Daewoo Wins Contract to Build Agbami FPSO

Nigerian National Petroleum Corporation and ChevronTexaco Nigeria signed agreements for the award of a $1.1 billion contract for the construction of the floating, production, storage and offloading (FPSO) vessel for the Agbami deepwater offshore oil field.

Construction of the FPSO, which will handle the storage and exports of about 250,000 barrels per day (bpd) of crude oil and 450 million standard cubic feet of gas per day, will be handled by South Korea's Daewoo Shipping and Mari-time Engineering (DSME).

The Federal Government has, however, granted approval to Nigerdock Plc to set up an Export Free Zone around the Snake Island yard, in Lagos, to take maximum advantage of the local content provisions in the execution of the FPSO contract.

Speaking at the signing ceremony in Abuja, the Managing Director of ChevronTexaco Nigeria, Mr. Jay Prior, said that the partners would use the execution of the project to showcase more of its core values, which include high local content development, safety, environmental stewardship and community engagement.

"We are aware that many people regard Agbami as remarkable for its reserves...but we want the project execution to show that it has more to offer Nigeria and its other stakeholders than production figures," said Pryor.

In the award of the contract package, 300,000 man-hours or 40 percent of the total man-hours that will be spent in constructing the vessel, have been allocated to Nigerian companies, representing a major shift in execution of major Nigerian oil and gas contracts, especially in the deep offshore.

Also, the partners have earmarked 7,000 tons of fabrication of the entire FPSO to be carried out in the country, compared to an average of between 500 and 1,500 tons in the previous deep offshore projects.

The award of the Agbami FPSO contract had actually been delayed from the earlier planned period of first quarter of 2004, partly due to the disagreement between the NNPC and Chevron over the level of local content in the field development project.

The NNPC, which holds 50 percent interest in the field, had directed that ChevronTexaco, the operator, should ensure 45 percent Nigerian content.

Also speaking at the event, the Group Managing Director of NNPC, Engineer Funsho Kupolokun, who described the local content provision in the Agbami Development Project as "significantly more than has been done on any deepwater project in the country," however, urged Daewoo Shipping to improve further on local content package by providing opportunities for Nigerdock to bid for the main process packages to provide the required challenges for growth.

According to Kupolokun, the selected scope for Nigerian participation was still limited to fabrication of platforms, suction piles and booms, which are still of the low end of engineering,

The NNPC chief executive disclosed that Nigerdock had been granted approval to set up an Export Free Zone around its ship building yard on Snake Island, Lagos, with plans already ongoing to inject substantial funds to make the yard capable of fully integrating the FPSO topsides in Nigeria.

"The true value (of Agbami local content) will be assessed based on the actual composition of the work packages. The split between core engineering, drafting, project management and other services must be properly balanced to ensure that real value is captured," he added.

The Federal Government had stated that it would use the Agbami project as a test case for its local content advancement program. It has set a target of achieving 45 percent local content in the oil sector by 2006 and 70 percent by 2010, up from the present level of about 15 percent.

Kupolokun said the development of the Agbami oil field represents another major step towards meeting the country's aspiration of attaining a daily crude oil production of four million barrels by 2007 and reserve base of 40 billion barrels by 2010.

Agbami field, which lies in block OPL 216, ranks among the largest single discoveries in deepwater in the West Africa sub-region, with a structure spanning an area of 45,000 acres. The field was discovered in 1998 with reserves estimated at over 800 million barrels.

Other partners in the project are indigenous oil company Famfa Oil (10 percent) and Brazil's Petrobras (8 percent). NNPC holds 50 percent equity while ChevronTexaco holds 32 percent equity.