The oil and gas sector is predominantly dominated by multinational oil companies, especially in the areas of engineering, procurement and construction sub-sector of the industry. However, in this interview with OLATUNDE DODONDAWA, during the recently Offshore Technology Conference in Houston, United States, the Managing Director and Chief Executive Officer of Oilserv Limited, an indigenous oil and gas engineering/construction service company, Mr Emeka Okwuosa, outlined the reasons his company is a force to reckon with in EPC sub-sector.
LAST year, you told us that Obiafu-Obrikom-Oben (OB3) was 90 percent ready and would be delivered by April 2018. What is the state of the project now and when would it be completed?
OB3 is currently undergoing pre-commissioning in the past three months. A project of that size, which is the largest pipeline existing in Nigeria for gas, is 48” diameter and 67 kilometer. For you to do pre-commissioning, you have to clean up the pipe, pressurise it. Just imagine 48”-67km pipeline and the volume of water you have to fill. It has to be sectionalise, fill the water, pressurise and clean it up to meet all the standard before you can now remove the water, dry it up.
To dry alone, because you can’t mix water with gas which you intend to transport, you will use a compressor with high pressure and temperature and pump. Just imagine the volume of air you have to pump into 48” diameter-67km pipeline. Sometimes, it can take up to three months to dry. The process is long and that’s what we are doing now.
And we are also doing the installation works at the end facilities because the pipeline we are building is different from ordinary pipeline you are familiar with. We have the facilities which include the metering stations, the pigging stations and other heavy duty equipment you have to install, interconnect, test, caliberate and do all those things.
The project is at the terminal end, we are supposed to finish by end of July 2018. So we are still on tract definitely.
You have been recently awarded a new Ajaokuta-Kaduna-Kano (AKK) pipeline contract which is 614 kilometer and worth $2.8 billion. What gives you an edge among your peers in terms of pipeline technology? Why Oilserv?
Oilserv is not about singing our praises, it is about fact. Oilserv was set up on a sound basis and principle. That’s the basis of sound knowledge of engineering and clear plan to grow technology and grow the company organically.
When we started in 1995, it was a very small company. It was only myself and one other employee and we slowly build it up. Now, we built it up by re-investing whatever money we make and acquiring latest technology. It’s not just about technology acquisition but by knowing the principles of these technology.
By my background, I am a cerebral engineer and I worked in 12 different countries before I came back to Nigeria. I was principally focused on developing engineering capacity. Along the line, we moved on to look at the best way of achieving the EPC work we have. We later introduced the welding works.
Welding is at the core of pipeline construction and the major threat in welding is the fact that using traditional welding system which is the manual welding system, will involve welders association. Some of them are not there to work but to create problems and you can’t control the quality of output too. We moved on to develop automatic and semi-automatic welding system where it is more like being in a production line in a factory. We trained our own staffs and they became the welders. Because it is not manual welding but automatic so we are not bound by certain rules of the welder association.
With this, we are able to do as much as 25 joints a day. Manual welding can’t do more than six joints a day. That’s how we speed up.
The other technology is our Horizontal Directional Drilling (HDD) technology system. You may realise that in building pipelines, you cross rivers, creeks, and all kinds of barriers. If it is water, you will dredge it, drop the pipeline, and cover it up. But by doing that, you disturb the water system, damage the environment and you may muddle the water. If you don’t restate it very well, you create additional problem down the road which can be erosion of the the water bed.
We developed a system where we can drill from one bank to the other without touching the bed of the river.
In crossing roads, in the old day, we have to cut the road and imagine cutting an eight lane road. Today, we do cross-boring system by going from one end to the other without disturbing vehicular movement on the road.
These gave us advantage over others. We train students and graduates and we invest in human resources.
We won the AKK because it was through a bidding process and we came out best.
We are the only company in Nigeria today that can deliver such project, the rest can’t. We are the first indigenous firm to graduate from being a construction firm to full EPC company. To be a full EPC company is expensive. It requires investment, it requires dedication.
If you look at AKK, you realised that we got the first section which is the most important. If you don’t get the first section right, you don’t have a pipeline.
The AKK project is Oilserv/Oando consortium, what’s the role of Oando in the project because it is not an engineering firm?
You have to fully understand that this project is not just an EPC project but it’s a contractor-financed project. You go into consortium for a particular reason. Oando is a partner to Oilserv, while Oilserv is the principal EPC company. And I’m talking from the view of EPC, Oando does not build pipelines, we are in a consortium because it’s contractor-financed and it gives us more leverage.
Oando has always had concessions from NNPC to develop, for example, the gas pipeline system in Lagos, through their company called Gaslink. They built Eastern Horizon company, South-South pipeline which is from Okanafo through Calabar to Ifamoseng where you have Unicem Cement Plant.
Many other projects they have done but in the core of these projects was Oilserv EPC Company. Oilserv usually build the pipelines, Oando doesn’t. In the Joint Venture, Oilserv will build the pipeline and not Oando.
Most projects of these nature are capital intensive, how do you intend to provide the fund for this project since NNPC won’t be providing fund?
Why won’t we be able to attract funding for it? That’s the whole essence of the bid. In the bidding process, you actually demonstrate how you can raise the finance, not only that you can do the job. We have already done 80 per cent of that. What we are waiting for is to close the deal with the NNPC.
This is infrastructural development gas. There are funds all over the world. You just have to have the right term sheet, the right way of providing security for it. If for example, a bank in America says they can give you a billion dollars, there is more money in the chasing projects. The problem is the risk, can you pay back and then are you trusted to deliver.
All these come together and that could have effect on the pricing. If your risk is too high, your pricing will be up. And if the pricing is too high, the project may not be economical and that’s how projects fail.
But in this case, it all balanced. Oilserv being an EPC company of repute has given us advantage because we don’t need to prove ourselves, the financiers know we can deliver. We have the capacity to deliver.
We have three financiers eager to give us fund but the biggest problem in this kind of project is guarantee by the Federal Government.
If the contract says when you build and you agree on 15 years, that they will continue to pay and we have confidence based on our discussion with the Nigerian National Petroleum Corporation (NNPC) who is our client. NNPC has a system in place with the support of the Federal Government to make sure that it works.
We are satisfied with the security they are providing and our banks are also satisfied with that. So the issue of funding is not a problem at all.
The way it works is that when the money is ready, it is domiciled in the JV account with the NNPC. Now comes the EPC, as you work, you are paid from that fund.
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