Prospects in Nigeria’s maritime industry

Nigeria

Iroghama Ogbeifun, managing director and CEO of Starzs Investments Company, talks to The Energy Year about ways to facilitate local investment in the Nigerian maritime industry, the company’s recent expansion and how it plans to participate in the energy transition. Starzs Investments Company is a marine logistics company working in Nigeria’s oil and gas sector.

How would you evaluate the efficiency of the oil and gas sector in Nigeria?
Presently, Nigeria is majorly exporting crude oil and importing refined products and this current strategy is not efficient. We ought to build the refining capacity expected to transform our industry into a source of value for our citizens. These refined products will also serve as exports to other nations that lack access to these resources. Yes, we will still export crude oil; however, there will be more reliance on retaining a major part of the crude in the country as local refining capacity is built.

How could local investment in the Nigerian maritime industry be facilitated?
We need to make the maritime industry attractive enough that indigenous investors will be willing to invest in the country; the fiscal policies in place at the moment actually discourage these investments. For example, Nigerian shipowners and operators are taxed with higher import duty charges while trying to import owned ships as compared to chartering a foreign ship that only requires a temporary permit at the country’s point of entry. This shows that there is a clear asymmetry that undermines local investors since it would be more profitable to expand one’s fleet with chartered vessels that are owned by foreigners.
In addition, there is a need to invest heavily in intermodal transport infrastructure, especially railways as a means of transporting commodities in and out of ports. This will aid in decongesting the vast majority of our streets around the ports.
Transactions such as receiving of vessels and interactions between the ports authority ought to be modernised for greater efficiency. With the right political support, we can replicate models from foreign ports that have managed to improve their workability. Surely the maritime industry will thrive with the impact of the African Continental Free Trade Agreement [AfCFTA], as long as these improvements are implemented.

How will the Petroleum Industry Act (PIA) foster the development of local companies?
The PIA has been the focal subject of discourse in the Nigerian oil and gas space for the last 10 years.
However, the current timing of its passage is the main inhibition for its implementation, given the push for renewables and for decreasing investment in fossil fuels. The full benefits of the Act would have been reaped if the bill had been passed six to seven years ago.
We need to develop our funding capacity to drive exploration and production. The marginal field licences are a great opportunity for local companies to grow stronger and realise their potential since we have the in-country knowledge and commitment to the community to deliver optimally.
Corporate governance is required to introduce policies that would foster higher domestic competence and a greater degree of meritocracy in our socio-political system. The role of the PIA is to guide us through this entire process, and the way ahead is very exciting.

What were Starzs Group’s main expansion projects during 2021?
In the first quarter of 2021, we utilised an opportunity with one of the IOCs to expand our fleet, growing from 11 vessels to 12. The uncertainty of the industry’s future, the drop in oil prices and the reduced supply of gas pushed us to diversify our market reach in light of the fact that every industry requires shipping services, particularly in regards to imports and exports.
Currently, we are setting up cargo logistics operations leveraged on our long-standing expertise and experience. We have received FID approval from our Board to purchase our first cargo vessel, and we are structuring the parts of the company that will drive the operation. Our plan is to become operational by the fourth quarter of 2022. The AfCFTA will bring an opportunity for exports and imports, and our associated target is to position ourselves in this growing market, starting from the West African region.
The vessel will focus on conveying cargo between Nigeria, the Republic of Benin, Togo and Ghana and she will also support offloading motherships who are unable to come close at our ports due to draught restrictions given that we don’t have many deep seaports in this part of Africa.

How is Starzs Group taking advantage of Nigeria’s energy transition?
With the increased push for cleaner energy sources, everyone is moving towards gas, and its demand is forecasted to grow exponentially in the near future. To foster gas penetration you need cylinders, and that’s the reason we are planning to set up a subsidiary that would manufacture CNG and LPG cylinders. There are already companies manufacturing LPG cylinders, but the untapped market lies in the CNG sphere.
Taking into consideration the already existing challenges of LPG cylinders, our canisters would be more efficient as we are ready to overcome these challenges by introducing technologies that address those safety concerns. In order to achieve this, we are open to technological and financial partnerships.

The Deep Blue Project works to secure Nigeria’s waterways. What are its expected business implications for your company?
As a company, our insurance premiums are currently negatively impacted and are very high based on the grounds that the region is insecure and has been classified as a war zone. This has led to international partners requesting war risk insurance covers on their assets before they can operate in Nigeria.
While it may be too early to properly evaluate the impact of the Deep Blue Project; they have registered some wins from the time it was introduced. For example, in the first quarter of 2022 there were no piracy attacks in the Gulf of Guinea. This is a significant milestone which we hope will be sustained.
The role of an effective judiciary in tackling this insecurity is critical because you need a proper legal framework to properly prosecute the criminals, while using it as a deterrent. The issue at stake is that these are usually international prosecutions, so when piracy criminals are caught, we should apply the right legal procedure in line with globally aligned frameworks.

What role is Starzs Group playing in the related security services?
Our major role is to protect the IOCs’ installations through the provision of security patrol boats. We are duly licensed by the Nigerian Navy as a private maritime security service provider through an MoU that authorises us to man security patrol boats with Navy personnel. We are also active stakeholders in the discussions involving the security of the waterways and ways to deter occurrences of maritime crime.

Are you deploying any technology-related cost optimisation strategies?
We have upgraded our fleet management software, which helps us to remotely monitor our vessels’ activities. Before now, we have always had an electronic fuel monitoring system (EFMS), which measures and provides a detailed fuel consumption status on our vessels. We have also recently deployed an electronic training system that will help improve crew competency remotely through assessment, training and monitoring. Other areas that we have digitalised have been our documentation process. We have reduced our carbon footprint by digitally signing and stamping documents required onboard or to be sent to clients. This has also reduced our costs. Covid-19 also helped us see the value in remote meeting, which brought the shore support staff and crew offshore closer as meetings and other direct interactions are held more frequently.

What is Starzs Group’s value proposition?
We have shown consistency and excellence since 1986, and no other marine company can say the same. We have a solid foundation, where discipline, commitment, visionary leadership and corporate governance are passed from generation to generation. In our services we deliver professionalism, competence in our system and integrity, while creating value for our stakeholders.

Where do you see Starzs Group in five years?
We see ourselves as key players within the energy space, pushing for and stimulating the development of new technology. We want to support research and development innovation, positioning ourselves at the forefront of this sector. We want to be dynamic and participate in various aspects of the energy industry, as we have shown with our diversification into the cargo business. In five years, Starzs will be global.

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