Committee on Petroleum (Upstream), led by its Chairman, Senator Eteng Williams, embarked on an oversight visit to the Kaztec fabrication yard a day before the visit of the minister, to ascertain the level of degradation suffered by the facility since its eight years of inactivity owing to a force majeure declared on it in 2015 by Addax Petroleum.

 Accompanied by eight other members of the committee, Williams assured that the upper legislative chamber would ensure that the company gets justice and the facility revived.

 After touring the fabrication yard and receiving briefings from Kaztec officials, the Senate committee chairman expressed the readiness of the committee and the Senate to properly investigate issues relating to the keeping of the critical oil and gas asset moribund for eight years.

Williams pledged that his committee would carry out a comprehensive investigation, and identify the factors that led to the project’s current status while ensuring that justice was served to all the parties.

He also assured that the visit had afforded the committee first-hand knowledge and would lead to the effective formulation of policies that would result in the revival of the company and prevent future occurrences.

He added that all parties involved in the matter, including the Nigerian National Petroleum Company Limited (NNPC), the federal government, and others would be heard to enable it to proffer a solution for the revival of the project.

Williams said: “We’ve seen it all. We’re going back to the drawing board and we will call everyone involved. We have the assurance of the Senate President because we all want this country to work for everyone.

“We’re committed to making things work and we are assuring all stakeholders that justice will be done.”

The Senate committee’s efforts align with the vision of the President Tinubu administration towards maximising the nation’s petroleum resources and leveraging them for the overall growth and development of Nigeria.