Indications emerged at the weekend that Samsung Heavy Industries (SHI) Nigeria Limited, the first subsidiary of Samsung Heavy Industries of Korea to be established in Africa and Lagos Deep Offshore Logistics (LADOL), a 100 per cent indigenous logistics and port facility developer, have reached an out- of- court settlement on their legal dispute over the $3.8 billion Egina Floating Production Storage Offshore (FPSO) project, THISDAY has learnt.
Samsung and LADOL have also established a new partnership called SHI-MCI Free Zone Enterprise to build Africa’s first FPSO integration and fabrication facility in LADOL free zone in Lagos.
Located 130 kilometres offshore in Oil Mining Lease (OML) 130 in deep offshore Nigeria, the Egina field development is a project to build FPSO for Total Upstream Nigeria Limited and the Nigerian National Petroleum Corporation (NNPC).
The FPSO would be one of the largest in the world, with a storage capacity of 2.3 million barrels of crude oil and a targeted production capacity of 200,000 barrels per day.
LADOL had dragged Samsung, Total and the Nigerian Content Development and Monitoring Board (NCDMB) before a Federal High Court over an alleged plot to exclude the firm from the execution of the local component of the Egina FPSO vessel.
In the proceedings, which were issued for LADOL by a Senior Advocate of Nigeria (SAN), Professor Fidelis Oditah, LADOL is seeking 19 reliefs and appealed to the court to make a declaration that a contract awarded by Total to Samsung on or about March 15, 2013, for the construction and installation of FPSO at Total’s Egina oilfield is subject to the Nigerian Oil and Gas Industry Content Development Act 2010.
LADOL also sought a “declaration that the Egina FPSO Project contract was awarded by Total to Samsung, with the approval of the Nigerian regulatory authorities including the Nigerian National Petroleum Corporation (NNPC), National Petroleum Investment Management Services (NAPIMS), NCDMB and the Ministry of Petroleum, on the basis inter alia that a significant proportion of the steel fabrication and the integration of the FPSO topsides would be carried out at LADOL’s yard in the LADOL Free Zone, Tarkwa Bay, Lagos.”
But THISDAY gathered at the weekend that apparently worried by the negative impact of a protracted litigation on the world-class Egina project, the two parties had settled the matter out-of-court and would inform the court of this development at the next sitting scheduled next month.
“The next sitting of the court will be a mere formality to tell the honourable court that the matter has been settled amicably by the two parties,” a source familiar with the dispute said.
In a joint letter obtained by THISDAY and signed by the Managing Director of LADOL, Dr. Amy Jadesimi and her counterpart in Samsung Heavy Industries Nigeria, Mr. KS Lee, the two companies announced the formation of a new joint venture company to implement the Egina project, confirming the strong suspicion that the dispute had been settled.
According to the letter dated August 25, 2014, the joint venture company, SHI-MCI Free Zone Enterprise will build Africa’s first FPSO integration and fabrication facility in LADOL free zone.
The letter further stated that the essence of the facility is to ensure that large vessels, including FPSOs are integrated – that was, partially constructed and assembled onshore in Nigeria.
“The construction of this facility is expected to take 18 months and has already begun in LADOL free zone. Once completed, the facility will be capable of fabricating 1,000 tonnes per month and capable of integrating all the FPSOs expected to be built in Nigeria in the next decade,” the letter read.
The letter also stated that the companies were jointly investing $300 million in the establishment of the new facility, which would create 50,000 direct and indirect jobs.
The development of the integration facility is expected to be a Nigerian Content milestone as it will also ensure the domestication of a large chunk of oil and gas industry activities in the country.
FPSOs are floating vessels that store crude oil produced in both deep and shallow offshore and offload it into export tankers for shipment.
Of the over 100,000tonnage in a typical FPSO, only less than 10,000 tonnes are fabricated in Nigeria by indigenous contractors as all the major fabrication works are done in foreign yards.
Even the small structures fabricated in Nigeria are transported to foreign yards for integration into the main FPSOs, before the FPSOs sail to Nigeria, on completion.