Post on 23-Apr-2018
Copyright of Shell Petroleum Development Company of Nigeria Limited 1June 2011Confidential
The Subsea Sector in Nigeria’s Oil & Gas Industry
Subsea North East
Conference & Exhibition
June 9, 2011
Engr. Uzoka Austin Emmanuel
NCD Manager
Disclaimer Statement
This presentation contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All
statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements
of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties
that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking
statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing
management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of
terms and phrases such as ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘intend’’, ‘‘may’’, ‘‘plan’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘probably’’, ‘‘project’’,
‘‘will’’, ‘‘seek’’, ‘‘target’’, ‘‘risks’’, ‘‘goals’’, ‘‘should’’ and similar terms and phrases. There are a number of factors that could affect the future operations of
Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this Report,
including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for the Group’s products; (c) currency fluctuations;
(d) drilling and production results; (e) reserve estimates; (f) loss of market and industry competition; (g) environmental and physical risks; (h) risks
associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions;
(i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments
including potential litigation and regulatory effects arising from recategorisation of reserves; (k) economic and financial market conditions in various
countries and regions; (l) political risks, project delay or advancement, approvals and cost estimates; and (m) changes in trading conditions. All forward-
looking statements contained in this presentation are expressly qualified in their entirety by the cautionary statements contained or referred to in this
section. Readers should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of this
presentation. Neither Royal Dutch Shell nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as
a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred
from the forward-looking statements contained in this presentation.
The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only proved
reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing
economic and operating conditions. We use certain terms in this presentation, such as “resources" that the SEC's guidelines strictly prohibit us from
including in filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575 and disclosure in our
Forms 6-K file No, 1-32575, available on the SEC website www.sec.gov. You can also obtain these forms from the SEC by calling 1-800-SEC-0330.
Contents
� The Nigerian Oil & Gas Industry
� The Nigerian Oil & Gas Industry Content Development (NOGICD)
Law
� NOGICD : Challenges and Opportunities
� Road Map for Success in Nigeria
Nigeria Oil & Gas Industry Facts
After four decades of production, the sector is still very much dependent on foreign
technologies
Nigerian Ambition
0
20
40
60
80
100
up to 2004 2004 - 10 2010 - 15
Nigerian Foreign
Attracts high foreign direct investment and is
the most developed amongst all economic
sectors
Accounts for 95% of country export earnings
and 80% of national income
Over 40% contribution
to GDP
Proven oil & gas reserves
� 37bbln blls
� 185 Tcf natural gas
Employs <10% of working
population
The Nigerian Oil & Gas Industry
35bn barrels
Proven Oil Reserves
187 Trillion Cubic Feet (TCF)
187 Trillion Cubic Feet (TCF)
Proven Gas Reserves
Estimated 600TCF
Estimated 600TCF
Undiscovered Gas Potential
R
E
S
E
R
V
E
S
DAILY PRODUCTION
�Oil - Over 2 Million Barrels �Oil - Over 2 Million Barrels �Gas - Over 8 Billion Cubic Feet �Gas - Over 8 Billion Cubic Feet
�Gas Export - Over 3 Billion Cubic Feet
�Gas Export - Over 3 Billion Cubic Feet
ESTIMATED ANNUAL SPEND
�Industry Wide - About $20bn Annually
�Industry Wide - About $20bn Annually
Source : Investment Opportunities in the Nigerian Oil & Gas Industry - Diezani Alison-Madueke (Mrs.) Honourable Minister of Petroleum Resources – OTC 3rd May, 2011
�Upstream Gas - $1.5bn to $2bn by FGN�Upstream Gas - $1.5bn to $2bn by FGNProven gas reserves ... We are clearly well positioned to move from the current 7th
position in the world to the top three in due course.
The Nigerian Oil & Gas Industry
Oil and gas will remain the major sources of energy for the next 25 years
Nigeria is a major player in the oil and gas industry
Oil and gas will remain the major sources of energy for the next 25 years
Nigeria has the 10th largest proven oil reserves Nigeria has the 7th largest proven gas reserves
OPEC Report 2009
� Ample opportunities exist in the Nigerian oil & gas ndustry
History of the NOGIC Bill
• Titled “ An Act to make Provision for Nigerian Content Development in the Upstream Sector of the Petroleum Industry and for Matters Connected Therewith” sponsored by Hon. Chudi Offodile
Conceived in 2002 by the National Assembly
Stalled as the initial sponsor of the bill lost his seat in the 2003 election
Resurfaced in 2005 and sponsored by Senator Lee Maeba
• This policy trust was sponsored by NNPC
Government issued policy on local content 45% - 2006 and 70% - 2010
• Contracts to comply with LC requirements.
Shell Nigerian Content policy signed in 2006 by Basil Omiyi
The Senate passed Local Content bill in April 2008 and House Representatives in October 2009
Committee harmonized the report passed into law by Senate and HOR-2010Committee harmonized the report passed into law by Senate and HOR-2010
The NOGICD Act - Overview and Structure
The law was unveiled on April 28, 2010 with the formation of Nigeria
Content Development Monitoring Board (NCDMB).
It applies to all matters pertaining to Nigerian Content in respect to all operations or
transactions carried out in or connected with the Nigerian Oil & Gas Industry.
Part I – Nigerian Content Development in Oil &
Gas Industry
Part II – Establishment of the NCDMB
Schedule A – Minimum Nigerian Content (NC)
targets
The Act (110 Clauses in 3 Parts)
� 68 clauses on the provisions and application of the law
� 42 clauses on the structure, roles and activities of the NCDMB
� Stipulates % NC per category
� 17 Main and 285 sub categories listed
NOGICD Act – Nigerian Economy
Oil & Gas sector is the primary driver of economic activities
� Stimulate industrial development
and strengthen local industry
�Create linkages between oil & gas
industry and other sectors of the economy
� Build a globally competitive supplier base and energy
sector
�Highly skilled and innovative local workforce
�Increasing local capability and capacity
� Develop vibrant local economy
�Increase the pace of economic diversification
�Maximise overall economic
Local Content
Development
: Transformation that
is generated and
sustained over time
from withinLocal Content Development - part of government’s comprehensive agenda
Nigerian Content Act: Key Challenges for Investors
All operator, contractors and sub-contractors to maintain bank accounts in
Nigeria
Operators or project promoters to retain a maximum of 5% of management
positions as expatriate positions
1% of every contract awarded to any operator in the upstream sector to be
deducted for the purpose of funding the development of Nigerian Content
All operators engaged in Nigerian oil and gas industry must carry out all
fabrication and welding activities in-country
Before carrying out any work or activity in Nigeria, the operator or other body
submitting a plan must have an office and personnel with decision -making
authority, where the project management and procurement decisions on the
project are made
Investment Opportunities
“I am personally excited about the
explosion in opportunities that I
see unfolding in our industry, for
all current and prospective
investors. Our vision is focused
and we have a clear and
implementable roadmap and most
importantly, there is now
continuity in government
policies.”
Honourable Minister of Petroleum Resources – Diezani
Alison-Madueke (Mrs.) OTC 3rd May, 2011
Enabling Business Environment
� The NC Act sets out provisions that guarantee that investments made infacilities within the country will be fully utilized and ... that the rights of everyinvestor is protected under the laws
� Implementation of the most aggressive reform of the commercial frameworkfor
gas in Nigeria to address the observed inadequacies in the erstwhilecommercial terms that stunted investment
� The massive requirements for oil & gas infrastructure development, projectedannual tonnage of pipelines, welded steel products and other structures willsupport investments in fabrication yards, machine shops and related facilities
� An extensive Nigerian coast line, high volume of cargo into Nigeria, marinesupport vessels and equipment, rigs, offshore production units and thrivinginformal ship repair industry justify the further and increased development ofmodern dry docking facilities in the country
Source : Investment Opportunities in the Nigerian Oil & Gas Industry - Diezani Alison-Madueke (Mrs.) HMPR – OTC 3rd May, 2011
Investment Opportunities
• Support the development of the various petrochemical, fertilizer, gas processing plants, refineries
Engineering Design and Related Services
• Growth of gas utilization from 1 bcf/d to 5bcf/d requires considerable step growth in petroleum engineering studies, drilling activity...
Petroleum Engineering Services
• Current capacity is significantly smaller than required... need for investment in the area of modern fabrication yards
Fabrication and Construction
• Required for the laying of over 2,000 km of gas and oil pipelines over the next four years
Pipe Mills, Pipe Laying and Support Activities
• A major opportunity for investorsEquipment leasing
• Major construction effort, often in hostile terrainCivil Works
• Over $40bn is planned to be expended within the next few years in both oil and gas activities, logistics to account easily for 5-10% of this spend
Logistics and Haulage
Source : Investment Opportunities in the Nigerian Oil & Gas Industry - Diezani Alison-Madueke (Mrs.) HMPR – OTC 3rd May, 2011
Opportunities in Nigeria Oil and Gas Industry
Criteria
• Technological
requirement
• Skill requirement
• Level of capital
investment
• Employment
opportunities created
Criteria• Complexity of total cost of ownership considerations • Level of coordination required across divisions• Switching costs/switching difficulty• Cost of infrastructure
Size of circle = opportunity size(absolute spend projected for 2011-2012
BSWA Opportunity Dimensions and Scope
Project Objectives
• Develop 3.2 billion bbls of STOIIP in 7 deepwater
turbidite reservoirs
• Produce 820 million bbls, developed in two phases
(Phase 1 + 2) over 25 yrs
Project Scope – currently being optimized
as part of concept selection
• Subsurface & Wells
– Phase 1: 16 wells (10 producers/6 water injectors) pre-
FOD
– Phase 2: Additional 25 wells (11 producers/14 injectors)
drilled post FOD to maintain plateau
• Subsea & Topsides Facilities
— New Regional FPSO Hub
— Storage: Circa 2.5 MMbbls (non-segregated base case)
— Oil production capacity – 225Kbopd
Project Schedule – P50
FIDQ2-15
FEASIBILITY
SELECTION
Time Now
DEFINE EXECUTE
FODQ2-20
VAR 3 Q3-11DG3 Q4-11
Bonga North - Overview
Project Objectives
• Tie-back Bonga North Field to BongaFPSO – “keep Bonga full”
• Develop 1200+ MMbo of STOIIP in 5 deepwater turbitide reservoirs
• Produce 397 MMstb (Phase 1)
Project ScopeSubsurface & Wells• 13 oil producers and 12 water
injectors to mature 397 MMstb in BN Field (Phase 1 – incl. 7 Smart)
• 4 oil producers and 3 water injectors to mature ~ 40 MMstb in BN Field (Phase 2)
Subsea & Topsides Facilities• Single loop tie-back to the Bonga
FPSO with 4 Production and 3 WI manifolds
• Substantial brown-field modification of producing FPSO
FIDFIDFIDFID
2013201320132013
FEASIBILITY FEASIBILITY FEASIBILITY FEASIBILITY SELECTIONSELECTIONSELECTIONSELECTION
Time NowTime NowTime NowTime Now
DEFINEDEFINEDEFINEDEFINE EXECUTEEXECUTEEXECUTEEXECUTE
FODFODFODFOD
2017201720172017
PSC/JV Requirements
SNEPCo (PSC)
NAPIMS Tender rules apply and require competitive tendering – only in very isolated cases will sole source be supported, needs very robust business case.
NCD laws require demonstrable and increasing Nigerian Content, Capability and Capacity Development.
NIPEX portal will automatically inject Nigerian Govt approved (domestic) vendors
All contracts to be through Nigerian companies, briefcase companies frowned upon –seeking genuine NCD commitment and progress.
EFA’s will need to compete on own commercial merits, Vendors with EFA’s will need to demonstrate clear NCD intentions, actions and actual accomplishments.
NAPIMS suspicions of any contract not tendered – IOC “bias/benefit”.
Minor contracts (<$250K or <NGN10m) at discretion of operator but use of consecutive contracts frowned upon and subject to challenge and even non recovery of costs(i.e. Shell exclusive – x20(JV) x3.5(PSC)).
NAPIMS referral contracts typically take 12+ months to put in place.
Preference to fix $ exchange rates for duration of the contract (pessimistic hedging).
Split currency contracts to 60/40 max ($/Naira).
SPDC (JV)
As SNEPCo but minor contract levels <$500K or <NGN10m
Contracting and Procurement Process
Process and timelines depend on value limit set by JOA & PSC
Pre-qualifySupplier
TechnicalBid Bid
Pre -qualifySuppliers
TechnicalBid
Commercial Bid
JV- >$.5/N10M
PSC- >$.25/10M
subject to 3 stage open tendering process
Involves NAPIMS and NCDMB
Historical cycle time approximately 24 months
Ongoing collaboration to reduce cycle to < 1year
Technical and commercial stages done via NIPEX
JV- <$.5/N10M
PSC- <$.25/10M
Not subject to open tender
Normally awarded within 6 weeks
� NIPEX prequalification process will be eliminated and replaced with Joint Qualification System (JQS) via NIPEX
NCD Contracting Flow & Required Documentation
STRATEGY1. Part A proposals2. Waiver application (if required)
ADVERT1. Proposed Advert to be published
PREQUALIFICATION1. Questionnaire issued2. Bidders’ Responses to adverts
PREQUA EVALUTATION
1. Evaluation Criteria2. Bidders’ responses3. Evaluation Score sheet
TECHNICAL1. Bidders’ list from Prequa
evaluation2. Technical ITT
TECHNICAL EVALUATION1. Evaluation Criteria
2. Site visit report (where applicable)
3. Bidders’ responses4. Evaluation Score sheet
Information Required in Documents
Stages & Documentation Required� NC Scope� Project Scope Duration� Schedule A targets & Compliance
� NC Plan including training� Office & facilities location� Company Ownership� Other NC requirements
� Company ownership�Staffing Structure�Bidders’ NC Plan
�Memorandum of Agreement �NC Scope (manpower, services, equipment, materials & sub contractors �Reporting & monitoring Requirement
�Cut-off marks�Bidders NC compliance level�Evaluation results
�Cut-off marks�Evaluation results
�Parameter for NC evaluation�Weighting mechanism
�Bidder’s name,�Head office & Facilities location
� Scope of work� Contract Duration� Advert closing date� Staffing structure
� Contract Strategy� Cost Estimates� Contract Plan� NC Plan
�Bidders’ names & company asset ownership, �Nigerian based locations, �Bid closing dates�Schedule A requirements�Parameter for NC evaluation�Weighting mechanism
Subm
issio
ns f
or
Adve
rt &
P
requa S
tage
Contr
act
Str
ate
gy
&
NC
Pla
n
Subm
issio
n
for
bid
ders
lis
t sta
ge
Bid
D
ocum
ents
&
Eva
luation
Crite
ria
NCD Contracting Flow & Required Documentation (Cont’d) Information Required in
Documents
Stages & Documentation Required
COMPLIANCE CERTIFICATE
1. Signed award notification letter2. NC compliance certificate template
AWARD1. Award Notification Letter2. Model Contract
REPORTING &
MONITORINGAll reporting obligations as listed in the reporting list
�Agreed NC scope of work & Value�NC delivery milestone
Information as contained in the different reports formats
� NC delivery Milestones� Schedule of prices for
NC scope
�Bidder’s NC delivery milestones�List of successful bidders
�NC Scope & value�Total contract sum�1% NCD fund contribution
�Reporting & monitoring obligations�Contract duration
COMMERCIAL1. Bidders’ list from technical
evaluation2. Evidence of waiver application if
required3. Commercial ITT
EVALUATION1. Bidders’ responses2. Summary of commercial evaluation
�Project title �Commencement of bid date�NC Scope & value
�Vendor’s quoted prices�NC Scope pricing�Award Price
� Bidders’ names� Contract Duration� Agreed NC Scope
Bid
Docum
ents
&
Eva
luation C
rite
ria
Waiv
er A
pplic
ation
Subm
issio
ns
for
Aw
ard
Periodic
R
eport
ing
Registration Requirements
Memorandum and Articles of
association, Form Co7 and Co2
endorsed and stamped by the
C.A.C
DPR certificate (2010)
VAT registration certificate.
Organisational chart.
Letter of financial competence from
the bank.
Audited accounts
Two local govt identification letter for
the directors.
Two (2) passport
photographs each of at least
2 directors endorsed by the
Nig. court of law.
Proof of medical
retainership.
Health Security, Safety and
Environment (HSSE) Policy
or (HSE-MS MANUAL)
QA/QC Manual.
Tax identification number
Recipe for success
Economic justification
Openness to competition
Integrity
No political affiliations
Commitment to health, safety, security and the environment
Care for local communities
Continuous communication and engagement
Compliance with Nigerian Law