Nigerian OSV owners bullish local content focus to boost growth

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A shift of licenses for shallow water fields from IOCs to Nigerian operators could benefit domestic OSV owners, leaving others scrambling for charters
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A member of the Organisation of the Petroleum Exporting Countries (OPEC), Nigeria is Africa’s largest oil producer, and its oil and gas resources are the backbone of the country’s economy. Much of the country’s reserves are located in the Niger River Delta and offshore in the Bight of Benin, the Gulf of Guinea and Bight of Bonny. Some good news for offshore vessel support owners in the Nigerian market was borne by the arrival of the floating production, storage and offloading vessel (FPSO) Abigail Joseph, following vessel upgrades in Singapore.

In a continuous effort to transfer skills to the Nigerian industry, a team of Nigerians participated in the conversion and life extension upgrades of the FPSO at the Keppel Benoi Shipyard in Singapore. This team will now form an integral part of future work on the FPSO.

Under a long-term charter, the FPSO will be working for Nigerian National Petroleum Corporation (NNPC), which holds a 60% interest, and First E&P, the remaining 40% stake, in the OML 83 and 85 fields. Both of these leases are located in shallow waters offshore Bayelsa State, Nigeria.

FPSO Abigail Joseph has a production capacity of 50,000 barrels of oil per day, with gas lift and gas injection capacities at 15 million standard cubic feet per day (mmscfd) and 39 mmscfd and a storage capacity of ‘not less than’ 550,000 barrels. The FPSO will be operated by First E&P and Yinson in coordination.

FPSO Abigail Joseph is Yinson’s second vessel to operate in Nigerian waters, the first being FPSO Adoon which is currently operating in Block OML 123.

First E&P is a Nigerian oil and gas company based in Lagos, with offices in Port Harcourt; the company started operating mid-2012.

Dangote, also a Nigerian company, is upping its activities in the offshore field with its laying out of loading pipelines from its new refinery to the offshore berthing facility.

Local sources. plus Shelf Drilling’s latest fleet status report, indicate that the jack-up rig Adriatic I is expected to remain under charter with Conoil into October 2020. Based on a Marathon LeTourneau 116-C design, Adriatic I has a maximum water depth of 350 feet and maximum drilling depth of 25,000 feet, with accommodation for 120. This rig has been working for Conoil since late September 2019 and has an up-to-five wells option outstanding.

Operations of Shelf Drilling’s MLT Super 300 design Baltic in Nigeria were suspended by Total Nigeria in July. Trident XIV completed its contract with ExxonMobil in July and is now for sale, while Trident VIII and Shelf Drilling Resourceful are both available.

On top of this the large international oil majors have not shied entirely away from investing and keeping up operations in Nigeria. SNEPCO (Shell) remains active in the market as it is still working on the two Bonga field development projects, Bonga North and Bonga South West Aparo. From local sources it is understood that FIDs for future investments remain to be decided.

Also, industry sources indicate that Chevron is likely to require a floater for deepwater work offshore Nigeria, sometime during 2022. The work scope remains undisclosed and is believed to constitute one or two wells. It is unclear whether the operator will use the same rig for its Nigerian and Angolan programme (also slated for 2022).

The most recent deepwater work for Chevron in Nigeria was carried out in the Agbami field by the drillship Valaris DS-4.

From Total there are indications that it has plans to go ahead with a six-month development drilling programme, but only in late 2021. Tenders will be out for the OML 130 field, holding the Egina field and Preowei discovery.

Team Nigeria Offshore operates 14 Nigerian-flagged OSVs, including Topaz Endurance (image: P&O Maritime)
Team Nigeria Offshore operates 14 Nigerian-flagged OSVs, including Topaz Endurance (image: P&O Maritime)
Local content prioritised

The OSV industry would do well to look towards Nigerian indigenous companies operating on the shelf, as opposed to the oil majors operating in deep water. There is still hesitancy in investing heavily in the deep-water segment. To add to this argument, the current licensing rounds are expected to trend towards Nigerian operators in shallow water working with mature fields. These fields have taken over from the IOCs, the licenses of which have come to an end.

For OSV operators, this is an interesting and potentially concerning trend. This inshore, shallow water, short-trip work can be almost completely supported by the domestic fleet of Nigerian-flagged and fully owned vessels, leaving little opportunities for the international fleet of support and supply vessels.

Over the last year Nigerian owners have gained strength, know-how and experience and they are now lobbying strongly to ensure that the Nigerian Content Development & Monitoring Board (NCDMB) rules are enforced. This means that Nigerian-built, -owned and -crewed vessels have a legal right to go to the top of the pile when new charters are available.

“Nigerian owners are lobbying strongly to ensure NCDMB rules, which prioritise their vessels when new charters are available”

Among those that stand to benefit are Team Offshore Nigeria, a 100% locally owned marine and offshore services provider, which operates a relatively young fleet of 14 Nigerian-flagged vessels.

An assessment of the present OSV market indicates that a majority of vessels on hire are Nigerian-owned, leaving little space for the international players.

Addax Petroleum has seven vessels on hire, out of which one is international. Anglo-Dutch oil major Shell and French energy company Total have similar situations, while Italy’s Eni’s six vessels on-hire are all Nigerian.

Chevron has around 14 vessels on contract across a number of vessel types, only one of which is international. And, at time of writing, ExxonMobil had around 11 vessels on hire, only one international.

Overall, the market for OSVs remains depressed, with small-/mid-size anchor-handling tug supply (AHTS) vessels ranging between US$7,000 to US$9,500/day and small-/mid-size platform supply vessels (PSVs) ranging from US$8,000 to US$9,500/day. A recent survey conducted locally indicated that the rates are closer to the bottom end of the mentioned range.

Vroon Offshore Services
Nigerian crude oil exports and condensate exports, by country, 2019
Country Percentage of exports
United States 10
other Western Hemisphere 3
South Africa 7
other Africa 3
India 20
China 3
other Asia 7
Netherlands 10
Spain 11
France 7
other Europe 19
Source: US Energy Information Administration
Uptick in Angola

Amid the depressed markets, it is encouraging to see that there seems to be an uptick in the Angolan markets. This is mainly driven by Total, which contributes approximately half of the Angolan oil production today. Total Exploration & Production managing director Olivier Jouney said that sanctioned projects, such as the Zinia Phase II and CLOV Phase II, were actively being pursued. The activities will include drilling campaigns, seismic acquisitions as well as maintenance on present assets. Transocean drill ship Deepwater Skyros is already in Angola, with the company’s Ocean Rig Skyros under charter starting in 2021, according to the latest fleet status report.

Meanwhile, Total expects to restart operations with Maersk Drilling’s ultra-high spec deepwater drillship Maersk Voyager and Seadrill’s West Gemini in August. Maersk Voyage was originally chartered for a three-well exploration project for Total E&P Angola for Blocks 32 and 48 and one well offshore Nambia for Total E&P Nambia.

The well in Angola’s Block 48 will be drilled at a new world record water depth of 3,628 m. The current world record is 3,400 m, set by Maersk Voyager’s sister drillship Maersk Venturer when it drilled the Raya-1 well for Total offshore Uruguay in 2016.

Maersk Voyager recently completed its special periodic survey in Walvis Bay, Nambia, after completing campaigns in Ghana and Equatorial Guinea in 2019.

Qatar Petroleum has now made its entry into Angola through a farm-in agreement with Sonangol and Total, acquiring a 30% participating interest in Block 48.

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