Nigeria Zircon Seyi AJIBOLA.

Gas is the future in Nigeria so we want to make sure we develop the expertise for it.

Seyi AJIBOLA CEO ZIRCON MARINE

Nigeria’s coming gas transfer demand

February 15, 2021

Seyi Ajibola, CEO of Zircon Marine, talks to The Energy Year about recent advances and setbacks in the marine sector and coming opportunities in natural gas transfer and crude evacuation. Zircon Marine is an indigenous company specialising in providing vessel charter and marine operations to both the upstream and downstream sectors.

What advances and setbacks has the marine sector experienced in recent years?
Over the last decade, there has been a drive toward indigenous ownership of foreign marine assets. The NCDMB [Nigerian Content Development and Monitoring Board], through local content legislation and their intervention fund, have been actively providing capital to a lot of asset owners. They have helped local companies climb up the asset ownership ladder, giving them a foothold in the sector. We are now at a more advanced stage, reappraising those efforts and trying to reposition.
However, we still face hurdles. The cost of maintenance, dry docking and infrastructure in Nigeria is still high. From a global standpoint, we are a lot less competitive in our ability to provide marine assets. The fact that dry docking costs are three times what they are in Europe or Asia makes it impossible for Nigeria to compete. Further, when one thinks of the cycles of doing business at lower oil prices, we witness companies working at their margins and having higher costs, which in turn reduces one’s flexibility.
In addition to the asset cycle, there is also an age threshold, especially from the IOCs. If your vessel is more than five years old, it is no longer considered bid-worthy, which is a struggle. Moreover, many local companies have not paid back their loans yet and they find themselves out of work given the current situation. As a response, the government has helped to fix these imbalances via funding but still a lot is to be done.

What degree of interdependence do we find between marine ownership and the cost of assets in Nigeria?
There are some things outside of the NCDMB’s control, such as the cost of power or the availability of infrastructure, but generally speaking, even internationally the ownership of marine assets is interwoven with cost. As of today, around 20% of participants own 80% of marine assets directly or indirectly. This means that there is a tight-knit relationship when it comes to marine ownership and costs. The reason is actually quite simple: economies of scale. Ownership of large fleets lowers costs and offers all kinds of flexibility.
On this note, we need to think about whether we want to make Nigeria a hub for marine asset ownership and services like maintenance and dry docking for West Africa. If so, do we just want to be asset users, or do we really want things to be owned by Nigerians? From here, further questions arise from an economy of scale point of view. It is about lowering costs as well as sustainability and survival. It is one thing to buy assets but another to deal with these five- or 10-year cycles after which you have to either dispose of or refurbish your assets.

What hurdles do companies face when it comes to acquiring the needed marine certifications?
The societies that determine that your vessel is not scrap are all international. This means that Nigerian asset owners that want to certify their vessel as foreign class must travel to find the ports that do it, and these are mainly in Europe or Asia or bring expertise into Nigeria at significant costs. To address this, we could get class societies permanently based here, which would at the same time trigger the development of in-country expertise, as an example.
Structurally speaking, there are plenty of other issues. For instance, for your mooring masters to be used by foreign companies, they need to be certified by passing certain simulations every three years. To go for these training schemes, one has to go to either Egypt, or to Europe. Even getting visas for these mooring masters is a challenge and the bureaucracy of this process is tedious. Until last year, there was no simulation provider in Nigeria. Hudson Trident, with NIMASA’s and DNV’s certification, opened a simulation centre in 2019.

 

What recent steps have you taken to secure official certifications from Total and BP?
Our core competency is ship-to-ship transfer, where we cater for downstream and upstream companies. NNPC works with many IOCs such as Total, BP and Shell which have very high standards that they will not compromise. This has meant that the only companies that can provide those services are foreign. However, NNPC has opened up avenues to engage with Total and BP.
In this regard, we started the process more than a year ago and we just got the Total approval for international lightering services for Nigeria and West Africa. In addition, we are also about 80% of the way through the process with BP. These two leads are major upgrades for us as a company as they will provide us with the opportunity to exclusively work with IOCs.
In the case of BP, the process has been rigorous. Along with facility inspections, we have had to invest heavily in new assets and so we think the process will take until the end of Q1 2021. So that is where we want to be: service-centred and less asset-dependent. We do have a robust set of assets in the lightering services ambit and we also work with partners where we need to aggregate other assets like tankers. In that way, asset owners can specialise in growing their fleets and we can continue to work with them.

What opportunities do you see in natural gas transfer?
We are trying to move into LNG and LPG to provide the same ship-to-ship services. With the rise in gas demand, there will be a corresponding demand for gas transfer. We are still figuring out some of the dynamics around ownership but the whole idea is to also be able to transport gas. So, we are trying to position ourselves for the gas lightering opportunity. It has happened in the past but we feel that as the market becomes a bit more liberal and more depots open up, we can participate.
Our strategy is to continue to go down that path because it’s the same services that we already provide, just with a different type of hydrocarbon. Lastly, if the opportunity for the ownership of LNG or LPG marine assets comes up, we will definitely look into it. We feel like it is something that makes sense. Gas is the future in Nigeria so we want to make sure we develop the expertise for it.

What crude evacuation works and partnerships have you harnessed in the past year?
We have continued to do extremely well even without assets because we bring so much more to bear in terms of conceptualising and providing critical turnkey solutions. Earlier this year [2020], we had five non-owned assets working for us and now we have two. These are carrying out crude evacuation, and we are the only indigenous company that has the capacity and expertise to offer this type of service in Nigeria. In the past year we have moved from downstream-facing work to more upstream crude evacuation, which has worked very well for us.
At the moment, we are looking for partners that are rich in assets, ideally indigenous. We believe in valuable partnerships such as the one we have with Sea Transport, a major indigenous company with a solid fleet of tankers, through which we are looking to do several projects in the coming year.

What key achievements are you aiming to solidify in 2021 and beyond?
Our business plan for the next three years is to be the number-one indigenous company for liquids transfer. Our parallel plan is to get all the approvals and certifications we need from IOCs. We are hoping that by the end of 2021, we have at least four approvals to operate. We have done Total and are working on BP and next we will work on Glencore and Shell. Crude evacuation is a real turnkey service opportunity. Accordingly, we want to get through with our IOC audits, get our approvals and eventually deepen our services in evacuation.
Lastly, we are making a low-level play in Mozambique along with our partner Red Offshore. We are ready to activate that scheme by sending assets there by the end of the year and see where that can take us.

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