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Major Project Implementation in Nigeria - The Challenges
- 1. WWW.ECRIONLINE.ORG ECRI Sponsors Meeting Cape Town, South Africa Major Project Implementation in Nigeria - The Challenges Wednesday 05th December 2012 Geoffrey Mason Project Director, Nigeria
- 2. ©2011KBR,Inc. 2 Major Project Implementation in Nigeria Nigeria is strategically important to the world oil and gas industry Nigeria has 187tcf of proven gas reserves of which only 50% is dedicated to target markets and projects; Nigeria also has 600tcf of unproven gas reserves. In comparison, Australia, a country with 110tcf of proven gas reserves is moving forward with ten projects that will deliver 81mtpa LNG export capability Nigeria and Africa are roaring like the next economic lions The majority of the challenges to be discussed will be faced by others who work in developing countries This presentation gives guidelines, not a roadmap, to a successful project delivery; every project is different in Africa This presentation describes the challenges in delivering mega-projects in Nigeria The Engineering, Procurement and Construction for the Escravos project in Nigeria is being provided by KBR (Houston) and Saipem (Milan).
- 3. ©2011KBR,Inc. 3 Photograph provided by courtesy of Chevron Nigeria Limited Typical Project Site Niger Delta Region Mangrove Terrain
- 4. ©2011KBR,Inc. 4 Site Preparation Activities Sand Stabilization, Piling and Infrastructure Photograph provided by courtesy of Chevron Nigeria Limited
- 5. ©2011KBR,Inc. 5 Photograph provided by courtesy of Chevron Nigeria Limited Photograph provided by courtesy of Chevron Nigeria Limited Early Construction Activities Civil Foundations, Piling & Main Camp Construction Photograph provided by courtesy of Chevron Nigeria Limited
- 6. ©2011KBR,Inc. 6 Photograph provided by courtesy of Chevron Nigeria Limited Photograph provided by courtesy of Chevron Nigeria Limited Construction Activities Process and Utility Pipe Rack Modules on Site Photograph provided by courtesy of Chevron Nigeria Limited Photograph provided by courtesy of Chevron Nigeria Limited
- 7. ©2011KBR,Inc. 7 Photograph provided by courtesy of Chevron Nigeria Limited Photograph provided by courtesy of Chevron Nigeria Limited Construction Activities Site Status Today Photograph provided by courtesy of Chevron Nigeria Limited Photograph provided by courtesy of Chevron Nigeria LimitedPhotograph provided by courtesy of Chevron Nigeria Limited
- 8. ©2011KBR,Inc. 8 Niger Delta – The Situation on Ground Internal / external tribal disputes History of militancy and security issues on the river systems Lack of social programs Education system challenges – primary through university Hospitals and health care below international standards Unemployment due to lack of growth and new investment Sustainable skill challenges in the available labor force
- 9. ©2011KBR,Inc. 9 Project Locations Typical Offices Supporting a Mega-project Construction Site Main Project Office & Logistics Base Satellite Project Office (Lagos)
- 10. ©2011KBR,Inc. 10 Construction Site Delta State Oil / Gas Producing Region
- 11. ©2011KBR,Inc. 11 Worker Migration Limitations - Example A 6 Train LNG project was built on Bonny Island between 1996 through 2006 The Bonny Island area has a large number of qualified construction workers that could not be used in the project in Delta State because of community issues Even though the 2 sites are 160 miles apart, in terms of project execution, they are completely different
- 12. The Logistics Challenge – Moving Material to Escravos
- 13. ©2011KBR,Inc. 13 Design Offices - Houston - Milan - Hersham (UK) - Monterey, Mex - Lagos Support Procurement - Houston Fabrication - Qtec, Thailand - Abu Dhabi, UAE - Thai Herrick, Thailand - Boccard, Tunisia Logistics - Rotterdam Storage - Yokahama Storage - India Storage - Houston Storage - Thailand Construction - Escravos, Nigeria Licensors - Hersham (UK) - South Africa Operator Training - South Africa - Warri Storage - Warri - Warri EGTL – Worldwide Activities
- 14. ©2011KBR,Inc. 14 Houston Belgium Tunisia UAE Thailand The Logistics Challenge – Major Shipping Routes Japan
- 15. ©2011KBR,Inc. 15 Shipping Route into the Construction Site and Warri Port
- 16. ©2011KBR,Inc. The Logistics Challenges… Niger Delta terrain and site locations require “island type” construction Limited lay down space at the construction site requires materials to be staged remotely from the construction site, this increases logistics cost and complexity Requires extensive discussions, alignment and partnership with State Governments, the Nigerian Ports Authority, Customs, Immigration and local communities The EGTL project demonstrates through performance and results that it can work: ● 72 ships entered the Escravos River carrying cargo into either Escravos or Warri Port, 55 ships discharged into Warri Port, 17 direct discharged at Escravos: ● All material shipped to Warri Port in 55 ocean going ships was moved to Escravos in 2,000 barges in lots that meet construction needs for the following 4 to 6 weeks ● Barges and tug boats must be hired from the local communities – this is a very sensitive, emotional issue in the project catchment area ● The Escravos and Forcados Rivers and Chanomi Creek have been proven to be secure for shipping into Warri ● The project and stakeholders managed a monumental planning and scheduling effort to keep a workforce of 6,500 men and women supplied with material so they can perform their work - the material storage facility in Warri Port must be able to locate and deliver material to Escravos in the required construction sequence ● All completed with world class safety and security; with infrastructure development for the State and empowerment for local contractors and workers
- 17. ©2011KBR,Inc. 17 The Escravos Island The construction site is an island created from the swamp – the site cannot be expanded, the area allocated for the plant cannot be increased – we have what we have The “island” gives daily challenges for the project team as the number of man-hours that can be expended is fixed, so if more man-hours are needed, the schedule extends As the design developed, more space was needed – this reduced the amount of space we could use for on-site materials storage and forced the project to find an off-site location for material storage – eventually Warri Port was selected A site that is congested is difficult to design, difficult to construct and difficult to operate Main construction camp at construction site The construction site prior to site preparation Photograph provided by courtesy of Chevron Nigeria Limited Photograph provided by courtesy of Chevron Nigeria Limited
- 18. ©2011KBR,Inc. 18 The Reactor Journey – Loading in Japan Photograph provided by courtesy of Chevron Nigeria Limited
- 19. ©2011KBR,Inc. 19 The Reactor Journey – Arrival in Escravos Photograph provided by courtesy of Chevron Nigeria Limited
- 20. ©2011KBR,Inc. 20 The Reactor Journey – Setting on the Foundation Photograph provided by courtesy of Chevron Nigeria Limited
- 21. ©2011KBR,Inc. 21 Moving Plant Modules from the UAE to Nigeria Photograph provided by courtesy of Chevron Nigeria Limited Photograph provided by courtesy of Chevron Nigeria Limited
- 22. ©2011KBR,Inc. 22 Moving Plant Modules from the UAE to Nigeria Photograph provided by courtesy of Chevron Nigeria Limited
- 23. ©2011KBR,Inc. 23 Typical Barge Movements Photograph provided by courtesy of Chevron Nigeria Limited Photograph provided by courtesy of Chevron Nigeria Limited
- 24. More Challenges…
- 25. ©2011KBR,Inc. 25 Developing an Executable Plan It was clear that community engagement was going to be a major factor in delivering the project The Project Execution Plan was developed based on 4 core elements: ● Trust ● Dignity ● Respect ● Transparency / Openness The project had to engage the communities and let them know what we were doing at the construction site and what jobs and contract opportunities were available If the communities do not know what you are doing, they will not trust you and will not cooperate. A verbal commitment is an unwritten contract, if you commit to do something, then do it, otherwise trust is lost and “issues” arise Local Community Contractor capacity building was going to be a major part of our execution strategy The early phases of the community engagement process consumed more than 50% of the Director’s time
- 26. ©2011KBR,Inc. 26 Community Challenges The community challenge changed the Project Execution Strategy significantly The host communities expect the Owners and Contractors of projects to provide employment and contract opportunities to the exclusion of other neighboring communities Bringing workers from other countries and other parts of Nigeria to Escravos is troublesome – host communities believe all jobs on the site belong to them – even if they do not have the basic skills for the work The available workforce does not have the “safety culture” that is found on projects in more developed countries – skill levels are limited Ethnic balancing of opportunities is an emotional and critical issue – accusations of marginalization need to be carefully managed The project had to embark on a massive worker training program to get labor of the quality to build a technically complex project Mobilization and demobilization of labor – critical and emotional issues for the construction labor force
- 27. ©2011KBR,Inc. 27 Community Contractors – Starting Capability Small management team No continuity of projects Poor cash flow - over-reliance on bank loans at 20+% interest rate Lack of a safety culture Lack of engineering and QA/QC capability Lack of project control or contract management capability Work is performed by verbally telling crews what to do rather than developing a plan
- 28. ©2011KBR,Inc. 28 Niger Delta Obstacles to Capacity Building Local Community Contractor No. 1 Project A …to the “back of the line” (impact in years…) Local Community Contractor No. 2 Local Community Contractor No. 3 Project B Local Community Contractor No. 4 Project C Local Community Contractor No. 1 In the future Project X Survival mode Survival mode • Local contractor starts over… • Management Team Dismantled • Lost Business Focus • Lost work processes • Lost supervision • Lost equipment • Lost Labor Community Contractors – Survival Mode
- 30. ©2011KBR,Inc. 30 Prime Subcontractor 1 Prime Subcontractor 2 Local Community Contractors Owner EPC Contractor Prime Subcontractor 3 Prime Subcontractor 4 Local Community Contractors Local Community Contractors Local Community Contractors – Support all Prime Contracts Local Community Contractors Local Community Contractors Local Community Contractors Local Community Contractors Local Community Contractors 1 2 3 W 1 2 3 X 1 2 3 Y 1 2 3 Z Jobs are balanced in terms of $value and man‐hours across the ethnic groups at this level, according to an agreed‐upon sharing formula. LCC recruits their workers through the Regional Development Councils (RDCs) Community Contractors – Plan Implementation
- 31. ©2011KBR,Inc. 31 House and Feed a Construction Work Force of 6,500+ Persons Designing and installing the labor camp is a critical issue – no camp, no workers, no progress Camp design is always difficult because camp capacity is based on an assumed labor productivity – the project was built in a location where no previous experience was available In a site where the construction camp size is fixed, and more man-hours are expended, the completion date is delayed New camp designs in Africa should make accommodations available for females, no matter what the male elders tell you; if you deny women access employment opportunities, the women will agitate and be at your gate, build it and they will come! The original construction camp was designed as a male only camp - it now has secure accommodations and facilities for females Quality of life should be a key construction camp design factor – meeting halls, football, tennis etc – this was difficult on the project because the site was congested This size construction camp is a small town, it needs everything that a small town needs Because the construction camp has a fixed number of beds, we must manage the beds carefully; we must have beds filled with crafts workers that have current work and when they have finished, they must demobilize to allow other craft workers to mobilize
- 32. ©2011KBR,Inc. 32 Food service in Escravos EGTL Size / Food Consumption 66 FIFA Size Football Pitches Food for one month: ● Chicken 90 Tons ● Meat 55 Tons ● Fish 35 Tons ● Vegetables 55 Tons ● Rice 25 Tons ● Cooking Oil 20 Tons ● Eggs 700,000 ● Fruit 25 Tons Food is purchased from 100+ farms across Delta State Logistically challenging to transport food on the river to Escravos Then the food must be cooked! Photograph provided by courtesy of Chevron Nigeria Limited
- 33. ©2011KBR,Inc. 33 Camp Construction Site Potable Water Potable Water 159, 564 m3 Process 2,871 m3 156,693 m3 80,196 m3 Diesel 1,397 m3 Diesel AGO Fuel Diesel AGO Fuel 936 m3 461 m3 Power Generator 53 MW18 MW 35 MW Natural GasWaste Handling Waste Handling Waste Water Treatment Waste Water Treatment Food Stocks Chicken 90 tons Rice 25 tons Meat 55 tons Cooking Oil 20 tons Fish 35 tons Vegetables 55 tons Fruit 25 tons Eggs 700,000 H20 239,760 m3 Effluent Effluent Treated Water 50,994 m3 56,661 m3 Solid Waste 45 tons 335 tons 310 tons IncineratorIncinerator 317 tons Ship Out The Ins and Out of the Construction Camp – 1 Month Operation
- 35. ©2011KBR,Inc. 35 Community Projects International companies with projects in Nigeria will have community projects as part of their delivery plan Some examples of community projects are as follows: ● Transformers to a housing estate ● Expansion of a primary school ● Teachers’ accommodation quarters for towns that can only be reached by canoe ● Civic centers and buildings for community meetings ● Skill acquisition center ● Solar-powered street lights
- 36. ©2011KBR,Inc. 36 Primary School Classroom and Revamp of Existing School Electrical Transformers supplying 2 housing estates New classroom block New library Primary school pupils Photograph provided by courtesy of Chevron Nigeria Limited Photograph provided by courtesy of Chevron Nigeria Limited Photograph provided by courtesy of Chevron Nigeria Limited Photograph provided by courtesy of Chevron Nigeria Limited
- 37. ©2011KBR,Inc. 37 Okere Town Hall Ugbori 1 Town Hall Ugbori 2 Town Hall Ekurede Town Hall Community Projects Photograph provided by courtesy of Chevron Nigeria Limited Photograph provided by courtesy of Chevron Nigeria Limited Photograph provided by courtesy of Chevron Nigeria Limited Photograph provided by courtesy of Chevron Nigeria Limited
- 38. ©2011KBR,Inc. 38 Community Projects Ugbuwangue Skill Acquisition Center Ewein Civic Center Ode-Itsekiri Teachers’ AccommodationOrugbo Teachers’ Accommodation Photograph provided by courtesy of Chevron Nigeria Limited Photograph provided by courtesy of Chevron Nigeria Limited Photograph provided by courtesy of Chevron Nigeria Limited Photograph provided by courtesy of Chevron Nigeria Limited
- 39. Nigerian Oil And Gas Industry Content Development Act - 2010
- 40. ©2011KBR,Inc. 40 Nigerian Oil And Gas Industry Content Development Act - 2010 Legislation was signed into law in March 2010 Many African countries are using this act as a model to pass their own local content laws The government seeks to empower Nigerians: changes are most likely to negatively impact some owners and engineering / construction companies; project costs will increase due to extended project schedules; the above new risk cannot likely be mitigated with any level of certainty A Nigerian Content Board (NCB) was established to oversea implementation of the act
- 41. ©2011KBR,Inc. 41 Nigerian Oil And Gas Industry Content Development Act – 2010 The act injects the NCB into several aspects of our business which will result in project execution changes. The NCB is given review and approval authority over: ● Award of subcontracts ● Award of purchase orders ● Expat quota approval – and hence the make up of the construction management team ● Change orders to subcontracts and purchase orders ● Access and approval rights for estimates, project plans, bidders lists, bidders qualifications, final bid tabulations, personnel records and other items as the board deems necessary. This covers in country and out of country POs and subcontracts A Nigerian indigenous company with the capacity to execute such job shall not be disqualified exclusively on the basis that it is not the lowest financial bidder, provided the value does not exceed the lowest bid price by 10%
- 42. ©2011KBR,Inc. 42 Nigerian Oil And Gas Industry Content Development Act – 2010 All operators and project promoters shall consider Nigerian Content when evaluating any bid where the bids are within 1% of each other at the commercial stage and the bid containing the highest level of Nigerian content shall be selected provided the Nigerian Content in the selected bid is at least 5% higher than its closest competitor All fabrication and welding activities must be performed in-country The Minister shall make regulations which shall require any operator to invest in or set up a facility, factory, production units or other operations within Nigeria for the purposes of carrying out any production, manufacturing or for providing a service otherwise imported into Nigeria 90% of FEED and detailed engineering man-hours shall be performed in Nigeria A waiver provision is included in the act but requires substantial documentation for each waiver request
- 44. ©2011KBR,Inc. 44 Delivering World Class Safety Performance World class safety performance is achievable in developing countries such as Nigeria – The Escravos Project proved it The Escravos project developed a vision to utilize Niger Delta opportunities as a catalyst to show that through an incident and injury-free culture and a core value relying on the strength of diversity, a collective pride for the project could be achieved across all nationalities – implemented in the Delta Pride Program This level of safety performance does not come automatically, it is the result of a significant commitment by thousands of workers to work Incident and Injury- Free In 2011 the Escravos project worked over 40 million man-hours and 500 days without a lost time Incident The Warri Port team worked over 4 years with no recordable injuries Photograph provided by courtesy of Chevron Nigeria Limited
- 45. ©2011KBR,Inc. 45 Managing Community Issues / Crises Accept that if you build a mega-project in Nigeria, you will have “issues” and crises with the local communities – if you expect it, plan for it, and watch what is going on, the communities will not disrupt your project The success of your Community Engagement Plan directly impacts the security of the construction site You must develop an industrial relations team that is staffed by nationals, they must be qualified but also must have ties to key community stakeholders to stay off agitation in the workforce A robust Industrial Relations Plan and carefully selected individuals working in the industrial relations team will prevent “issues” coming up The goal is to know what issues are around, know what is going on in your labor camp and predict periods where tensions may be high (elections, GSF actions in the area, community disputes etc) Management involvement in the community engagement is vital, when problems arise, agitators only want to deal with the Boss or “Oga”
- 46. ©2011KBR,Inc. 46 Demobilization of the Workforce as the Project Completes The goal of worker demobilization is to have an orderly exit of workers from Escravos with minimal impact to ongoing work The Demobilization Plan must be carefully thought out and communicated fully to community leaders and local community contractors Demobilization of the workforce is an emotional issue as many workers will not find jobs when they are demobilized from the construction If you get the demobilization plan wrong or do not engage the right stakeholders, expect to have work disruption at the site The project team reviews demobilization plans weekly and must constantly revise plans as lessons are learned
- 47. ©2011KBR,Inc. 47 Wrap-Up Nigeria and Africa have a huge growth potential over the next 10 years The Nigerian Content Act must be considered in all aspects of project execution It is not easy to manage risk in developing African countries – tread carefully with large new investments – know your country and your site location well and be prepared for a bumpy ride!
- 48. A Personal Memory of Nigeria
- 49. ©2011KBR,Inc. 49 Pupils of the Ekpan Primary School
- 50. Questions?