How Ajaokuta-Kaduna-Kano pipeline project will revive moribund companies — Okwuosa, Oilserv boss

By Olayinka Ajayi

Emeka Okwuosa is the Chairman, Oilserv Limited, lead contractor for the first segment of the Ajaokuta-Kaduna-Kano AKK, 614km-long pipeline project being developed by the Nigerian National Petroleum Corporation, NNPC. In this interview, Okwuosa says when there is energy in the form of gas, moribund industries within the pipeline corridor will have the impetus to kick start again, and also stimulate start-ups. Excerpts:

 

Considering the critical nature of the Ajaokuta-Kaduna- Kano AKK, project, which is going to carry the full pressure of the full pipeline volumes, could you give a guarantee of capacity and delivery?

We are ready for it. We are already working at laying the lines. Although we are 100 per cent an indigenous company, with the AKK project, we intend to engage between 1,500 and 2000 personnel at the peak of operations. The fact remains that we are ready. This is not the first project; we are commissioning the OB3 Gas Project, which is actually slightly larger than this in terms of diameter. The OB3 Gas Pipeline project is 48-inch in diameter. So, we have the experience, we have the personnel, we have the equipment and we are capable and we are delivering this project.

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You mentioned host community participation in the project…

We will crank up our employment by more than 1000 and the major part of this 1000 will be indigenes of the areas where we operate. We have a clear plan to develop the areas where we build pipelines.

What does this project represent in the Nigerian Content policy implementation?

First of all, I thank Mr. President for being in the forefront of driving the progress in the oil and gas industry. As you may be aware, President Buhari built the infrastructure we had in the 1970s when he was the Federal Commissioner for Petroleum Resources. Most of these refineries you see today were built within the period he was at the helm. When President Buhari came to power in 2015, he made the domestic gas infrastructure development a cardinal project. This project has been on the drawing board since 2008, 2009. He made it happen. What this project shows clearly is the dedication of President Buhari to local content and local capacity. We are an example of that. Oilserv shows clearly that government means what it says. We have been operating before the local content law came into being, but we have continued to build capacity, including building capacity beyond Oilserv by empowering other contractors to grow. So, we constitute a team with the Federal Government in this regard.

How do you intend to manage the project partnerships to guarantee smooth process in the project delivery within the time frame?

We have partners as I said earlier. It’s a consortium arrangement and this consortium arrangement is China First Highway Engineering Co., Ltd. (CFHEC). You may be aware that this project is also not directly funded by the government. The project is funded using facilities or loans that were obtained for this project, because it is commercially viable. So in lieu of that, we have injected a Chinese partner to meet the Chinese content requirements. But Oilserv is the primary engineering, procurement and construction (EPC) company. Our experience is what we also help to drive this process. We also have Oando in the consortium and Oando is a consortium partner, they are not an EPC company but we have been together for a long time in other projects where Oilserv is the EPC company.

How is it going to generate funds to address the loan?

This is fully viable. The facility being taken is meant to be repaid in 15 years; but this project can pay itself in less than 10 years because this is a commercial venture. When you pipe this gas you have gas flowing through to industries, to power plants. There are tariffs to be paid to even transport this gas.

If you understand the mechanism of gas transportation, for every cubic meter of gas that passes by there is an amount that is paid by those who use it. In addition to that the gas itself that passes by would have to be paid for to be used. So, this is a commercially viable project. It’s not the kind of a project that the government has to support for it to be viable.

How do you plan to overcome the challenges in delivering the project?

I won’t say I have fears. Every project has its challenges. There are challenges to build a project like this in virgin forests, to go through rivers, to go through rocks, to deal with security issues. These are challenges; but I don’t have fears because we have the knowledge and the experience to deal with it. We are very ready to deliver the project and deliver on time.

Can we share your perspectives on the value proposition of the AKK pipeline for the economy?

Gas is very important to the economy of Nigeria. Nigeria is predominantly a gas country, and not necessarily an oil country. We have an abundance of gas reaching up to 200 trillion cubic feet of gas already proven and existing reserves; but clearly there is far much more than that because exploration has not gone far much in the gas sector.

When we look at the real gas issues in the country, I would say that Nigeria has not developed the capacity to utilize gas; and the capacity for gas utilization is about infrastructure. You cannot easily store gas after producing it. The reason is simple. Gas is very difficult to hold unlike liquids. And for you to keep gas in a place, you have to pressurize it in order to move it to a location. There are many ways to move gas. One is the liquefaction system in which you have to pressurize, compress and freeze it in order to ship it. That is what the NLNG does presently.

But to utilize gas in Nigeria, what is required is clearly a gas transportation infrastructure. Nigeria has conceived this in a clear way since the early 2000s and came up with the Nigerian Gas Master Plan NGMP, of which a portion has been constructed. One is the Escravos to Lagos Pipeline, which starts from Escravos, goes through Benin and then heads to Lagos. It goes all the way to the Egbin Power Station and feeds the entire Lagos. The other section of the NGMP is actually what was going to kick off from the Qua Iboe Terminal (QIT) in Akwa Ibom State, and then goes through Ibom node, then to Umuahia and Enugu to Ajaokuta. The system would now progress from Ajaokuta to Abuja, to Kaduna and Kano.

And yours?

What we are working to achieve now is the AKK, which is the section from Ajaokuta to Kano. And the Ajaokuta-Kaduna-Kano is very important because without the existence of this pipeline, the entire section of the Qua Iboe pipeline, which ends in Ajaokuta will not be commercial enough in the sense that the off take will not be robust enough to justify that pipeline.

So, in reality gas will make a lot of difference because with gas availability industries can run. And besides industries running, we are also talking about power generation, gas-based industries like the urea plants, which manufacture fertilizers. So, with AKK you will be able to locate these plants where you need the fertilizer which is where you have agricultural activities going on. That makes it cheaper and more available. In terms of the economic effect it is going to be massive.

 

AKK is very important and it is going to make a lot of difference in the economy of Nigeria.

Why is AKK now perceived as the main project in the entire Nigerian Gas Master Plan, especially when there are no sales agreements justifying the pipeline?

It is important to state clearly here that this issue of Nigerian Gas Master-Plan is well articulated, and it has been there for more than 20 years.

 

The implementation of the master-plan started with the Escravos to Lagos pipeline, which is already in place. I will come to that. The master-plan also involves the OB3 pipeline, which is the East to West interconnector. Now when you look at the NGMP, it is just well articulated. The execution of the AKK part of it, as well as other southern parts, has been delayed for quite a while and the reasons are there.

But we give credit to President Muhammadu Buhari for taking the gauntlet and making this a reality and supporting it strongly.

 

Most private operators in the country’s petroleum industry already have plans for their equity gas commercialization. Is there an obligation on operators to feed gas into the AKK pipeline?

These activities are centered on NNPC’s state of operations. They articulate this with the international oil companies (IOCs). When you look at the midstream industry, which is these pipelines, you find out that NNPC is at the center of activities and the corporation has done a lot of studies, a lot of operations economics, a lot of work on long term outlook value generation, a lot of work on industry collaboration. I am privileged to be pretty involved in all these. I am an optimist and that is why I am also an entrepreneur. I am involved in the set up and building of all the pipelines in Lagos, delivered by Gaslink, which was owned by Oando. Those pipeline supply industries from Ikeja all the way through Ikorodu Road and down to Western Avenue.

Even before that, the entire Ikeja was served, Ilupeju was served, Ilasamaja was served. As we speak today, the reason industries are bubbling between Ikeja and environs is the presence of energy sources. And this energy is gas. So, let us also put this in perspective, when we talk of the AKK pipeline, industries that are already moribund are huge in number. If you go to Kaduna you will see that, and if you go to Kano you will see that. So, when there is energy in the form of gas, these industries will have the impetus to kick start again. Of course, we are not yet talking about other industries that will spring up from the scratch. So, I am optimistic.

 

Critics are of the view that gas infrastructure is needed more in the upstream industry to connect and enhance production of stranded gas

When you talk of stranded gas, it doesn’t translate to production. But remember that you do not talk of production when there is no off-take. And the reason why production is muted is because of off-take issues. Off-take cannot happen if you do not have the infrastructure to deliver the gas. These are step by step issues. When you have stranded gas and you have this need of interconnecting it to demand centres, it creates a business case for investments. And the investment that comes in is what drives employment; it is what drives capacity building. AKK will generate thousands of jobs. It is not just all about jobs, local vendors will come in, and materials will be supplied locally during the construction phase.

 

Given the terrains that the pipeline will traverse, do you think the 2023 timeline for delivery is feasible given the obvious challenges in the operating environment?

Of course, you will always have challenges when you construct pipelines in Nigeria. Those challenges come from the issues of security, issues of local conditions, road conditions because you have to move the line pipes by road most of the time. We do not have the robust rail system to do that. So, that impacts a lot on the speed. Having said that, the timing put on this project is well-articulated. It is feasible and we know it is possible. It is just that we have to work hard on it because it is necessary to do that. So, when you look at the economic impact, I would say clearly that the impact of this project is massive in concept and will be massive in reality.

 

What are the guarantees that the AKK pipeline will not be vulnerable to vandalism that plague NNPC’s pipelines?

On pipeline security, I would emphasize that we are not waiting for an explosion to happen, but the issue of public education is necessary. Gas pipeline is not an oil pipeline. Gas pipeline has a massive amount of pressure. And when you talk of pipelines of 40 inch diameter size, and you look at the length of this pipeline, then you imagine the amount of pressure that is built up there. Any attempt by anybody to sabotage the pipeline will lead to catastrophe for the person and for any person around. It is not an oil pipeline, so people should endeavour to keep away from it.

Having said this, we take serious action during construction to bury this pipeline about two meters below the surface. We also install a system to monitor when somebody is trying to break in. These are some of the measures to prevent third party infringement. There are other measures we take but these are some of the ones that we put on ground to ensure that no unauthorised person interferes with the lines.

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