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Published on January 4, 2008

Author: Sophia

Source: authorstream.com

Slide1:  Business Opportunities in the Nigerian Oil & Gas Sector – Prospects & Challenges Presented at the Aberdeen& Newcastle Road-shows For the British Deputy High Commission, Lagos Bola Afolabi, Ph.D. FCIPS Senior Adviser Contracting & Procurement – NNPC Transformation Project Shell Manufacturing Services, Nigeria Source: EPG-PN-TLN 14th – 17th March 2006 Slide2:  Africa in View Slide3:  Nigeria in View Slide4:  Population 120 million people (1 in 4 black person is a Nigerian !) Size 924k sqk (2ce the size of California) GDP $115b (per capita = $956/a whereas population grows at 3% / a Daily Production – oil circa 2.6 Mbopd Daily Production – Gas circa m 2mscf Proven Oil Reserves 35.2billion barrels (expected to reach 40b by 2010) Shell Nigeria Daily Production – oil & gas circa 50% country production No of Staff in 2005 5300 Spend $3b per annum Oil & gas aspiration 2m & 2.5mscf Spend on goods & services is circa 85% Dimension Nigeria Slide5:  Oil Robust portfolio & maturation of oil & gas Stimulating Nigerian content Create & sustain environment Alternative funding ! Premise / Growth Levers Aspiration Investment Horizon (2005-8) GAS Proved Reserves = 184TCF AG reserves = 95TCF NAG = 89TCF Huge upside discovery but un-appraised Daily Production = 4bcf/d World’s 7th largest gas reserves Rich gas Proved Reserves = 35bn bbls Oil Reserves = 30bn bbls Condensate = 5bn bbls Average Daily Production = 2.4mbd Installed Production Capacity = 3mbd Rich light, sweet crude Grow reserves to 40bn bbls by 2010 Grow production capacity to 4.5mmbbl/d by 2010 Change focus from oil to integrated oil & gas producing country Stop flaring by 2008 Restructure and revalidate refineries Oil – spend projection (34.4bn) Onshore - $6.4bn Offshore - $28bn Gas – spend projection ($32.7bn) Upstream - $12.4bn Downstream - $20.3bn Unprecedented investment – requires alternative funding argmt Nigeria’s Hydrocarbon Resource Base Slide6:  Average Daily Production Deferment Crude Oil Theft This nefarious activity dropped from 100,000b/d in 2003 to about 35,000b/d by 2005 Challenges in the Niger Delta Slide7:  87 Banks reduced to 25 Capitalisation went up from N2b to N25b Insurance re-capitalisation ongoing 10 Independent Power Program (IPP) by govt & corporate 3 more refineries 4 LNG plant British American Tobacco wants to spend N34m in Nigeria in 2006 Several government establishment up for sale Business Development Slide8:  Typical EPIC Structure FEED E P C Initial Ops Comm. Management In-house EPIC In - House EPP) Including Long Lead Procurement + Design follow - up support for continuity & integrity Stand - alone contract EPIC EPIC Integrated Oil & Gas Facilities (CPF, BS, Intc . P/Ls, etc.) Site Preparation (Dredging, Sandfilling , geo - drainage, etc.) Civil Infrastructure/ Field Logistics Base PMS & Interface Management pipeline - 2 Electric Power Transmission Systems (Power Cable) E PIC Ops Maint Specialist Support Contracts (PME) Stand - alone contract In - house FEED CD Projects Some stand – alone projects, some to be included in the contracts Existing Contract Scenario (Scatteer):  Existing Contract Scenario (Scatteer) EPRS UT works Manifold works Composite repairs Plan p/l upgrade / repairs Coating repairs Valve mtce Civil/ structure Routine pigging Guage pig Geometric / calipers Intelligent pigging De-scaling pigging Mfld struct inspection Riser Inspection Coating survey CP Survey RoV survey P/l repair shallow offshore P/l repair at Beach approach Chemical injection Corrosion control chemical stocking Sampling / corrosion monitoring Corrosion Coupons Lab Analysis Bulk line construction Flow line construction Delivery line construction HSE training ESI & ERR Waste mgt Env. mapping Env. monitoring ISO impl. Support services Spill containment Vessel & marine services Clean-up Remediation CP upgrade / repairs Mfld protection Hardware Remote monitoring Security Prosecution Surveillance Intelligence Proposed Contract Strategy (Clustering) :  Proposed Contract Strategy (Clustering) Survey. P/l repair shallow offshore P/l repair at Beach approach Security Surveillance Intelligence Grass cutting/over fly Slide11:  The Shell Petroleum Development Company of Nigeria Ltd. SPDC Vision: To be the Industry Leader, Employer of 1st Choice, and a Company that Delivers as Promised. Source: EPG-PN-TLN Slide12:  This means… Industry leader: - preferred operator by all partners and stakeholders - respected for the efficiency and scope of our operations - admired for the quality and competency of our people Employer of first choice - caring company that takes advantage of its diversity and that people are proud of - people demonstrate professionalism, entrepreneurship and feel empowered - displays core values of honesty and integrity, and respect for people Company that delivers as promised - accountable for its promises and excels - rejects poor quality, corruption and non compliance - focused drive and discipline to ensure delivery Slide13:  SNOP and SNG (100% Shell) Current Shell businesses in Nigeria SPDC JV (55% NNPC, 30% Shell, 10% Total, 5% Agip) NLNG (49% NNPC, 25.6% Shell, 15% Total, 10.4% Agip) NLNG: gas liquefaction People: 1,049 Revenue: 1.4 bn $ (S/S) Production: 11 mtpa LNG Location: Bonny Island Initiated in 1998; now a world class/size operation Shell is the technical advisor and shareholder New trains (4, 5 & 6) under construction SPDC: EP Company People: 5,000 Revenue: 4.6 bn $ (S/S) Production: 1 MM bbl/d Location: Niger Delta Largest EP company in Nigeria Shell is operator of Shell/Agip/Total/NNPC JV JV produces 40% of Nigeria’s oil SNEPCo (100% Shell) SNG: domgas distribtn People: 40 Revenue: 8 M $ (S/S) Production:9MMSCF/d Location: Niger Delta Downstream gas supply (to quadruple in 5 years) Incorporated in 1993, SNEPCo is Shell’s offshore operator. SNOP: oil products People: 30 Revenue: 45 M $ (S/S) Sales: 125*106 ltr of products Location: Warri, Port Harcourt Downstream operations in Nigeria SNEPCo: EP Company People: 500 Revenue: 0.25 bn $ (S/S) growing to 2.5 bn $(S/S) Production: 125 kbbl/d Location: Offshore Slide14:  Size: 70,000 Square km Population: 27 Million Number of Communities: 1,600 Characteristics: Sandy coastal ridge barriers,brackish or saline mangrove, fresh water permanent, seasonal swamp forest and low land forests. Background: The Niger Delta Shell in the Niger Delta Slide15:  Shell’s E&P footprint comprises the total Niger Delta … Shell has an extensive portfolio which extends itself over the full Niger Delta (unlike its competitors). The Niger Delta population has many different and diverse communities (~1,600). The Delta is difficult accessible land, characterised by mangroves, seasonal swamps and forests. Shell is making concerted efforts to address legacy issues: Address Poverty, Health, and Local Governance challenges through strategic partnerships and increased local content. Provide financial, technical support to whole communities to raise their self-confidence to take ownership for, and ensure sustainability of their development Slide16:  SPDC Dimensions About 35,000 employed (5000 core, 94%Nigerian) Shell operations, incl. roads, take 0.7% of acreage (0.3% of Niger Delta)  Production capacity of over 1,000,000 b/d of oil  94 producing fields  87 SPDC flowstations  6,200km of flowlines and pipelines  2 SPDC major crude export terminals Slide17:  SPDC PROJECT PORTFOLIO Slide18:  Major Project Area Map & T3/4/5/6 Nodes EGGS 2 EGGS 1 RP-A Slide19:  Significant investments to materialize growth . . . Shell intends to build up its investments in Nigeria to US$ 4.5 bn per year in its onshore and offshore acreage and LNG investments. Total investment including government and JV partners will be around US$ 15 bn per year for the next 5 years. Hydocarbon investments typically have lifecycles of 10 – 20 years. Stable and robust fiscal frameworks are essential. Funding . . . with pay off after 5 years Portfolio - NLNG Gas Supply Projects:  Portfolio - NLNG Gas Supply Projects 2003 2004 2005 2006 2007 Downstream Train 3 Projects OGGS Cawthorne Channel Forcados Yokri Train 4/5 Projects Soku / EGGS Gbaran/Ubie Bonny NAG-2 Odidi AG/NAG Southern Swamp by-pass Staggered Start-up 3 Compression/Treatment Plants Slug catcher complete 2008 T3 T4 T5 T6 EGGS Soku NAG AG EGGS-2 pipeline AG and NAG Portfolio - Oil projects:  FYIP Ovhor Kolo Creek PL Nembe Creek PL Gbaran Ubie Oil/Gas Plant CC FOD Soku FOD KC platform Portfolio - Oil projects 2003 2004 2005 2006 2007 !st Oil 1st Oil 2008 Proj Closeout Oil & AG Comp Facilities Oil Facilities (notional) 1st Oil Proj Closeout Slide22:  Projects Scope US$m T4/5/SOKU oil facility & gas supply to LNG FYIP onshore/offshore facilities – gas for T3 OGGS offshore gas gathering trunk-line BTIP restore integrity ageing facility & new tanks AGG WEST associated gas gathering (SSAGG for T3) TRUNK replacement of aged trunkline AGG EAST associated gas nodes (Oguta, Belema) CC new facility and gas gathering DEE engineering works, QA/QC KC platform upgrade at Kalaekule SUBSURF seismic works, mapping and geomatics PET ENG petroleum engineering, core analysis AFAM power project – Afam 1-VI (circa 15nos) Total Pre-Estimate for up to 5yrs (incl. SD) circa USD 7b Some Major Contract Overview 2004 - 2009 Slide23:  Projects Scope US$m T4/5/SOKU - Soku debottlenecking - oil & gas facility to LNG - EGGS Phase 1 - EGGS linepipe procurement - Gbaran/Ubie CPP - Site Prep G/Ubie - Civil works (roads, bridges) - Electric power transmission - Project management OK LNG LNG 2 new refineries Typical Breakdown Slide24:  FUTURE/PLANNED PROJECTS Slide25:  GAS DEVELOPMENT LNG Gas Supply H-Block Development Southern Swamp AGG Govt IPP’s AG Solutions Odidi-NAG Portfolio of Future Projects OIL DEVELOPMENT Cawthorne Channel FOD H-Block Development Soku FOD Slide26:  Contracting & Procurement SPDC Nigerian Content Development Slide27:  The Contracting process Definition of Contract Strategy Pre-qual and Contractor Selection Tendering Award Post-Award Mgmt. Close Out Identification of need to contract/procure Contract Planning Strategy documentation Strategy approval (Shell/NNPC) Place advert & invite bids Prequalify Bidders (Shell/NNPC) Approve Bidders list Issue ITT Receive replies to ITT Technical evaluation (Shell/NNPC) Commercial evaluation (Shell/NNPC) Award proposal Approve award (Shell/NNPC) Sign contract Initiate contract kick-off Implement contract management plan Execute contract Reconcile payments, claims, etc. Contract closeout report Slide28:  Incorporated bodies Non-Incorporated bodies  Memo and articles of association Tax Clearance Certificate Certificate of registration Directorate of Petroleum Resources Permit Directorate of Petroleum Resources Permit Form CO2/C06 (Registered names) Current Year Tax Clearance Certificate Certificate of Registration Form C02 (Shareholders)/C07 (Directors)   Additional Documents Required  VAT Certificate (if any) Organisational chart Letter of financial competence from the Company’s Bankers Last audited accounts or statement of affairs (for newly registered companies) Current workmen’s compensation insurance certificate Letter from L.G.A. for all Directors and photocopy of International Passport for Expatriate Directors 2 passport pictures of at least 2 Directors endorsed by a Nigerian Court of Law Evidence of projects previously undertaken Curriculum vitae of technical personnel Proof of medical retainership CASHES Policy QA/QC manual   SPDC Contractor registration – Documents required Slide29:  Only Foreign companies that are duly registered in Nigeria (in accordance with section 54 of the Companies and Allied Matters act of 1990) are allowed to do business Foreign company may do business in Nigeria through the instrumentality of a separate entity. (A Nigerian affiliate or subsidiary meets that requirement) Foreign Company can work in Nigeria without a Nigerian Affiliate, provided the entire work is done overseas (no Nigerian element, no visit to Nigeria) No Withholding Tax (WHT). Resident Non-Indigenous Status: Foreign Co. Nig. Ltd with no local directors is allowed provided appropriate tax is paid Contracts denominated in local & foreign scope (Naira & US$ only) : Pay WHT and VAT or else obtain letter of exemption from Federal Inland Revenue Service. Doing Business with SPDC – Foreign Companies Slide30:  www.nipex.com.ng An electronic marketplace with integration to Joint Qualification System database System developed in December 2005 Facilitates supplier selection and contract approval processes between the IOCs and NNPC Doing Business in Nigeria – Nigerian Petroleum Exchange NipeX Portal Area:  NipeX Portal Area Slide32:  The Nigeria Joint Qualification System . . . . . . to be introduced in 2006 A central system set up, maintained and supported by all the stakeholders of the Oil & Gas Upstream Industry business that will : Provide a Data Hub to reduce the burden of pre qualification on both suppliers and purchasers; Allow purchasers to benchmark own performance Allow suppliers to benchmark their performance Provide a monitoring tool (Nigerian content) for NAPIMS and DPR; Provide Data on upcoming contracts to improve opportunities and investment decisions. The scope will cover Supplier Registration Supplier Pre-Qualification Supplier Audit & Verification Performance Feedback and Profiling Nigerian Content Reporting and Monitoring Broadcasting Contract Opportunities Slide33:  Traditional Approach Joint Qualification System Consolidated Opportunities - The Marketplace :  Consolidated Opportunities - The Marketplace Focus Oriented for buyers (buyer-centric). Target Market Oriented to satisfy the needs from the oil industry – initially upstream Geographical Scope Oriented to satisfy the needs from companies operating in Nigeria. Marketplace BUY Slide35:  SPDC NIGERIAN CONTENT DEVELOPMENT SPDC Nigerian Content Development Slide36:  SPDC Nigerian Content Development – Core Elements Increasing Nigerian Content create employment and personal development opportunities for Nigerians; maximise the use of Nigerian manufactured goods & services; drive structured training & skill development for effective transfer of management and technical skills Promoting growth of indigenous contractors’ base sustainable development of Nigerian businesses as suppliers, sub-contractors & service providers; promote the contribution of our contractors to the development of the national industrial base beyond the Oil & Gas Industry Nigerian Content is . . . “the quantum of composite value added to, or created in the Nigerian economy through a deliberate utilization of Nigerian human and material resources and services . . . without compromising quality, health, safety and environmental standards in order to stimulate the development of indigenous capabilities”. Slide37:  Govt set target to achieve 45% by 2006 and 70% by 2010 NC is a prerequisite for entry into the Nigerian Oil and Gas Industry Directive on reserved work-scope for in-country execution Enabling law being completed by National Assembly OPTS set up NC sub-committee in 2004 initiated development of JQS developing gap analysis, reporting etc Government Goals Slide38:  Why Nigerian Content Development? The Federal Govt seeks to use the Oil and Gas Industry as a vehicle for creating jobs, enhancing transfer of technology and increasing the GDP The NNPC as part of it’s ongoing transformation – Project PACE – into a world class company wants to develop in-country capacity & Nigerian capabilities in the Oil & Gas Industry For Operating Companies, it will be an opportunity area for competitive advantage and is becoming a prerequisite for entry into Nigeria For SCiN, it is part of our contribution to the sustainable development of the Niger Delta and Nigeria, as a whole and . . . it is good business. Slide39:  The strategy seeks to . . . recognize the needs of our host communities’ contractors and suppliers and to ensure they receive the opportunity to tender for work encourage and promote the development of Nigerian businesses and the transfer of technology from international contractors to Nigerian contractors contribute to GDP growth Our Commitment: “ . . . to the development of the Nigerian content of its business as part of its immense contribution to the sustainable development of the Niger Delta and Nigeria, as a whole.” What we believe . . . An efficient & competitive Nigerian industry is good for Nigeria and the business. Increased Nigerian content would ensure steady & increased incomes and improved standard of living of the people of Nigeria and the Niger Delta in particular Opportunity exists for some Nigerian contractors to grow into international players in their area of expertise and make Nigeria the service hub of the West Africa region. SPDC Nigerian Content Development – Strategy & Goals Slide40:  SPDC Nigerian Content Development – Current Situation Federal Govt of Nigeria/NNPC: Set targets of 45% by 2006 & 70% by 2010 NNPC Nigerian Content Division set up with a Group General Manager reporting to the Group Managing Director Nigerian Content Consultative forum set up with 7 sub-committees on Petroleum/Well Eng. & Drilling, Fabrication, Manufacturing, Engineering, Shipping/Marine, Logistics, Banking & Insurance. NC a prerequisite for entry into the Nigerian Oil and Gas Industry Directive on reserved workscope for in-country execution Draft Bills being proposed by National Assembly & Min of Petroleum Resources Oil Producers Group (OPTS): Nigerian Content sub-committee set up since 2004 Initiated development of Nigeria Joint Qualification System for Vendor registration & prequalification (now fully supported by NNPC & DPR to take off 2006) Working on various industry sponsored initiatives – Gap Analysis, Reporting, etc. SPDC Policy/Strategy: SPDC Indigenous Contracting Policy, 1998 SPDC Strategy on Local Content Development, 2002 Mandatory inclusion of NCD strategy in Supply Chain Council submissions, 2005 Slide41:  Nigerian Content Development – NNPC directives Slide42:  Nigerian Content Development – NNPC directives Slide43:  Nigerian Content Development – NNPC directives Slide44:  SPDC Nigerian Content Development – Delivered . . . Contract Awards > 70% of contractors are Nigerian All contract proposals now include a Nigerian Content Development plan In-country fabrication Surge vessels, slug catchers, flare liquid knockout drums fabricated locally, with the 2 surge vessels at the South Bank flow station being the biggest in Shell Operations worldwide (weighing 120 tons each) Nexan Kabelmetal supplied 1,128 km of LV cable to BTIP Nigerdock fabricating the SPM/PLEM for the Bonny Terminal Export Oil Pipeline Buoy System Alliances between Nigerian & Multinational companies Facilitate entry into areas previously beyond capability of Nigerian companies e.g. provision of Swamp drilling Rigs, Integrated Well Completions, Facilities construction Manpower development Hyundai Heavy Industries, main EPIC Contractor for Bonny Terminal Integrated Projects (BTIP), established a Welding Training Centre in the Project’s host community, Bonny Slide45:  Fabrication & Construction Support Services Engineering Mandatory domestication of fabrication works 50% FPSO modules Pressure vessels up to 75mm Over $8bn planned for fabrication scope E&P from now to 2010 Supporting the upgrade of local fabricators to gain ISO Domiciliation of Project Management teams Circa $25bn spend expected on sourcing within next 5yrs Valves, fittings gaskets are potentials Train 300 design engineers per quarter from 2006 Banking Insurance Legal services Shipping (UNCTAD 40) Nigerian Content Slide46:  Opportunities for Compliance Fabrication Pressure vessels, Topsides, Steelworks, Platforms Engineering Design Front End Design, Detailed design Marine transportation Offshore services Construction & installation, Operation & Mtce services Provision of Drilling Rigs Swamp & Shallow Offshore Maintenance services TAM, Pipelines, Mtce & Overhauls Petroleum Engineering services Studies, Modelling Slide47:  The Known Barriers Corruption Insecurity Corruption Poor infrastructure Unreliable power supply Some are pure perception but we are conscious and determined to correct the anomalies Why Nigeria The Unknown Attributes Nigerians are friendly people Fairly stable political regime and still improving Largest in Africa (population, wealth) Abundant natural resources Conducive weather for living Gateway to other African region Most profitable stock exchange Government determination to change Wonder why Business in Nigeria is good, in spite of all the bad press ? Slide48:  The Benefits of doing Business in Nigeria Guaranteed Huge Return on Investment Virgin opportunities (gas, solid minerals, refinery, power, agro-allied ethanol) Cheap labour and land Low tax regime Multi related investments (by-products & services) Cheap oil & gas (cost of production less than $2, elsewhere $9) Huge deposit of solid minerals Strong political relationship with the UK, commonwealth member Easy reparation of currency Why Nigeria Slide49:  Attributes of Successful Investors Determination and doggedness Employ local Community Relations Manager Sustainable Community Development Plan Corporate Social Responsibility Aggressive Nigerian content input The Good & The Bad Common Mistakes to Avoid We Pay Tax, SD is government responsibility Non inclusion of qualified locals in management cadre Bribery & Corruption Tax Evasion Slide50:  Thank You for Listening Any Question ? Conclusion

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