Naice 2006 full paper building local capability (case study of agbami project)


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Naice 2006 full paper building local capability (case study of agbami project)

  1. 1. BUILDING LOCAL CAPABILITY: A CASE STUDY OF AGBAMI PROJECT Daniel F. ADEBOLA, Justina O. OKORO, Engr. Obi T. NWASIKE – Chester Mead Associates Limited This paper was prepared for presentation at the 30th SPE Annual International Conference and Exhibition (NAICE 2006) held in Abuja, Nigeria 31st July – 2nd August 2006. The views expressed therein are entirely those of the authors. ABSTRACT Agbami Field, which lies in block OPL 216, ranks among the largest single deepwater discoveries in the West Africa sub-region. The field was discovered in 1998 with reserves estimated at over 800 million barrels. Agbami is due on stream in 2008. Chevron's partners in the project include Petrobras, Statoil and the Nigerian National Petroleum Corporation (NNPC). Daewoo Shipping and Mari-time Engineering (DSME) was awarded the contract for the construction of the floating, production, storage and offloading (FPSO) vessel for the Agbami deepwater offshore field. About 40% (approximately 300,000 man-hours) of the total man-hours that will be spent in constructing the vessel have been allocated to Nigerian companies. The Nigerian content for the Agbami FPSO Topside Engineering and Services at 300,000 man-hours is a significant increase compared with previous deepwater projects that recorded between 40,000-50,000 man-hours in country In line with the Federal Government’s aspiration to build local capability in Engineering Design, a minimum of 175,000 man-hours of the total man-hours reserved for locals have been earmarked for Indigenous design outfits under a consortium led by the Nigerian Engineering and Technical Company (NETCO) a subsidiary of the NNPC. Chester Mead Associates Limited is one of the local design outfits presently involved in the Topside Design of the FPSO. This paper addresses assessment of the true value of Agbami local content development on Engineering Design Capabilities and the challenges involved in achieving the Federal Government set target of 45 percent local content in the oil sector by 2006 and 70 percent by 2010. INTRODUCTION The subject of local content development in the oil and gas industry received a major boost with the guidelines released December 2005 by the Nigerian National Petroleum Corporation (NNPC). The Federal Government commitment to the implementation of the said guidelines and the enforcement of the policies are issues that most be given topmost priority to ensure full local capacity development in the oil and gas industry. The Agbami deepwater project is expected to set a local-content participation standard with an astonishing 6,400 tons of fabrication and 300,000 man-hours of engineering services performed by Nigerians on this FPSO contract. Agbami Deepwater Project Agbami Field, which lies in block OPL 216, ranks among the largest single deepwater discoveries in the West Africa sub-region. The field was discovered in 1998 with reserves Chester Mead Associates Limited/NAICE 2006 Abuja Page 1 of 24
  2. 2. Chester Mead Associates Limited/NAICE 2006 Abuja Page 2 of 24 estimated at over 800 million barrels. Agbami is due on stream in 2008. Chevron's partners in the project include Petrobras, Statoil and the Nigerian National Petroleum Corporation (NNPC). Daewoo Shipping and Mari-time Engineering (DSME) was awarded the contract for the construction of the floating, production, storage and offloading (FPSO) vessel for the Agbami deepwater offshore field. Chevron had earlier obtained and evaluated bids from Engineering, Procurement, Installation and Commissioning (EPIC) Contractors for the supply of the facility. Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering, and Technip are some of the companies that bidded for the work. The Agbami FPSO will be moored in about 4,700 feet water depth, and at least 40 subsea wells will most likely be necessary to fully exploit the field. The FPSO will be designed to handle 250,000 barrels of oil per day, 450 million cubic feet of gas production per day and 450,000 barrels of injected water per day. Approximately 415 million cubic feet of gas per day will be re-injected. Designed to store approximately 2.2 million barrels of oil, the Agbami vessel is set to be on location for more than twenty (20) years. The Agbami FPSO will have thirteen topside modules, which contain the main process and utility systems. Weighing approximately 30,000 tons, the vessel topsides will generate 75 megawatts of power and have living quarters for 100 personnel. Figure 1.1: Agbami Deepwater Map
  3. 3. ssociates Limited/NAICE 2006 Abuja Page 3 of 24 Figure 1.2: Agbami FPSO Module Arrangement Chester Mead A
  4. 4. Overview of Niger Delta Area The Niger Delta extends over an area of about 70,000 square kilometers and accounts for 7.5% of Nigeria’s land mass. Extending from Apoi to Bakassi, from Mashin creek to the Bight of Benin, it covers a coastline of 560 km, about two-thirds of the entire coast line of Nigeria. The Niger Delta is world's third largest wetland, coming after Holland and Mississipi. It consists of relatively small upland with the rest being riverine fresh and brackfish water mangrove swamp hemmed in by sandy coastal ridge barriers. The Niger Delta region traverses nine out of the 36 States making up the Federal republic of Nigeria. These are Abia, Akwa Ibom, Bayelsa, Cross River, Delta, Edo, Imo, Ondo and Rivers States. The estimated population of the region is about 20million comprising over forty different ethnic groups speaking 250 different dialects across about 3000 communities. The predominant occupation in the area are farming and fishing. Except for the oil sector, the industrial base is virtually none existent; the further one goes into the wetland. The people are mainly engaged in farming and fishing activities. Since oil was first struck more than forty years ago, the area has grown to become the main source of foreign exchange earnings for the whole country. Over the period 1975 to date, more than 90 per cent of the nation's export earnings have, on the average, been generated from the region’s oil resources. The core producing area covers some 60% of the total acreage of about 31,105 km2 . The outlying area remains a significant asset yet to be exploited. The concessions are mainly held by joint venture with government participation. Some examples of major fields in the Niger Delta with their ultimate recoverable reserves are shown in Table 1.1. Chester Mead Associates Limited/NAICE 2006 Abuja Page 4 of 24
  5. 5. Table 1.1 Major Oil Fields in the Niger Delta Operator Fields Reserves (mmbbls) Shell Bonga 600 Bonga South West 600 Bomu 875 Cawthorne Channel 750 Forcados-Yokri 1,235 Imo River 875 Jones Creek 900 Nembe Creek 950 Mobil Edop 733 Erha 1,200 Ubit 945 ChevronTexaco Agbami 1,000 Delta 300 Meren 1,100 Apoi-North-Funiwa 500 Okan 800 Agip Ebegoro 160 Total Amenam-Kpono 500 Akpo 200 Obagi 670 National Engineering & Technical Company Limited (NETCO) NETCO was established in 1989 to acquire Engineering Technology through direct involvement in all aspects of Engineering in the Oil and Gas and non-oil sectors of the economy. NETCO is Nigeria's premier indigenous Engineering Company with the strategic vision of providing Basic/Detailed Engineering, Procurement, construction Supervision and Project Management services, using state-of-the-art Technology. It was a JV between Nigerian National Petroleum Corporation (NNPC) and American Bechtel, Inc. The main object was to fulfill NNPC's strategic vision of developing in-country engineering capability which will enable Nigerians to design and build plants and facilities for the nation's oil and gas industry, and other allied industries. NETCO started commercial operations in August 1990. From 1990 to 1996, NETCO worked alongside Bechtel staff and executed more than 50 engineering projects. These include CHEVRON's Onshore Gas Plant of the Escravos Gas Project Phase 1, a project that involved more than 143,000 engineering manhours and is still the most technologically advanced engineering effort ever undertaken in Nigeria by Nigerians. The NNPC/Bechtel joint venture lasted until April 30, 1997 when Bechtel exercised its options under the Shareholders' Agreement and formally withdrew. NNPC purchased Bechtel's shares, thereby making NETCO a wholly- owned NNPC subsidiary. Since the exit of Bechtel, NETCO has executed many significant projects and was awarded the prestigious ISO 9001 Quality Certificate in May 2000 by Bureau Veritas Chester Mead Associates Limited/NAICE 2006 Abuja Page 5 of 24
  6. 6. Quality International (BVQI). This achievement is the first by any indigenous engineering company in Nigeria NETCO played a principal role in the Nigerian content for the Agbami FPSO Topside Engineering. The minimum of 175,000 man-hours of the total man-hours reserved for locals was earmarked for Indigenous design outfits under a consortium led by NETCO. Overview of NETCO-OGDEN Partnership NETCO displayed its leadership role with the Agbami FPSO Project, when it agreed to provide and train engineers as past of its statutory obligation towards the development of in-country capacity in Nigeria content and a way of bridging skills gap in the multi discipline and extremely technical Oil and Gas Industry. NETCO in collaboration with the Oil & Gas Engineering Design of Nigeria (OGDEN) carried out a screening which pre-qualified 63 out of about 500 engineers from about eighteen (18) indigenous Engineering companies. Some of the participating companies are Chester Mead, Sigma, DeltaAfrik, Amazon, Linkso, Terra, Paragon, Atlas, Titan, Cakasa and many others. These engineers are expected to participate in various intensive training in Deepwater Technology i.e. Naval Architecture and Marine Engineering for a period of three (3) to eight (8) months. Deepwater Operations required specialized skills, knowledge and complexities in terms of technology and it was a realization of this fact that has propelled the initiatives to train young Nigeria Engineers to acquire the technical capabilities and expertise in these areas. In all NETCO has mobilized about thirty-five (35) Engineers to Daewoo Shipping & Marine Engineering (DSME) office at Okpo in South Korea, while another twelve (12) Engineers were assigned to KBR offices in Houston, Texas, U.S.A. and three (3) Engineers had been identified with a scope in NETCO. Chester Mead Associates Limited/NAICE 2006 Abuja Page 6 of 24
  7. 7. LOCAL CONTENT DEVELOPMENT Nigerian Content can be defined as the quantum of composite value added or created in the Nigerian economy through the utilisation of Nigerian human and material resources for the provision of goods and services to the petroleum industry within acceptable quality, health, safety and environmental standards in order to stimulate the development of indigenous capabilities. The Nigerian National Petroleum Corporation (NNPC) vision for local content development is to transform the oil and gas industry into the economic engine for job creation and national growth by developing in-country capacity and indigenous capabilities. In this way, greater proportion of the work will be done in Nigeria with active participation of all sectors of the economy and ultimately Nigeria will be positioned as the hub for service delivery within the West African sub region and beyond. Local Content development is an initiative on the part of the Nigerian Government to help develop local capacity building in the Nigerian Oil & Gas Industry and to enable Nigerians as well as indigenous companies participate actively. It can be seen as the utilization of the Nigerian human and material resources in the exploitation and exploration of the Nigerian hydrocarbon resources. The Oil and Gas industry worldwide plays a dominant role in technology development advancement of the use of local inputs as a way of reducing production costs and improvement of economic base of the respective oil producing countries. In Nigeria, the Oil and Gas sector plays a very dominant role to the economy in that 90 percent of the total revenue is from Oil and Gas production while over 90 percent of the nation foreign exchange earnings comes from the sales of crude oil. Nigerians have very little share of the oil and gas business, local participation is very low. It is estimated in the oil industry that Nigerian content presently accounts for less than 5% of the yearly $8billion used for technical services and goods. The objectives of the local the content development is to significantly increase the contribution of the expenditures in the upstream sector to the Gross Domestic product over a defined period of time. It is hopeful that local content development would ensure that the quantum or percentage of locally produced materials, personnel, goods and services rendered to the industry are increased, thereby generating more employment and economic empowerment Local Content Bill During the stakeholders seminar held in Abuja March 2003 on Nigerian content development in the upstream sector of the petroleum industry, the local content bill sponsored by Hon. Chudi Offodile was extensively discussed. The content of the bill are as listed below. (Section 1) Application of the Bill Not withstanding anything to the contrary contained in any other enactment or law, the provisions of this Act shall apply in respect of all operations and or transactions carried out in or connected with the upstream sector of the Nigerian Petroleum Industry. (Section 2) Responsibility of DPR and NNPC 1. The Director of Petroleum Resources shall or ensure compliance of all provisions of this act. Chester Mead Associates Limited/NAICE 2006 Abuja Page 7 of 24
  8. 8. 2. The Nigerian National Petroleum Corporation (NNPC) shall monitor the performance of all her joint operations partners, contractors and service providers with a view to bringing their activities in line with the provisions of this Act. (Section 3) Categorization of Operating, Service Companies and Jobs 1. To ensure the systematic tracking of the progress in the development of Nigerian content of the upstream petroleum industry, oil and gas service companies and oil and gas exploration and production services are hereby categorized as provided in the First and Second Schedules to this Act respectively. 2. All available jobs and competences shall, be categorized according to technology impact as provided in the Third Schedule to this Act, which schedule shall be updated from time to time by the Department of Petroleum Resources (DPR) to reflect current realities. (Section 4) Joint Qualification System 1. There shall be established a National Databank of available capabilities and a system for joint qualification of contractors through a body of industry stakeholders approved by DPR. 2. The body under subsection 1 shall be known as the Joint Qualification Committee and shall administer the joint qualification system and continuously update the National Data Bank. (Section 5) Set Targets The DPR and NNPC shall implement the provisions of this Act with a view to ensuring: a) A measurable and continuous increase in market share of the Petroleum Industry in the director of “Category A” Service Companies in the First Schedule to this Act. b) A measurable increase in contribution to the National Oil and Gas productions in the direction of “Category A” Exploration and Production Companies in the Second Schedule to this Act. c) A measurable in the market share of “Category A” Oil Service Companies in the First Schedule to this Act in the direction of high technology impact jobs categories in the Third Schedule to this Act. d) For low technology impact jobs as shown in the 4th column of the Schedule “C”, “Category N” Oil Service Companies shall be given the first consideration for inclusion in a bid list elating thereto. e) Non- “Category A” Oil Service Companies shall however be considered for inclusion in the bid list where NNPC is satisfied that “Category A” Oil Service Companies’ capacity had been exhausted. f) Specific targets shall be set for the industry from time to time by DPR. (Section 6) Implementation Procedure The Nigerian National Petroleum Corporation and its respective joint venture partners shall implement the “Uniform Project Implementation Procedure” of their Joint Operating Agreement (JOA) with necessary modifications to bring it into conformity with this Act. (Section 7) Price Premium on Bids There shall be allowed a price premium of up to 10% for “Category X” Oil Service Companies when bidding against non- “Category A” Oil Service Companies. (Section 8) Offence and Penalty Chester Mead Associates Limited/NAICE 2006 Abuja Page 8 of 24
  9. 9. A “Category A” Oil Service Company that wins a contract and engages another company to execute the contract, commit an offence and is liable to fine of N1, 000,000.00 and in addition, the company’s license shall be withdrawn by the DPR for a period of three years. (Section 9) Execution of Contracts over $ 100 million Without prejudice to existing laws on indigenous manpower requirement for oil exploration and production companies, all contracts awarded in excess of USD $100 million shall contain a “Labour Law” mandating a) The use of minimum percentage (to be stipulated by DPR in each case) of Nigerian Labour (on professional cadres) for listed projects in such contracts. b) The use of indigenous companies with minimum staff strength to be determined by DPR. (Section 10) Competency Certificate 1. DPR shall design a competency certificate, which shall be issued to indigenous contractors by operators and major contractors after the completion of a contract. 2. The original certificate, which shall be forwarded to the DPR by the operator with a copy to indigenous contractor, shall form one of the assessment basis for the renewal of licenses for indigenous contractors and their grading for purposes of establishing a National Data Bank of available capabilities. (Section 11) Middle Level Training and Specialized Skills Development DPR with the assistance of Petroleum Training and development Fund (PTDF) shall take all necessary steps to ensure that Petroleum Training Institute (PTI) becomes the industry center for middle level training and specialized skills development. (Section 12) Compliance with Nigerialisation 1. Multinational oil operating companies and oil service companies that have been in existence in Nigeria for a period of ten years or more shall ensure that the number of citizens of Nigerian employed by the company in Managerial, Professional and supervisory grades or any other corresponding grades designated by the company shall reach 95 percent of the total numbers of persons employed by the company in those grades and further ensure that at least 60 percent membership of the board of directors are Nigerian citizens. 2. DPR shall regularly compile the list of companies that have not complied with the provision of subsection 1 and recommend revocation of their licenses or leases. (Section 13) Local Content Performance Monitoring Procedure 1. DPR shall establish a local content performance monitoring procedure to be adhered to by NNPC and all the oil exploration and producing companies and all the oil services companies. 2. The DPR shall cause all operating companies and their contractors to calculate quarterly and annually and submit to it the value of the Nigerian Content of their executed contracts, jobs and operations using a pre-approved value matrix as in the Fourth Schedule to this Act. (Section 14) Conditions and Targets for Multinational Oil Service Companies Chester Mead Associates Limited/NAICE 2006 Abuja Page 9 of 24
  10. 10. DPR shall where necessary, impose conditions on, and set targets for multinational oil service companies to form joint ventures or partnerships with indigenous oil service companies for the purpose of achieving technology acquisition. (Section 15) Approval from DPR From the commencement of this Act, no expatriate quota shall be granted to any oil producing company or oil service company without first obtaining the approval of DPR which approval shall be through the recommendation of NNPC in case of her operating partners to DPR. (Section 16) Investment in Local Fabrication 1. DPR shall ensure that multinational oil service companies invest in local fabrication, infrastructure and other facilities in Nigeria. 2. A company engaged in local fabrication of oil and gas facilities in Nigeria and a company that sets up plants in Nigeria to exploit and process raw materials available in the country and used in the industry such as Bentonite and Barite shall be granted the following incentives a) An initial tax-free period of three years, which may be subject to the satisfactory performance of the business, be, renewed for an additional period of two years b) Tax free dividends during the tax-free period where the investment for the business was a foreign currency, or the introduction of plant and machinery during the period was not less than 30 percent of the equity share capital of the company. (Section 17) Enforcement of Sections 9 and 18 of Cap.279 LFN The National Maritime Authority shall ensure the enforcement of the provisions of sections 9 and 18 of the National Shipping Policy Act, Cap. 279, Laws of the Federation of Nigeria, 1990 to facilitate the development of the Nigerian Shipping Industry. Provided that where Nigerian crude oil is carried as a cargo, it shall be on C and F basis with title passing at the port of loading. (Section 18) Interpretation In this Act, “Nigerian Content” means 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 in the upstream sector of the Nigerian petroleum industry which includes all activities connected with the exploration, development, exploitation, transportation and sale of Nigeria crude oil and gas resources, without comprising quality, health, safety and environmental standards. (Section 19) Citation This Act may be cited as the Nigerian Content Development Bill, 2003. Local Content Target The new Nigerian federal guidelines issued December 2005 demand immediate project- management team and procurement center relocation to Nigeria. NNPC joint-venture partners Shell, ExxonMobil, Chevron, Total and Agip have been directed by the federal government to immediately relocate project-management teams and procurement centers for all local upstream oil-and-gas projects to Nigeria. Also under the new guidelines, the Nigerian National Petroleum Corporation (NNPC) will not approve projects without a binding agreement by the contractor with a Nigerian local Chester Mead Associates Limited/NAICE 2006 Abuja Page 10 of 24
  11. 11. firm, and a minimum of 50% of the total tonnage for floating, production, storage and offloading (FPSO) topsides must be fabricated in Nigeria starting January 2006. The earlier directive stated FPSO topsides should be built in Nigeria beginning by mid- 2006, but that starting date has now been backed to January 2006. The measures are aimed at quickly attaining the target for local-content input in the upstream oil sector. Project management teams have traditionally been located in the home countries of international oil companies (IOCs) operating in Nigeria and virtually all materials and equipment needed for oil and gas projects were imported. The directives are being implemented to halt the huge capital flight in the oil and gas sector where only 10% of the average $8 billion spent annually benefits the Nigerian economy. A government memorandum directed the NNPC not to honor tenders that did not include full participation of indigenous companies and that did not show sufficient patronage of equipment and materials manufactured in Nigeria. Other immediate directives included: • front-end engineering design (FEED) and detailed engineering design for all projects is to be domiciled in Nigeria by end of 2005; • fabrication of all piles, decks, anchors, buoys, jackets, bridges, flare booms and storage tanks are to be done in Nigeria immediately; • all subsea-systems fabrication including riser/flowlines, subsea assemblies/ancillary facilities and system integration tests are to be performed in Nigeria; • all FPSO contract packages are to be bid on the basis of carrying out topside integration in Nigeria; and • domestication of all seismic-data processing projects and all reservoir- management studies effective end 2005. LCD Target for Engineering in Nigeria Front-end engineering design (FEED) and detailed engineering design for all projects is to be domiciled in Nigeria by end of 2005. Some of the strategies adopted by the Nigerian Government for achieving the local content development target for engineering design are listed below: • Survey of available capacity and identification of needs for competence development • Training of Nigerians in targeted areas of competency and acquisition of Technological and Managerial capability • Development of infrastructure and upgrade of facilities • Project financing and funding of local businesses • Identification of new opportunities for local companies The Russian Approach In many areas the Russian design industry has well established capabilities. This includes civil and process plant design in general (i.e. refineries) and onshore oil and gas plant and pipeline design. This capability has been used extensively in Shells Russian projects. An example is the Salym project (see section 19.3). Also onshore topographical survey Chester Mead Associates Limited/NAICE 2006 Abuja Page 11 of 24
  12. 12. capability exists. In the Salym project all surveys have been carried by a number of Russian companies. In addition it is expected that Russian companies will be able to carry out the offshore surveys (bathymetry, ice, environmental base lines, unexploded ordnance, etc.). Russian companies have obtained significant experience in designing offshore platforms, parts of LNG plants and onshore reception facilities. Rubin has designed, for Sakhalin Energy, the accommodations for the Sakhalin II Phase 2 platforms. Companies like Nipigaspererabotka have participated in the LNG plant design. Some of the offshore components (i.e. sub sea facilities) are new to Russia. However companies with related experience exist in those areas. For example it is expected that a submarine designer like Rubin could develop over time into a sub sea system designer. Another key aspect of design is the approval of design. The knowledge of Russian standards and approvals lies with Russian design institutes. Therefore the development of the TEOC documentation and development of project specific standards would certainly by carried out by a number of Russian design institutes. The consortium can promote the development of design capability by stimulating a structured process of knowledge transfer. Assuming no prior experience, the knowledge transfer process could be as follows (see figure 2.1): 1. In the first phase (entry) the Russian design institute would work with an international contractor on the design. This could for example be in a joint venture. In this phase the design institutes involvement is envisaged to include development of project specific standards, the TEOC documentation, secondment of staff into the contractor organisation and liaison with authorities. 2. In the second phase of knowledge transfer (partial design), the Russian design consultant would carry out part of design, in addition to the activities listed above. Similarly to the entry phase, some form of cooperation with an international contractor is envisaged. 3. In the third phase of the knowledge transfer (Design with support) the RDI would carry out all design. In this stage the international contractor would still support the RDI in areas of specialist engineering and project management. At this point all design would be carried out in Russia. This would most likely involve seconding international contractor staff into the Russian design institute. Alternatively the operator could appoint a team of specialists to help the design institute with the design. For this purpose Shell has a large pool of discipline specialists, which could be made available to the consortium. 4. In the last phase the Russian design institute carries out the design independently. The above staircase presents the worst case. Particularly for the onshore plant design the established capability is far higher and knowledge transfer could start in phase 2 and 3. Chester Mead Associates Limited/NAICE 2006 Abuja Page 12 of 24
  13. 13. Entry Partial Design Design With Support Full Capability Knowledge Transfer Entry Partial Design Design With Support Full Capability Knowledge Transfer Figure 2.1: Knowledge Transfer Model for Design Chester Mead Associates Limited/NAICE 2006 Abuja Page 13 of 24
  14. 14. AGBAMI DEEP WATER LCD ASSESSMENT The LCD criteria considered in this paper presentation was based on the assessment of inputs compiled from the appraisal forms completed by fifteen engineers (15) engineers on training/secondment assignment specific to the Agbami project. Local Content Capacity Development Appraisal Form A template for review and appraisal of the true value of local content development on the Agbami project was developed and forwarded to engineers on training/secondment assignments on the Agbami project. The appraisal form however was tailored at extracting relevant information from trainee engineers on engineering design capacity development. The information received from this exercise was used to benchmark against the Nigerian Government set target of 45 percent local content in the oil sector by 2006 and 70 percent by 2010. A sample of the appraisal template developed for this purpose is shown below: Name Job Title Place of Secondment/Training Review Period Review Date 1. Secondment/Training Assignment Job Responsibilities Job responsibility one Job responsibility two Job responsibility three Job responsibility four Job responsibility five Understanding of Job Responsibilities Knowledge Transferred One Two Three Four 2. Engineering Capability Development Engineering Design Goals Training/ Secondment Goals Status Goal one Goal two Goal three Goal four Goal five Chester Mead Associates Limited/NAICE 2006 Abuja Page 14 of 24
  15. 15. Additional Achievements One Two Marhours Earmarked for Training/Secondment Actual Manhours Expended Design Software Experience Acquired During Training/Secondment Period Software one Software two Software three Software four 3. Challenges and Recommendations Challenges Encountered During Training/Secondment Period One Two Three Recommended Way Forward One Two Three Overall Assessment of Training/Secondment Programme Name: ____________________________________________________ Company Name: ____________________________________________ E-mail Address: _____________________________________________ Date: ______________________________________________________ Table 3.1: LCD Appraisal Template Manhours Earmarked for Engineering Design on the Agbami Project A minimum of 175,000 man-hours of the total man-hours reserved for locals was earmarked for Indigenous design outfits under a consortium led by the Nigerian Engineering and Technical Company (NETCO). NETCO in getting this due quota allocated to indigenous design outfits collaborated with the Oil & Gas Engineering Design of Nigeria (OGDEN) to carry out a screening exercise which pre-qualified 63 out of about 500 engineers from about eighteen (18) indigenous Engineering companies for participation in the topsides design of Agbami FPSO. Chester Mead Associates Limited/NAICE 2006 Abuja Page 15 of 24
  16. 16. Actual Manhours expended for Engineering Design Capacity Building On the average about 98% of the manhours earmarked was expended for engineering design capacity building. This figure was however based on the evaluation and assessment of the questionnaires sampled from some of the engineers that participated in the training/secondment programme arranged by NETCO in collaboration with OGDEN members. NETCO had earlier screened and shortlisted sixty-three (63) engineers for placement on training/secondment assignments in Houston, USA; Okpo, South Korea and Lagos, Nigeria. NETCO in collaboration with OGDEN have mobilized 50 engineers of various engineering backgrounds to participate in the programme. This value represents about 79% of the original number of engineers shortlisted for the programme. Assessment of Agbami Project LCD Value on Engineering Capability The initiative of the Federal Government of Nigeria to increase participation of indigenous design firms on the Agbami FPSO project is indeed a worthwhile development. The evaluation and assessment of the appraisal forms completed by engineers that participated in the training/secondment programme is an indication that substantial value has been added to engineering design capacity development. Some of the skills and competence developed during the training/secondment period are indicated below: Proficiency in the use of MSC PATRAN software for FPSO structures modeling and stress analysis. Proficiency in the use of AutoCAD software PDMS 3D modeling of equipment and piping Preparation of Process Flow Diagram and P&ID Pumps selection Basic fundamentals of Piping design Proficiency in the use of PDMS for equipment and piping modelling Design of Offshore Platform marine systems Design of Offshore hydrocarbon storage systems Development of SAFE chart for FPSO hydrocarbon storage systems Design of FPSO loading and offloading systems Development of Piping Isometrics Preparation of MTOs Review of PDMS model against Pipe Isometrics drawing Pipe stress analysis using CAESAR II Pipe support analysis using NAUTICUS Engineering, Procurement and Construction of not only FPSOs, but other offshore installations such as Drill Rigs, Drillships, Platforms, LNG Ships and Commercial Vessels Machinery Arrangement in the Hull Mooring System Arrangement, Offshore Loading System Arrangement Understanding & Interpreting P&IDS Process Simulation using HYSYS Hydraulic Calculations using PIPENET Valve and Equipment sizing Advanced use of Microsoft Excel and Primavera Planning and scheduling techniques for EPCI projects Risk Assessment as it affects budget and schedule of a project Preparation of work procedures Chester Mead Associates Limited/NAICE 2006 Abuja Page 16 of 24
  17. 17. Chester Mead Associates Limited/NAICE 2006 Abuja Page 17 of 24 Production Design Process Control Procurement Engineering Process Schedule Control Material Resource Planning and Control Development of HAZID table and systematic approach to risk assessment Knowledge of OSHA safety standards and monitoring of the compliance Preparation of inspection reports and monitoring of corrective measures Incident investigation and coordinating of Root cause analysis meeting Commissioning work activities procedures and how to handle interface operations Development of safety procedures and plan
  18. 18. Tables 3.2: Tabulation of Information Compiled from Some of the Candidates Appraised Chester Mead Associates Limited/NAICE 2006 Abuja Page 18 of 24
  19. 19. Chester Mead Associates Limited/NAICE 2006 Abuja Page 19 of 24
  20. 20. ssociates Limited/NAICE 2006 Abuja Page 20 of 24Chester Mead A
  21. 21. CONCLUSION AND RECOMMENDATIONS Following the uproar that trailed foreign domination in earlier deepwater projects, the Federal Government designated the Agbami field as a test case for its objective of raising the local content in the oil sector. Over all, the government wants at least 45 percent Nigerian input in the project. The Nigerian content of the Agbami FPSO Topsides contracts is in the region of 6400 tons - a significant increase in FPSO Topsides over previous deepwater FPSO projects by other operators. Similarly, Chevron has prescribed the Nigerian content for the Agbami FPSO Topside engineering and services at 300,000 man-hours compared with previous deepwater projects that recorded between 40,000-50,000 man-hours in country. Challenges Involved 1. There were significant delays in the deployment of OGDEN engineers on training/secondment assignments. Most of the engineers that benefited from the programme were not there at the early stages of the FEED and detailed engineering scopes. 2. Some of the engineers earlier listed for training programme could not participate due to visa and other logistic problems. A situation where availability of valid US visa was used as a criterion for participation is outrageous and should be corrected. 3. Communication gap is another major challenge faced by engineers seconded to South Korea. Some materials essential to trainees/secondees were written in Korean language. This places a big limitation on competent development and skill acquisition. 4. Delays in payment of allowances and other entitlements of the trainees/secondees. 5. Significant knowledge transfer on engineering design capability was lost because of the late participation of design engineers on the Agbami training programme. For instance HSE in design competence could not be fully delivered to the HSE engineers that participated in the training programme because HSE design team were not available at DSME yard in South Korea. Recommended Way Forward 1. In line with the federal Government set target of executing front-end engineering design (FEED) and detailed engineering design for all projects in Nigeria by end of 2005, local design engineers should be given the opportunity to fully participate in subsequent design of deepwater projects. 2. The major players in the oil industry should be mandated to set up design centers of international standards in Nigeria to train and groom local engineers. 3. Subsequent deepwater projects should be structured to involve the participation of local engineers from inception to completion of the design phase. A well structured schedule should be put in place and meticulously implemented to allow for the participation of at least 100 local design engineers in subsequent deepwater projects of Agbami capacity. 4. Local design firms should be assisted in the areas of skill acquisition, infrastructure development and funding when necessary to enhance their full participation in offshore design projects. 5. The Russian approach to local content development in engineering design referred to earlier in this paper should be imported and implemented in Nigerian content development. Chester Mead Associates Limited/NAICE 2006 Abuja Page 21 of 24
  22. 22. The recommendations listed below are expressed by some of the engineers that benefited from the FG training initiatives on Agbami project. Future trainees/secondees should be given a clear picture of what is expected of them at the end of the training programme. An orientation programme should be organised for prospective trainees in-country before their departure to get them acquainted with the project they are going to work on. The trainees should be challenged with a similar project on their return to the country as a way of assessing their capabilities and consolidation of experience gained. The programme is worthwhile and should be maintained by the stakeholders. A training coordinator to be stationed at training place to monitor progress Supervisor’s years of experience should be emphasized before trainees will be assigned to them. A clear schedule should be drawn for the trainees. A defined KPI should be defined for the training program. The trained engineers should be engage in future project, to enable them develop their skills. A program like this should be structured such that the engineers participate from the design phase to the construction stage. Training programmes like this should be sustained and repeated periodical. Trainee/secondees should be involved in similar projects in-country. The program should be structured in a way to clearly defined what each discipline is expected to pass through while on training. The sponsors should work out ways to allow for prompt and regular payment of allowances. Opportunities should be created to allow the beneficiaries (particularly the competent ones) to be involved in similar projects. If beneficiaries of this kind of training initiative do not have the opportunity to work on similar or related projects, then the purpose of the training programs might be defeated. A detailed schedule covering the entire training period and scope should be prepared and agreed on prior to commencement of training. Trainees’ rights and privileges should be clearly defined. After the training programme, engineers should be made to participate in projects where the knowledge acquired can be useful. Any such training in the future should be properly timed so as to have a thorough understanding of the entire project. The responsibilities of the trainee(s) should be outlined at the commencement of the training. Relevant agency should appoint a representative who will monitor company training system and progress. Government agency and training Partners should put up well articulated programmes to engage trainees immediately after the training. There should be continuous re-training of trainees and training of new engineers. Conclusion The local content achievement so far on the FG aspirations on the Agbami project is quite commendable. Substantial knowledge has been transferred to Nigerian engineers. However, there is room for improvement in subsequent deepwater projects. Chester Mead Associates Limited/NAICE 2006 Abuja Page 22 of 24
  23. 23. ACKNOWLEDGEMENTS The authors would like to specially thank the management and staff of Chester Mead Associates Limited for the useful advice and suggestions while writing this paper. We also acknowledge the support of the team of engineers on Agbami training/secondment assignments for their support and information while writing this paper. NOMENCLATURE CMA Chester Mead Associates Limited DPR Department of Petroleum Resources DSME Daewoo Shipping and Mari-time Engineering E&P Exploration and Production EPIC Engineer, Procure, Install & Commission FG Federal Government FPSO Floating Production Storage & Offloading vessel HAZID Hazard Identification HAZOP Hazard Operability HSE Health Safety & Environment IOCs International Oil Companies ISO International Standards Organization KPI Key Performance Indicator LCD Local Content Development LNG Liquefied Natural Gas LPG Liquefied Petroleum Gas MTO Material Take Off List NA Not Applicable/Available NAG Non Associate Gas NAPIMS National Petroleum Investment Management Services NEPA National Electric Power Authority NETCO National Engineering & Technical Company Limited NNPC Nigerian National Petroleum Corporation OGDEN Oil & Gas Design Engineers of Nigeria OML Oil Mining Lease/License OPL Oil Production Lease/License P&ID Piping & Instrument Diagram RDI Russian Design Institutes SPDC Shell Petroleum Development Company of Nigeria Limited REFERENCES 1. Afolabi O.R Oladele “ Opportunities for Indigenous Participation in upstream Industries” August 2001 pg 4-20 2. NNPC Official Website 3. Thisday Newspaper November 21, 2005 “Local Content Boost for Agbami FPSO” 4. National Engineering & Technical Company Limited Bulletin – Quarter 3, 2005 5. 6. 7. Local Content Development Seminar “Abuja Stakeholders Seminar Brochure” March 2003 8. Article on Russian Content Perspectives 9. G.E. Omene “Definition of the Scope of Local Content and Indigenous Company in the Upstream Sector of the Petroleum Industry” August 2001, pg 1-50 10. The Nigerian Oil and Gas Outlook – 2004 Edition published by Chez Associates ABOUT THE AUTHORS ADEBOLA Daniel Folorunso holds a bachelor’s degree in Chemical Engineering from Federal University of Technology Minna. He has over seven (7) years experience in different areas of engineering professional practice but majority in the Project Management and Process Design of Oil and Gas facilities for indigenous and multinational oil companies. He co-authored and presented Chester Mead Associates Limited/NAICE 2006 Abuja Page 23 of 24
  24. 24. a technical paper published at Offshore West Africa Conference, Windhoek, Namibia, March 2003 titled “Technology Options and challenges of Marginal Field Development”. He participated in the Technical audit and evaluation of capacity and capabilities of Nigerian fabrication companies for Total upstream deep water project in September 2003. He also led the team that carried out the Technical evaluation and analysis of Shell Nigeria Exploration Company (SNEPCO) local content performance for the year 2003. He is a member of the Nigeria Society of Engineers. OKORO Justina Ode holds a bachelor’s degree in Chemical Engineering from Enugu State University, Enugu. She has over seven years experience with expertise in HSE engineering and process engineering design of oil and gas facilities for indigenous and multinational oil companies. She participated in the Agbami deepwater topsides design as an HSE engineer at the DSME yard in Okpo South Korea. She is a member of SPE. NWASIKE Obi Timothy has degrees in Mechanical Engineering from University of Wales, Swansea and in Environmental Engineering Science from CALTECH, Pasadena. He has over 28 years career in the oil industry, including working for Shell Nigeria and Shell Expro UK. He served in Field Engineering, Human Resource Management, Appraisal & Process Engineering and Hydrocarbon Asset Management. Over a ten-year period he gained experience in the development of new technologies & methods for low cost development of so-called marginal fields in Shell Nigeria’s portfolio. Engr Nwasike has written and presented over 15 articles in international journals and conferences. He is listed in World’s Who is Who in Science & Technology for process engineering and change management contributions to the oil industry. He was the Deputy Engineering manager in Shell Petroleum Development Company Nigeria before leaving to set up an oil, gas and technology consultancy, Chester Mead Associates where he is currently the Managing Director. He is a keen crusader and apostle of local content. He is a member of SPE, PMI, ASME and the Nigerian Society of Engineers. Chester Mead Associates Limited/NAICE 2006 Abuja Page 24 of 24