In the second part of her interview, Managing Director of Lagos Deep Offshore Logistics Base (LADOL) Amy Jadesimi tells us how operating in Lagos promotes activity in the Niger Delta and how the indigenous company overcame negative perceptions.
How does a service base in Lagos such as LADOL feed the energy industry in the Niger Delta, and vice versa? What are the advantages of operating out of Lagos, as opposed to in the Niger Delta?
The reason we set LADOL up in Lagos is because our target markets are deep offshore and near-Lagos acreages. What we recognized about 15 years ago when we started is that the nature of oil and gas in Nigeria was changing. Initially, all the oil and gas was in the Niger Delta, in very shallow water or onshore, and it was very accessible. We knew there was going to be a doubling of oil and gas production, and that it would be focused on offshore fields, as well as fields close to Lagos. Increasingly, we are going to have production coming from these offshore locations.
The nature of offshore production is that it requires a completely different service provision. For the conceptualization of LADOL, we went around the world looking at fully integrated logistics bases and we knew what we would need: a location that can easily receive very large vessels; access to services and the best technology 24/7; and a secure location.
That is what we found here. LADOL is specifically designed for the offshore market, and it is located in Lagos as we can receive the largest vessels in the world. We are on a secure island inside Apapa Port, and in a facility that is operating 24/7 with streamlined, focused services on offshore support. The facilities in the Niger Delta offer a widely dispersed broad sweep of services. LADOL is streamlined and has a laser-like focus on the offshore drilling and production support market. The facilities dotted all over the Delta are focused on different needs in the petroleum sector, extending far beyond the dispersed service provision for shallow water drilling. LADOL and the Delta are complimentary, our lower cost of service provision (50-80 percent cost savings) increases the return on investment from offshore oil and gas exploration and production in Nigeria. In addition, we are driving local content and enabling companies to operate transparently and focus on medium to long-term returns. This in turn attracts billions of dollars of new investment into Nigeria and encourages companies to make Nigeria their hub, driving up demand for use of the facilities in the Delta and elsewhere in Nigeria. For every one job created in LADOL an estimated 10 jobs are created outside LADOL in Nigeria.
For ExxonMobil to send a vessel from Erha Field, which is 100 kilometers from Lagos, to LADOL, it is 80 percent cheaper to send it here than to Onne. That is partly because of our location, and partly because we are set up as a fully integrated base, with quayside services, repair, fabrication, workshops, a hotel, etc. And we were built like that from the beginning. There are very few fully integrated bases like this in the world, because you have to start from the beginning. Most were ports modified to service the oil and gas industry, but this is a totally different concept.
I like to think that we have leapfrogged even ahead of the bases in other parts of the world, and we have developed something that is optimal for the deep offshore in West Africa.
LADOL is specifically designed to meet the needs of deep water offshore operations. What specific challenges do you face meeting these requirements and how are they mitigated?
In general, if you want to service the deep offshore market you have to make a huge upfront investment because offshore activities are so expensive. That is a barrier, that you have to make such an investment to start. You have to run a small town dedicated to offshore servicing, 24 hours a day, 7 days a week. As the needs from the offshore industry are very high-tech, we are staffed 24/7 by highly trained people with specialized skills. Some of the vessels calling at LADOL cost upwards of $300,000 per day, so when someone is sending these vessels to your facility, you have to have the best services available. Maintaining a very high level of readiness on a continuous basis is very high overhead.
Also, creating this facility in Nigeria, when you are the first local to set up such an advanced base, meant we had to deal with almost universal skepticism and huge hurdles. In the beginning, we were constantly explaining who we are, what we are doing and why we are doing it. So on top of the usual issues of starting such a business, we had the additional baggage of negative perceptions because we are Nigerians doing this. Thankfully, we have overcome those barriers.
The market we are in now is challenging because the oil price is low, but it is also good for us and Nigeria. Low prices and significant market shifts force companies to change and in some cases to behave rationally. If companies decide where to get their support based on price, technical expertise, reliability and safety, then there is no question they will chose LADOL. When the price is high, there is a tendency for companies to behave not so rationally and cling to sub-optimal and in some cases very damaging business practices.
The resource curse does not just affect countries, it also affects the companies operating in these countries, and the way many companies have managed their resources with prices over $100 per barrel was not reasonable. Now, you are starting to see rational behavior and sustainable thinking. You are starting to see international companies look at local content as the rational choice, because it lowers costs and creates a sustainable environment where they are operating.
Read the first part of Ms. Jadesimi’s interview, on how local content can reduce costs, here.