Nigerdock crisis threatens Bonga oil project

The protracted labour crisis in Nigerdock, Nigeria's flagship dock yard, has become a major threat to the timely completion and crude oil production from the country's first deep offshore field, the Bonga field worth $ 2.5 bn. Nigerdock has been shut down since May 14, 2003, in what the management said was a move to avert violent protest by workers demanding payment of allowance and to resist a proposed mass sack.
But while hopes of an early resolution of the conflict continued to deem, anxiety has gripped officials of both the Shell Nigeria Exploration and Production Company (SNEPCO), operator of the field and its partner, the Nigerian National Petroleum Corporation (NNPC) over the possibility of the crisis holding back the completion of the Bonga project on schedule.

Nigerdock, one of the local companies awarded sub-contracts in the Bonga field development project, was to handle construction of the Single Point Mooring (SPM), one of the facilities needed to handle oil production and exportfrom the field. The SPM, according to officials, should be nearing completion by now, in readiness to meet production start-up from the Bonga field in the first quarter of next year.
"The problem is that the Bonga floating, production, storage and offloading (FPSO) vessel is nearing completion in Newcastle, UK, while no one could say for now when one of the key facilities for the field being built here will be ready," one source said.

Part of the anxiety in the NNPC was that a delay in the completion of the project could push up the cost. "It can also serve as a set back in NNPC's push for execution of major oil and gas projects in Nigeria," an official added.
A spokesman for SNEPCO who admitted that the crisis in Nigerdock could delay the completion schedule for the Bonga oil field, however, told that the company was already making contingency plans to keep the project on track. Development of the field is being carried out under a Production Sharing Contract (PSC) agreement between the Shell and NNPC, in which Shell funds 100 %, the financing of the operation and will recoup such investment after production begins.

Bonga field, located in Oil Mining Licence (OML) 118 and in 1,200 metres water depth, was discovered in 1995 and was Nigeria's premier deep-water field. It holds 1.2 bn barrels of crude oil reserves, while first oil production will flow at a rate of over 150,000 bpd, reaching 250,000 bpd by end of 2005. Execution of the project was a subject of inquiry earlier at the National Assembly, following the uproar that greeted reports that the series of contracts awarded under the development plan, created several hundreds of jobs overseas.
The latest trouble however, started after the new Nigerdock management sent out letters early last May, indicating it was laying off 300 staff. Matters have not been made better by the inability of Nigerdock's new core investors, Global Energy to make available the $ 5 mm urgently needed as working capital for the dockyard. The intervention of the Ministry of Labour and Productivity and the recourse to arbitration panel has not been able to resolve the matter.

Meanwhile, the NNPC/Elf joint venture has awarded fresh $ 490 mm contract for the second phase of the multi-billion dollar Amenam/Kpono offshore field development programme.
The turnkey contract awarded to a consortium of Italian firms lead by Saibos, was awarded a turnkey contract for the execution and extension of the Amenam field facilities, 60 km offshore Bonny, to supply natural gas to the Nigerian LNG plant. The project scope include engineering, construction and instalment for a production platform and bridge.

The joint venture began production from the field last week. Executed at the cost of $ 1.4 bn, it is expected to raise the country's production capacity by 125,000 bpd.
"Amenam project is currently being expanded to be an Oil and Gas Production and Export Project that will in addition to oil production gather and supply gas to the trains 4 and 5 of the NLNG at Bonny," an Elf official told.