COLUMN | Namibia and Nigeria – Plunder on the dancefloor, kicks on the drill floor? [Offshore Accounts]

Oh, to be young today! I know, I know, I know, I know, Sophie Ellis Bextor’s 2001 single “Murder on the Dancefloor” is back topping the charts after it appeared in a post cinematic rip-off of The Talented Mr. Ripley, and David Guetta is filling the dancefloors with his Grammy nominated “Baby Don’t Hurt Me” (featuring Anne-Marie and Coi Leray, whom I am sure both used to work at Saipem).

This dance number channels the spirit of former Harvard president Claudine Gay by “prominently interpolating” Haddaway’s “What Is Love“, a classic that (checks notes) was first issued 31 years ago. There is nothing new under the sun in popular culture it seems.

So, in pop, as in offshore news.

Nigerian poverty alleviation scheme plundered (allegedly)

Nigerian crooks, if you think you are getting away, I will prove you wrong, to quote Ms Ellis Bextor. The country may have just appointed a record-breaking number of navy rear admirals in December, but it is now missing a minister.

Last week, Nigeria’s President Bola Tinubu suspended Humanitarian Affairs and Poverty Alleviation Minister Betta Edu over the alleged transfer of NGN585 million (US$640,000) in public money into the personal bank account of Bridget Oniyelu, the accountant for the government’s Grants for Vulnerable Groups initiative, according to the Citizen Digital.

Then on Friday, he also announced the suspension of a major national welfare programme administered by the minister, which is designed to help ease poverty. The National Social Investment Programme Agency (NSIPA) has provided cash transfers for some of the country’s poorest people as well as funds to help the young and to offer school meals, but it will be suspended for a minimum of six week as concerns mount that payments are going to wealthy politicians rather than the needy.

We should stress that Dr Edu has denied any wrongdoing, and her staff told reporters that she had approved the transfer into a personal account, which was not in her name, for the “implementation of grants to vulnerable groups”.

Really? In a country where over one hundred million people live below the poverty line, at least the poverty alleviation of ministers and senior bureaucrats remains a priority.

The poverty alleviation minister being busted for crookery is amusing, but it highlights the major problems of governance Nigeria faces as it attempts to rebuild its oil and gas production after decades of neglect.

Next floating LNG project now has more state involvement

As well as being longstanding critics of corruption in Nigeria, we have been longstanding advocates of floating liquefied natural gas (FLNG) projects. In 2024, we expect to see long-awaited progress on new FLNG projects in Indonesia and Malaysia, and maybe even in Mozambique.

Nigeria is now also a hotbed of interest in FLNG, mainly because discharging LNG to tankers offshore from a facility built overseas is a safer and more reliable option than trying to complete a construction programme onshore, where lawlessness and a broken customs system typically lead to massive project delays. There are huge opportunities here, if only the country’s broken system of oil and gas procurement could be reformed. As we have highlighted before, between 2018 and 2022, Nigeria slumped from producing around two million barrels of oil per day, to less than 1.2 million, with production today that is lower than it was in 1990!

In December, Nigeria’s first FLNG, the Yoho project, moved a step closer to fruition when local player UTM Offshore signed a deal with the government of Delta state to join the project with an eight per cent shareholding alongside state-owned Nigerian National Petroleum Corporation (NNPC), which holds a 20 per cent stake. The Yoho FLNG design features production capacity of 1.8 billion tonnes per year for domestic use and export. The gas has only to be exported one kilometre from a processing platform to the FLNG unit, removing the problems of pipeline tapping and sabotage in the Niger Delta.

The final investment decision is scheduled to be taken in the next few months. Technip Energies and JGC Holdings Corporation have been performing the FEED engineering study, and UTM expects the construction of the FLNG unit to begin in China later this year after the project is approved and financed. In 2022, African Export-Import Bank (Afreximbank) agreed to partly finance the project.

The FLNG unit will be positioned 60 kilometres from the shore of Akwa Ibom state, moored in around 60 metres of water with a turret mooring, and will also have a storage capacity of 200,000 cubic metres of LNG. It will also produce liquefied petroleum gas (LPG), which will be sold within Nigeria for cooking.

Yoho-ho and a barrel of oil?

If you are an industry veteran, you may be wondering why the name “Yoho” sounds familiar. This is because Yoho is not a new field at all; rather ExxonMobil has been producing oil there in block OML-104 in partnership with NNPC since 2003, and has already installed a large existing field infrastructure for oil production, including a central processing platform and a crude oil storage unit. Produced gas from Yoho is currently re-injected to maximise oil recovery and eliminate routine flaring, and has been for two decades, but as the field ages, oil production has dropped and the Nigerian state has finally decided to monetise the stranded gas with UTM’s help.

At the signing ceremony for Delta state joining the FLNG project, Upstream reported that NNPC chief executive Mele Kyari spoke of a transformation in gas usage in Nigeria.

“In the next two to three years, we will use gas to bring about a revolution in our country,” said Mr Kyari. “The outcomes will be clear. There will be prosperity and value created. [We’re] not just developing gas for export but progressing all our initiatives to bring gas into the domestic market.”

Whist we wish Mr Kyari every success in his plans, the evidence from Dangote shows how hard it is for even the best-resourced and most well-connected businesspeople to succeed in Nigeria.

Dangote’s first oil, first corruption bust?

Over the weekend, the Dangote Group announced that it had finally achieved first oil production from its Nigerian refinery, the largest in Africa, after over five years of delays. The refinery, which stands on a peninsula on the outskirts of Lagos, cost over US$20 billion to construct and was financed by Nigeria’s richest man, cement baron Aliko Dangote. It has now commenced test production runs ahead of moving to planned production of 350,000 barrels of kerosene diesel per day this year, and full capacity of 650,000 barrels per day next year.

The good news was somewhat overshadowed by the fact that a few days before, the Economic and Financial Crimes Commission raided the headquarters of the Dangote Group in Lagos as part of an investigation into the notorious former central bank governor Godwin Emefiele, who has been accused of fraud and mismanagement.

Did the Nigerian central bank copy the Venezuelan and Myanmar model?

The Financial Times reported that Mr Emefiele, who ran the Central Bank of Nigeria for nine years until his arrest last year when Mr Tinubu was appointed president, operated multiple foreign exchange rates at the bank. These different rates permitted his associates and favoured allies to buy US dollars with his permission at much better rates than were available to anyone else.

These multiple exchange rates are open to abuse as the restrictions favour the Nigerian elite, who can profit from “round tripping,” i.e., buying dollars for cheap from the central bank and then selling these back via the informal market at a much higher rate, then using the newly acquired naira to buy more US dollars, and so on. This is an age-old scam, and the crooked government of Venezuela has already abused it in its similar exchange rate control programme, as evidenced by the conviction of a German banker for money laundering on behalf of members of the Maduro government in 2019. In December, the notoriously brutal and corrupt military junta in Myanmar gave up their attempts to use similar exchange control measures, which have been connected to similar corruption amongst generals there.

Too big to fail with 400 million people?

The decision to permit the Nigerian naira to float freely rather than be controlled by the central bank has seen the currency plunge in value from NGN451 to the dollar in January 2023 to NGN959 for one US dollar today. Certainly, some individuals got rich on the disparity between the market rate and the official rate. Aliko Dangote’s spokesman told the FT that its representatives were already at the anti-corruption agency’s offices to deliver documents the agency had requested when the raid took place earlier this month. Investigating what happened under Mr Emefiele’s tenure and what is happening in ministries like Dr Edu’s is a crucial part of ending the culture of impunity that has dogged Nigeria since independence in 1960.

Ending such an obvious source of corruption can only be positive for the Nigerian economy in the longer term, even if inflation rises in the short term. With a population forecast to be the third largest in the world by 2050 at 400 million people, Nigeria is just too important to fail.

So, we will keep reporting on developments from this potential powerhouse.

Success for the Nigerian diaspora

One of the most positive statistics from the US is how well Nigerian immigrants do there, earning on average well above the median national income. The problems seem to lie with Nigeria’s dysfunctional institutions and corrupt political system. The success of the Nigerian-born co-founder of Global Infrastructure Partners (GIP), Adebayo Ogunlesi, shows this. Last Friday, Mr Ogunlesi announced a US$12.5 billion deal to sell his company to BlackRock, where he will be appointed to the board of directors. Amongst the infrastructure assets owned by GIP are the airports in Sydney and Edinburgh, the port of Melbourne, oil and gas pipelines in the US, and data centres.

Mr Ugunlesi was born and schooled in Lagos; his father was the first Nigerian professor of medicine and his mother ran a nursery school. He then moved to the UK and achieved a first-class honours degree at Oxford university before moving on to post-graduate study in law and business at Harvard.

There are lots of smart and talented Nigerians, but Nigeria needs reform to allow its people to flourish at home as well as abroad. Whilst western countries are open to talented foreigners like Mr Ugunlesi, Nigeria is a closed market where connections, bribery, and influence matter more than talent and ideas.

Not forgetting Namibia: Africa’s hottest deepwater market

If we have been writing a lot about Nigeria of late, we can expect to be writing a lot more about Namibia. In fact, you would have been treated to an entire article dedicated to the topic had this week’s free Deepwater Insight newsletter in Twitter not already got in and said what I wanted to say.

Unless you have been living under a rock, you can’t have failed to note the rush of deepwater oil discoveries in Namibia, where Shell and TotalEnergies made large deepwater oil discoveries in 2022 and 2023. This year, both companies are currently drilling appraisal wells there, using the Northern Offshore semi-subs West Mira and West Bollsta. Total will shortly announce the results of another high-potential exploration well, Mangetti-1X, which is being drilled by the Vantage drillship Tungsten Explorer.

Impact gets a high impact reward

Adding to the sense of a gold rush, TotalEnergies announced it would pay Impact Oil and Gas US$99 million to acquire an extra 10.5 per cent participating interest in Block 2913B and a 9.39 per cent interest in Block 2912. Both blocks are currently operated by TotalEnergies, and Impact would retain a 9.5 per cent stake in each after the sale, with Total funding Impact’s entire share of exploration and development costs until first oil is produced.

Last year, we asked whether Namibia would be a Nigeria or a Norway. Portuguese operator Galp’s announcement on January 10 of a significant light oil column in its first well in Namibia has only added to the sense that this frontier territory could be the next Guyana. The well was drilled with the semi-sub Hercules and supported by a trio of Remøy Shipping-managed platform supply vessels (PSVs).

Chevron and Woodside next

Chevron and Woodside are also planning to kick off their own separate drilling campaigns in Namibia at the end of this year. With deepwater harsh-environment rigs nearly sold out, we can expect to see more deepwater drillships heading there at day rates approaching half a million dollars.

Daylight robbery in Windhoek

Meanwhile, Namibia is gripped by a US$11 million bank fraud after a 30-year-old employee at Bank Windhoek transferred N$200 million (US$10.74 million) into two bank accounts without authority and promptly fled. The accounts had been opened only a few days before. This is yet another a reminder that strong checks and balances are required to prevent fraud and embezzlement everywhere.

As Namibia moves towards production of hundreds of thousands of barrels of oil per day in the next decade, the country of less than three million people will need to be vigilant.

The Norwegian model of oil and gas management has been a storming success – but Nigeria shows the dangers of failure.

Houthi-free column

Finally, yes, this is a Houthi-free column. We have been banging on about the problems of instability in Yemen for years and we are extremely grateful that the United Nations and Boskalis managed to empty the floating bomb that is the FSO Safer before the drones and rockets started raining down again.

Our focus is not on more war in an already war-torn country, where hundreds of thousands have already died since civil war erupted after former president Ali Abdullah Saleh stepped down in 2012, nor on Suez Canal deviations, which barely impact offshore vessels, nor even on the rise in the oil price back above US$80 per barrel, which is not a major shock. Instead, we should be focusing on the plight of the crew of the three vessels currently held by the Iranians and their allies in this conflict.

Don’t forget the seafarers held hostage

In November, the car carrier Galaxy Leader was intercepted and boarded by Houthis via helicopter in the Red Sea. The armed men demanded that the vessel and its 25-strong crew dock in Hodeidah, where they remain detained. Seventeen of the detained sailors are Filipinos, and the Department of Migrant Workers in Manila has reported that they are safe and in contact with their families, at least for now.

In December, the Navibulgar-owned bulker Ruen was seized by Somali pirates east of the Yemeni island of Socotra in the Arabian Sea, and was compelled to sail at gunpoint to the Somali province of Puntland. On December 20, a Bulgarian officer from Ruen was medically evacuated by an Indian Navy ship and transported to Oman for treatment, after he was shot in the shoulder and hit in the head with a rifle butt because he didn’t obey his kidnappers’ orders. He has now returned home, but 17 seafarers remain hostages on the vessel, including seven other Bulgarians and Angolan and Burmese nationals.

Finally, last week, the 158,500DWT Suezmax oil tanker St Nikolas was seized in the Straits of Hormuz by the Iranian authorities. The 18 Filipino and one Greek who comprised the crew of the Empire Navigation-owned, Marshall Islands-flagged tanker are safe and in good health, the company reported yesterday.

The satellite communications system remains disabled onboard, and St Nikolas sits anchored off Bandar Abbas in Iran. The tanker was en route between Iraq and Turkey.

Whilst every talking head in shipping is enjoying their five seconds of fame in the media pontificating on the Red Sea crisis, our thoughts and prayers remain with these seafarers and their families. The three ships should be released and their crews able to return home.

Once again, ships and seafarers are being used as pawns in great power conflicts.

Background reading

In 2021, Upstream provided this neat summary of the background to Nigeria’s offshore stranded gas problem and how UTM identified Yoho as the prime target for the country’s first FLNG.

Whilst we don’t usually cover upstream projects, the Dangote refinery is potentially a game-changer for Nigeria and for crude oil flows and refined product transportation around the Atlantic basin. We highlighted the long history of the project in this piece in November.