April 6, 2021

Oil/Gas: Nigeria loses billions of Naira as dockyards capacity drops to 15% — Investigation

By Udeme Akpan

There are indications that the capacity utilisation of oil and gas dockyards in Nigeria has dropped to 15 per cent as a result of relatively low oil prices in the global oil market.

This appears to be very significant, when the over 60 per cent capacity utilisation of the dockyards in 2014 is considered.

The oil and gas dockyards, including Niger Dock, Dormanlong, Kaztec Engineering, were established at various times to provide fabrication and other services to oil and gas companies, thus conserving foreign exchange, building indigenous capacity as well as promoting technological advancement in the nation.

In an interview with Vanguard, Monday, Chairman, Petroleum Technology Association of Nigeria (PETAN), Mr. Nicholas Odinuwe, who confirmed the drop in capacity utilisation, said: “The capacity utilisation of the dockyards has dropped to about 15 per cent in the past few years, due mainly to low oil prices, drop in foreign exchange generation, review of contracts and low patronage of the dockyards.”

Impact on economy

However, the Department of Petroleum Resources (DPR) has raised concerns over moribund oil and gas facilities across the country. Speaking during a visit to kaztec Engineering Limited, located at Ilase Village, Snake Island, Lagos State, Director of DPR, Sarki Auwalu, said: “The industry depends on facilities like this to actualise its investment because it is like a support system for the oil and gas sector.

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“Our visit is to the edifice that we licensed and it is dormant. But we are going to make it active because we see it as an opportunity to grow the oil and gas industry.

“We have seen an opportunity we can use to support our gas utilisation, penetration and expansion programme. We have issued several licenses for modular refineries that need fabrications. We cannot allow this kind of facility to remain under-utilised.”

FG’s Committee

Also worried about the situation, the government has set up an Inter-Ministerial Committee, to review and propose measures targeted at activating the dormant Kaztec Engineering Limited yard in Lagos.

The Chairman of the Committee, Senator Magnus Abbe, who led members, drawn from different government ministries and agencies to visit, weekend, said the yard has been idle since 2015 when Addax Petroleum, which played a major role in its establishment decided to withdraw from the project because of some issues, including tax with the government.

According to him, before then Kaztec which total investment stand at about $1 billion, said: “By that time, Kaztec Engineering had already spent more than $600 million and imported a lot of materials and was employing over 3000 direct workers and with over 10,000 dependants on these contracts.”

Speaking during the tour of the facility, Abbe said: “What happened here is a national tragedy in so many ways because not only is the economy very negatively impacted but at the time we are trying to save foreign exchange from every means possible. It is quite disappointing to see that there are a lot of things here that could help this company save millions of dollars in foreign exchange for Nigeria.

“I want to thank the President for setting up this committee because it actually shows that he’s in touch with the realities of what is happening in the economy of this country and that he is doing everything possible to see that the Nigerian economy is not negatively impacted duly by current happenings.

“I think that Nigeria should be grateful to the president for this initiative because this is a situation that has gone on for about six years and then nothing has been done about it until the intervention by this Presidential committee and I think it’s very commendable.”

Continuing, he said: “The President has set up his committee, expertise from within. We have Technical people from the various government ministries, who have now been here and they have seen things for themselves.

“So, their inputs, I think would be useful in making recommendations. I would like to assure Nigerians that Mr. President is on top of this situation and to the over 3,000 workers of the company, and over 10,000 dependants, the Banks, and others that the President is aware of what is going on here and he has set up this committee to make recommendations.”

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However, in his presentation obtained by Vanguard, Director, Kaztec Engineering Limited, Mike Simpson, said: “Kaztec Engineering Limited (KEL) was formed over 14-years ago specifically to provide integrated engineering, construction, installation, hook-up and commissioning services to Government, NOC, IOC, and independent operators for onshore and offshore upstream oil and gas developments.

“KEL is the only 100 percent indigenous Engineering, Procurement, Installation and Construction (EPIC) oil and gas contractor in Nigeria. KEL has invested in excess of US$600MM in fabrication and marine assets and, prior to 2015, delivered large complex developments to major Clients in Nigeria. Internal practices and procedures were developed and implemented that enabled KEL to achieve technically sound and commercially practical results. Client deadlines and first oil dates were met.

“KEL was a leading member of the Nigerian contracting industry and employed circa 1,250 Nigerians directly during peak operations and a greater quantity indirectly. KEL provided these highly motivated personnel with technical training and a pathway to supervisory and management positions. International client companies acknowledged that KEL regularly delivered world class facilities.

“Non-Nigerian employees provided high level management and specialist services for those projects that required this input; these personnel never exceeded 1% of the workforce.

“In 2015 market conditions and other Client internal difficulties caused suspension of normal operations. Almost all personnel were released; fabrication facilities were shut down and expensive marine assets and equipment became idle. Maintenance budgets were depleted, and marine assets fell into a state of serious disrepair.

“Further investment was, as a necessity, put on hold. KEL was transformed from a fast-growing oil and gas contractor to a stressed company through no fault of their own.

”KEL are anxious to resume operations, implement further planned investment, and remobilize our labour force. Support from your good offices in the form of activation of previously committed projects that were suspended and new projects that will ensure a steady workflow is necessary for our return to the market.

“Expertise accumulated during our years of operation is completely retained in our internal practices and procedures and ready to be put back into use. KEL is capable of restarting with little or no learning curve – we are still in continuous touch with our released personnel.”

He added: “KEL’s US$600MM (+) investment in construction assets is ready to be put back to work for Nigeria. Patronage of the upstream oil and gas industry is vital and your assistance in this matter is urgently and respectfully requested.”

Vanguard News Nigeria