Iroghama OGBEIFUN Starzs Nigeria

We must look at ways of making in-country shipbuilding more attractive.

Iroghama OGBEIFUN Managing Director and CEO STARZS INVESTMENTS COMPANY

Nigeria’s drive for a blue economy

September 14, 2021

Iroghama Ogbeifun, managing director and CEO of Starzs Investments Company, talks to The Energy Year about challenges facing Nigeria’s maritime sector and the company’s plans for expansion. Starzs Investments Company is a marine logistics company working in the oil and gas industry in Nigeria.

What impact have recent government policies had on Nigeria’s maritime industry?
We have come a long way through intelligent and effective policies that have been implemented within the industry. The NCDMB’s [Nigerian Content Development and Monitoring Board’s] local content act of 2010 has been the largest catalyst for growth in the maritime sector. By contrast, NIMASA [Nigerian Maritime Administration and Safety Agency] still has a larger role to play and the Cabotage Act introduced in 2003 still needs to have a greater impact.
More political will is necessary. Government policy should not just be written but should also be implemented, and compliance monitored. Proactive governance should cover all aspects, including fiscal and local content policies, human capacity and project development. If opportunities are dimmed in the maritime sector, it will not grow.

What obstacles need to be overcome to invigorate the maritime sector?
The Cabotage Act was meant to support development but was not written to fit into today’s reality; it has not succeeded. We should work on obstacles that serve as impediments to materialising the reality the Cabotage Act aimed to put in place.
Enhancing local shipbuilding capacity is a key pillar of this act that has not been realised. Shipyards that tried to build capacities failed. Building a ship in the country costs 30% more than importing ships from other countries such as China. We must look at ways of making in-country shipbuilding more attractive, in addition to establishing correct fiscal and tax policies on imported elements and Customs fees. Action is required here.
Without qualified and well trained seafarers, there will be no shipping industry. However, the Maritime Academy of Nigeria (MAN) Oron still needs to be equipped to certify certain seafaring disciplines required to manage certain ships. For example, MAN cannot produce the ETOs [electro-technical officers] that are required onboard larger vessels, subsea vessels and bigger tankers. Today, an ETO cadet will be required to go to Ghana or any other international institution for training to get certified. This is a major obstacle and an avenue for capital flight from the country.
Ship ownership is another interesting challenge. In Nigeria, due to the effective implementation of the NOGIC act, in order to be considered for long-term tenders, you must own a ship, but this requires funding. However, most financial institutions will only fund your ship acquisition transaction on the back of a contract, preferably a long-term contract that reduces their credit risk, so it tends to be a chicken and egg situation. The CVFF [Cabotage Vessels Financing Fund] was set up to enable ship owners and shipyard owners to have access to funding for asset acquisition. In order to grow this fund, it is a requirement that shipowners pay 2% of the value of their vessel contracts to NIMASA every month. In the same vein, the NCIF was established to enable the growth of local content within the oil and gas industry and in order to grow this fund, every oil and gas operator pays 1% of the contract value to the NCDMB monthly. The difference between both funds is that the NCDMB has revolutionised the oil and gas industry in terms of training, R&D, and investments and grown local participation within the industry significantly. By contrast, not a single ship owner or shipyard owner has benefitted from the CVFF.
Therefore, one can say that The Nigerian Oil and Gas Industry Content Development Act, implemented by the NCDMB, and the oil and gas maritime private sector are the ones catapulting the maritime sector. The rest of our industry, be it fish trawling or container shipping, remains underdeveloped. If we must develop the blue economy in a holistic way, we cannot have a defunct cabotage act. NIMASA must play a more prominent role in implementing their policies and stimulating growth and development within the sector.

How important is technological assimilation when upgrading the maritime sector?
Modernising our fleet is inevitable. Ship owners must look at how technology can enable them to achieve the emission levels the IMO [International Maritime Organization] and the rest of the international community are expecting by 2030 and 2050. There has been a lot of technology development since IMO targets for carbon emissions were set two years ago. We have also seen a rush of international companies trying to see what could be retrofitted, such as with scrubbers. However, The cost of these modifications are not cheap, but as more R&D takes place, we hope to see the emergence of cheaper technologies that ship owners can take advantage of.
In global trade, it will be essential. Eventually you will be unable to call at certain ports if your ships do not meet international standards for carbon emissions. The same goes for IOCs, as their emissions will be a comprehensive total of what their contractors also emit.
The Covid-19 pandemic has compelled everyone to digitalise. We had to perform remote inspections and remote audits and learn how to manage and superintend our fleet without being there in person. Our ships could not come to port for six months or more and we were forced to rely on digital and virtual means. We are looking at what we can do to improve our efficiency through technology because that is the direction the world is going. We have had to upskill our workforce to match the demand for technology and digital transformation so that we don’t become obsolete.

What efforts has the Nigerian Ports Authority (NPA) made to upgrade the country’s ports?
Nigeria has about six seaports that all have potential. The NPA is taking important steps to make sure all the seaports in Nigeria can receive container ship traffic. There have been improvements in terms of the draft at some of the seaports, such as the Calabar Port. In the last few months, they have had three container ships call to that port, which is a first in 11 years. This is giving hope for companies that are trying to diversify into cargo trading like ourselves. There is potential for us to call at the Calabar Port, Warri Port, Apapa Port Complex and Onne Port.
However, the federal government should further encourage the private sector to upgrade these ports. Collaboration is key. Modernisation of our ports and an upgrade of their standards is fundamental in becoming a maritime hub.

 

What opportunities will Nigeria’s transition from oil to gas have for the maritime community?
It will be interesting to see how the idea of the energy transition plays out. There is an obvious trend towards gas that will bring many opportunities. We need to figure out what role the maritime sector will play. Gas-based offshore operations present a great opportunity for maritime players. Gas will be transported by water onshore to be distributed. Additionally, heightened gas exports require a more robust shipping industry.
We are still trying to understand the gas value chain and establish gas-based opportunities. LPG has high potential. As part of the Decade of Gas narrative, there is going to be a campaign to improve the offtake and utilisation of LPG and LNG in other domesticated forms. This will mean more transport to make LPG more available. Developing capacity is pivotal in this conversation. We currently only have one Nigerian-owned LPG tanker working in the LNG space, the Alfred Temile. It has a capacity of around 350,000 cubic metres of LPG and moves product from NLNG to the Lagos terminal. However, NLNG has increased its target figure as the local demand for LPG continues to grow. This will certainly increase the room for more Nigerian players to supply the local market. Other African countries are also looking to enhance their utilisation of gas, which could present more opportunities for Nigerian companies.

How has security improved on Nigerian waterways?
Security is important in the region and for our sector. The federal government and NIMASA have made great efforts to combat insecurities in doing business in Nigeria and the Gulf of Guinea. The navy has stepped up surveys and oversight functions. For example, there are constant spot checks and enhanced monitoring by the navy. Consequently, piracy attacks on our waterways have been reduced in recent years.

What are you doing to grow your market presence?
We have continued to deploy a strategy of value creation. We have a track record within the industry of rendering value. We pride ourselves on having zero downtime on our assets and the highest technical capabilities. We are a reliable partner. We intend to steadily grow our fleet beyond the 12 vessels that we have.
Last year we entered a strategic partnership with an international company called KOTUG International, which has a large fleet of tugs and a well-established global track record. What we like about this partnership is the vessel-design innovations and technical expertise they share with us. We’re also collaborating with them for fleet exchange and leveraging their international presence to open our frontiers beyond Nigeria.
For example, we are now participating in a tender with an IOC in Guyana to deploy one of our vessels. In this collaboration we use different special purpose vehicles to achieve what each party wants out of each particular transaction. What remains critical in the partnership is that our values are similar and aligned.

How are you planning to diversify your business portfolio and delve into cargo logistics?
The Covid-19 pandemic was an eye opener in terms of the importance of business diversification. We looked at industries where we could transfer our core competencies and resources. We found cargo logistics to be a natural transit, especially since there is a huge market gap. We hope to have a pioneer status in this area and we are willing to take up that challenge. Our strategy is to develop partnerships with exporters and importers and then begin to trade internationally with an immediate focus on the routes to Europe, Asia and America. Network and partnerships – especially international ones – will be crucial to our success and we intend to leverage existing relationships.
Establishing an ocean-going fleet of vessels will give us an opportunity to consolidate on one of our core values, which is human capacity development. NIMASA has tried hard to train students outside the country but being onboard an ocean-going vessel is a requirement for them to complete their training. Cabotage trade does not have ocean-going vessels, leaving them stranded.
With this new venture, there is an opportunity for us to take on students and begin to train Nigerian seafarers onboard our ocean-going ships. This would be a huge shift for Nigeria. It’s an exciting project for us, and we are looking forward to hopefully seeing it materialise before the end of Q4 2021.

Why is your company choosing to develop its shipyard capacity?
Our plans are to expand our ship repair yard in Onne from a docking capacity of 500 tonnes to 7,500 tonnes and also include ship building capability. Presently, we are working with transaction advisers and technical consultants to develop a proper feasibility study and financial model that will show the bankability of the project. The next stage of the project will be to source funding and technical partners so that we can bring it to fruition.
The timing is perfect because there is a change in demand for certain kinds of vessels that we can take into consideration when planning our expansion. There is now more clarity on which vessels are no longer in demand and what sort of technologies new vessels will require. We also intend to construct vessels that can run on LNG to be ahead of the curve and in tune with the global energy transition. The drive for a blue economy means greater interest in the success of shipyards. It is a good time for the shipyard expansion.

What are your current goals for Starzs Investments Company?
We would like to expand our services to include container ship operations. We are also intentional about participating in the oil and gas value chain of other African countries by providing vessel logistics services to IOCs. We want to be established as the preferred tug operator and service provider in the country. This is in parallel with our fleet expansion plans within the oil and gas industry as it concerns tugboats.

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