After nearly two months extension, contractors have started a renewed race to meet the July 31 deadline to submit their technical and commercial bids aimed at supplying a floating production, storage, and offloading vessel for Shell’s $10 billion Bonga South West Aparo (BSWA) project.
People familiar with matter say if bids are submitted this quarter, clarification talks proceed as planned and costs meet the expectations of all partners in the deep-water project, Shell Plc. may attempt to take a final investment decision (FID) next year.
Three contractors with active interest in supplying the 150,000 barrels per day FPSO include South Korea’s Samsung Heavy Industries, with a base-case proposal, said to involve using the SHI-MCI yard in Lagos which most recently handled the FPSO integration work on Total’s Egina project.
A consortium of China’s Offshore Oil Engineering Company (COOEC) and Italy’s Saipem are also in the race. Iain Esau and Xu Yihe, analysts at Upstreamonline.com, an online platform that provides oil and gas news reported July 4 that an informed source said COOEC would build the topsides but would outsource hull fabrication work to other yards in China. Saipem will deal with the challenging local content aspect of the project.
A third group believed to be preparing to submit bid documents is China’s CIMC Raffles and Monobuoy, a Lagos-based engineering concern with a United States of America parent company. CIMC was previously expected to tie up with Kavin Engineering and NOV, and it is not known if these two contractors remain involved.
However, the Samsung-led group will be the bidder to beat because it has access to the only yard in Nigeria able to build and integrate FPSO topsides, a key factor in satisfying stringent local content requirements. It would have to navigate its thorny relationship with the Lagos Deep Offshore Logistics Base (Ladol), its joint venture partner in the SHI-MCI yard.
The most likely scenario will see Samsung use the SHI-MCI yard for BSWA, although experts have said that the Korean giant could propose other options. For years, Niger Dock has been touted as a possible facility that could be upgraded to handle FPSO and topsides work. On February 14th Shell Nigeria Exploration and Production Company (SNEPCo) had announced the release of Invitation to Tender (ITT) to contractors for the development of the Bonga South West Aparo (BSWA) oil field.
The project’s initial phase includes a new FPSO vessel, more than 20 deep-water wells, and related subsea infrastructure. The field lies across Oil Mining Leases 118, 132 and 140, about 15km southwest of the existing Bonga Main FPSO. The ITT is for engineering, procurement and construction contracts for the 150,000 barrels per day project in the Gulf of Guinea.
“This is a new vista for deep offshore oil and gas exploration in Nigeria based on a revised commercial framework embraced by government and the project investors,” Bayo Ojulari, SNEPCo’s managing director, said on 14 February 2018 a day after the execution of the Heads of Terms by the Nigeria National Petroleum Corporation (NNPC), SNEPCo and its Unit partners, revising the terms of the OML 118 Production Sharing Contract, in a media release of February 14, 2019, signed by Bamidele Odugbesan, media relations manager at Shell Plc stated; obtained from the super oil major’s website. Ojulari said, “SNEPCo has concluded OML 118 negotiations with the NNPC. We now have a clear commercial framework, supported by the government and project investors, toward a potential Bonga South West Aparo Final Investment Decision (FID).” BusinessDay rang Odugbesan at 12:57 pm on Tuesday but he was in a meeting and could not immediately comment before press time.
McDermott, Saipem, Subsea 7 and TechnipFMC are among those set to submit bids by the end of this month for the project’s EPC-2 package which will be worth upwards of $1 billion. BSWA’s umbilicals, single-point mooring system and subsea production system are subject to separate bid processes, with TechnipFMC, BHGE, and OneSubsea thought to be chasing the latter, which is centred on more than 20 wells. However, many project watchers are doubtful that the scheme will progress as planned unless the FPSO costs, in particular, can be reined in, and Shell and its partners can finalise an agreement with Nigeria’s government on a new production sharing contract for the asset.
In late May, Nigeria’s Minister of Petroleum Ibe Kachikwu said: “We’ll be looking to better terms than the previous production sharing contracts (PSCs).” He clarified that old PSCs which gave an 80:20 profit split in favour of oil companies is “a non-starter”, pointing out that a 60:40 split would be desired by Abuja. The PSC covering OML 118, which holds the bulk of BSWA, is due to expire in 2023.
Other critical projects that have also suffered delays in Nigeria’s oil and gas industry include: the 120,000bpd Shell and Eni’s Zabazaba/Etan project in the disputed Oil Prospecting Lease (OPL) 245, ExxonMobil’s 140,000bpd Bosi project, ExxonMobil’s 110,000bpd Uge project and Chevron’s 100,000bpd Nsiko deepwater project.
The delays in the execution of these projects, which are estimated to cost about $23 billion, is largely caused by the lack of clarity of terms as a result of the non-passage of the 12-year-old Petroleum Industry Bill (PIB), and inadequate funding. Business Day