Managing Director of LADOL, an oil and gas fabrication and multi-logistics services base in Lagos, Nigeria, Dr Amy Jadesimi, in this interview speaks on her company’s decade long operation and sundry issues.
Excerpts:
How would you describe your operations in the last 10 years that LADOL has been in business?
We have seen a lot of changes since we started. When we started about 10 years ago, we knew that we were going into a new market, so we expected a lot. We have seen series of struggles but they are struggles we prepared for. The issues we have encountered centred on the fact that the market was not designed to welcome private sector investors, particularly Nigerian extraction. So, we had a lot to proof before people could take services from us. The good news is that now, we have proven that Nigerians can build world class facilities. We are now enjoying a lot of support and recognitions, as exemplified by Mr. President’s endorsement of LADOL in March this year. In terms of our operations, where we started was investing in building our logistic and repair facilities. LADOL has facilities inside Apapa Port but unlike the rest, of Apapa Port it has been privately developed. It is important that we are Nigerians because with our difficulties in getting return on investment, only Nigerians are going to build this country. We need to attract Nigerians to build the kind of infrastructure we need to become the heartbeat of Africa.
Which situational factor guided you to go into this line of business?
What we noticed was that all over the world, when you have a country that has the kind of maritime profile, with the length of our coast line, we observed dearth of facilities that need to be developed, moreso as those that were in place had become obsolete, with most of them built 20 or 30 years ago. There was therefore need for new facilities. So, we saw the need for new facilities that would enable domestication of activities. Most of the offshore logistic support for drilling and production were old, making us to lose business to our neighbours. We recognised that oil and gas in Nigeria was increasingly going to both onshore and offshore. We also recognised that the market was grossly undeserved. Local content remained 10 to 15 per cent because we did not have the facility. What we did was to set out to build facilities that will grow the market by servicing the repair market. That would enable more to be done in Nigeria. We were looking at getting a modern facility to support offshore operations and thereby achieve lower operating costs which would make Nigeria a more attractive destination for investments and industrial activities.
One would have expected you to situate your facilities closer to the Niger Delta area to give you more advantage in terms of operational cost?
This is one of the misunderstandings common in the market. I know the Niger Delta extremely well. But we as Nigerians need to step out and we need to recognise that if a private investor like LADOL would embark on an investment worth $500 million, we must have done all adequate feasibility studies. This is not a matter of tribe but a business decision. What we were trying to do was to move across Nigeria and in other to do that, we had to locate facilities. In other to do that, we had to build facilities that will attract people to work in Nigeria. Our facility is located in Lagos because that is the ultimate location for our facility. The reason is that bringing in large vessels and by large vessels I am talking about 300 metre long 50 centimetre wide is easier in Lagos. There is a channel for them to traverse, it is save, it is reliable and if we are to attract those vessels to Nigeria, we have to recognise that we are not competing among ourselves but we are competing with our neighbours and secondly, the international locations where those vessels are from. We have to recognise that the geography of our coast line determines where the optimum location will be for certain type of facility. And that location is Lagos. The second is to recognise what happen when the facility is in Lagos. The first thing is that it creates jobs in the Niger Delta.
How?
A lot of our fabrication takes place in Niger Delta but everything fabricated in Niger Delta has to be put on a shell and sent to the other side. If you are a businessman and you are investing in a fabrication yard, would you invest in a fabrication yard where you knew everything fabricated has to be taken across the other side of the well. When we give contracts to foreign companies to build vessels outside, the company we gave the contract will not necessarily do all the work in their own yard. So, it is absolutely the case that jobs have been lacking in the Niger Delta because we have not ben able to berth large vessels like FPSO. Now that we have that vessel in LADOL in Lagos, it makes it very attractive to partners in the Niger Delta who will fabricate and send to LADOL. This is how it is done in other countries as well. So, the demand from the Niger Delta will increase because the facility is in Lagos. The more jobs that done in Niger Delta, the more they will be integrated here. Nigeria is like a family and every child in that family should be given a chance. It was therefore a business decision to locate LADOL in Lagos because of the wider channel facility and do the fabrication job in Niger Delta to maximize the job opportunities for the people.
Going back to the issue of challenges, was there not a time when you were overwhelmed that you were tempted to give up and what were the things that gave you the elixir to continue?
We were really encountering challenges that would have made us to give up but for the fact that we are Nigerians. Our chairman has said many times that if you are not a Nigerian, within one month, you would give up. To develop a facility like LADOL, we encounter challenges everyday. But I am a Nigerian and I have to continue. I am not like a foreigner who would feel that he can move Ghana or London or somewhere else. We are not going to give up. When we look at the impact on the economy, we are glad to see we have achieved the chairman’s vision, which is to create jobs, build facilities that help Nigeria become the heartbeat of West Africa. We have seen how Nigeria is being short changed. This is a game changer. When you see the way the international community looks at China and Brazil for instance, it should be understood that they have come a long way and have risen and built their countries from nothing to command global respect.
Specifically, to what extent have you been able to actualise your vision?
We have come near the achievement of our vision primarily through the facilities that we have built, the jobs we have created. By the end of the year, we would have taken on board 2,000 employees and 5,000 in the next five years directly employed and 50,000 indirect jobs. Our shipyard is the largest in West Africa. In terms of the amount we have managed to invest, which is $500 million, we have achieved a lot. In terms of the relationship with international community, we have also achieved a lot. You now have an international oil company like Total and the first time in Total’s history in Nigeria, it has fully supported the development of this shipyard. And for Total, this is a big change, especially at a time a lot of people were telling Total it could not be done. But those people believed in us and we have changed not only the economic landscape in Nigeria, we have also proven to companies like Total that if they have faith in real local content, their faith would be rewarded. Obviously, more oil companies are going to follow this example. This will impact on Nigeria. Nigeria has emerged a fantastically successful investment destination. The next growth area in the world is going to be West Africa and that is going to be led by Nigeria.
How have you been coping with material sourcing issue, more so with the low or non-development of the metal sector in the country?
This is a very good example of what we are talking about. Where is the demand for steel fabrication going to come from if the local demand for fabrication is not high? There was no demand. We have now solved that problem by increasing the local demand. When we talk about creating 50,000 jobs, one of the ways those jobs will be created is in steel manufacturing because now there is a level of manufacturing fabrication locally. We have enough demand for it to become viable. The demand is not just coming from the local market but from West Africa. If demand for fabrication goes up, the demand for steel will also go up. People will invest in steel. They will invest in engineering and others. This is all what will want to see happen and what we mean by collaboration. We need to sit with people who can potentially invest in steel. This is the kind of discussion going on in Europe. These things need to planned and coordinated and that planning and coordinating starts with all serious Nigerian investors sitting around the table and working together because the sky is the limit to how that will impact our economy. But the biggest danger to the vision I am talking about is ourselves. If we continue to allow the politics of divide and conquer, wasting our time to talk about monopoly, no meaningful impact will be created.
Currently, how are you sourcing your materials?
Currently, we source steel locally and from importations. But the point I am making is we have enough local steel manufacturing capability.
To which extent has the current low crude oil prices affected your business?
It has been very good for LADOL. I mentioned earlier that we were opening a new frontier and we were developing the first customised modern facility in the offshore support. It is a well known undisputed fact that a place like Lagos has all the attractions as a profitable business base that can lend huge support even for certain offshore operations. Despite some insinuations that Nigeria is a corrupt and high cost business environment, it is still a preferred destination because when you look at the cost variations, it presents greater attractions. So, for LADOL, low cost location and low oil price means people behave more rationally, make sensible decisions and that include getting more services from LADOL. For Nigeria, it is good because when people make rational decisions, they result in more investments.
But if you look at the cost template in respect of offshore operation, the margin has really reduced with the low crude oil price. Are you saying that LADOL is the game changer in that respect?
LADOL is one of the game changers. This is because what we need to do is to reduce the cost per barrel and one of the easiest ways to this if you have an offshore operation, is to get your support from LADOL, since for a certain offshore operation, you will usually save 50 per cent on your cost. The other things we understand is when the oil price was about a $100 a barrel, we had a lot of inflective costs, but right now, we are trying to keep cost below 30 to $40 per barrel. We need to reduce cost for offshore to 15 to $20 dollar per barrel. Cost across the board in Nigeria needs to come down. Secondly, for certain offshore operations, Lagos is the destination and within Lagos, LADOL is the only facility operating 24/7 that you can get immediate significant 50 per cent cost saving by making that decision but even in the other areas of the country, we still bring our cost down more and we know the suffering we are seeing across the country right now, to me, that is an indication of the fact that when the price was about a $100 a barrel, most people didn’t benefit. From business perspective, the biggest issue
I am seeing here is lack of investment. No matter what part of the country you are in, private sector investment is going to come only when it makes economic sense and the first thing people look at when they are making their investment is the cost. In every sector across the board, we need to bring our cost down and when we do that, no matter what the price of oil is, all of us will benefit more. Low oil price forces us to reduce cost, makes us a more attractive investment destination and attract more investors. The benefits flow to us in the whole country.
In your operations, to which extent are you relying on foreign expertise?
LADOL itself only has about five per cent foreign employees. We have been on for 10 years now and we have trained a lot of Nigerians on the job. Some of things LADOL do are things that have never been done in Nigeria before. Right from inception, we have activated the template to bring on board more Nigerians, especially for certain jobs which we had to understandably employ foreigners to do. But the key thing was the plan to develop local content in Nigeria. This has helped to significantly reduced operational cost.
Which organisation are you having your technical partnership with?
We are virtually independent because we have been working for about 10 years. For our core business and logistic support, we do that on our own. But we are partners to Samsung Heavy Industry of South Korea.
When are you likely to complete the much expected iconic Egina FPSO?
I can’t tell you the details because they are confidential but the project is currently on schedule and I think we are still looking at 2018 or so. Part of the project has been completed ahead of time.
What policy regime do you think should be enthroned by the current administration to support your business?
From an indigenous private sector investor perspective, we need a level playing field and enforcement of local content. The level playing field aspect is something that could be achieved with adequate capacity building. Level playing field means everybody who is investing should be given equal chance. It also means that no matter what the project we are looking at, there is space for people to collaborate. This is the only way through which we are going to develop. Level playing field is critical and we need this government to do that. We all believe that in this government, we will get that. We also need full enforcement of local content policy. There is need for more engagements between the private sector and all arms of government. There is need for full engagement between government and local private sector
Gulf of Guinea has emerged a strong operational zone of pirates. To which extent has it been impacting your business.
So far, it has not impacted on our business but we have to look towards the future. Issues bordering on security cannot be overemphasised. We are happy this government has been taking the issue of security seriously. We have seen the move that have been taken to improve security both in the maritime and the oil and gas sectors. So, we have to be continuously proactive. We encourage government to put in place measures that will discourage or eliminate piracy, to further promote investments in the country.
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