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Bonga South West-Aparo bidders braced for a battle

Three groups believed to be in the running to supply FPSO for Shell-led project off Nigeria, with local content set to play a big role

Contractors aiming to supply Shell with a floating production, storage and offloading vessel for its challenging $10 billion Bonga South West-Aparo (BSWA) project off Nigeria aim to submit bids at the end of this month, having been granted an almost two-month extension.

Upstream has established that three groups are plotting their contracting strategies ahead of submitting technical and commercial bids by 31 July.

However, industry sources suggested that one of the bidders has asked for a “one- or two-month extension” to the submission timeline, which had yet to be granted at press time.

Parties interested in supplying the 150,000 barrels per day FPSO include South Korea’s Samsung Heavy Industries, with a base-case proposal said to involve using the SHI-MCI yard in Lagos which most recently handled the FPSO integration work on Total’s Egina project.

Another group chasing the prestigious contract is a consortium of China’s Offshore Oil Engineering Company (COOEC) and Italy’s Saipem.

An informed source said COOEC would build the topsides, but would outsource hull fabrication work to other yards in China.

Saipem is expected to handle the challenging local content aspect of the project.

There was talk in the second quarter that China’s Shanghai Waigaoqiao Shipbuilding (SWS) yard would link up with COOEC and Saipem.

However, it is now understood that SWS is too busy in other markets.

A third group believed to be preparing to submit bids documents is China’s CIMC Raffles and Monobuoy, a Lagos-based engineering concern with a US parent company.

CIMC was previously expected to tie up with Kavin Engineering and NOV, and it is not known if these two contractors remain involved.

Upstream was unable to ascertain if further groups are chasing this contract, although Cosco was previously said to be interested — as were a group of all-Nigerian players. All sources canvassed by Upstream said the Samsung-led group will be the bidder to beat because it has access to the only yard in Nigeria able to build and integrate FPSO topsides, a key factor in satisfying stringent local content requirements — even though it would have to navigate its thorny relationship with Ladol, its joint venture partner in the SHI-MCI yard.

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The most likely scenario will see Samsung use the SHI-MCI yard for BSWA, although Upstream was told that the Korean giant could propose other options.

For years, Niger Dock has been touted as a possible facility that could be upgraded to handle FPSO and topsides work.

However, one Nigeria watcher suggested the bill for revamping Niger Dock would be “gigantic”, with significant funds having to be spent to just to remove shipwrecks and widen the existing ship channel.

It is thought that at least half BSWA’s topsides must be built in-country along with FPSO integration work.

McDermott, Saipem, Subsea 7 and TechnipFMC are among those set to submit bids by the end of this month for the project’s EPC-2 package which will be worth upwards of $1 billion.

This contract covers the engineering, procurement, construction, transport and installation of pipelines, flowlines and risers.

BSWA’s umbilicals, single-point mooring system and subsea production system are subject to separate bid processes, with TechnipFMC, BHGE and OneSubsea thought to be chasing the latter, which is centred on more than 20 wells.

Assuming bids are submitted this quarter, clarification talks proceed as planned and costs meet the expectations of all partners in the deep-water project, Shell may attempt to take a final investment decision next year.

However, many project watchers are doubtful that the scheme will progress as planned unless the FPSO costs in particular can be reined in, and Shell and its partners can finalise an agreement with Nigeria’s government on a new production sharing contract for the asset.

There was only a passing mention of BSWA in Shell’s management day strategy update and financial outlook presentation last month, while the most recent presentations by partners ExxonMobil, Eni, Chevron and Total failed to mention the project at all.

In February, the Anglo-Dutch supermajor announced it had signed heads of terms with state-owned Nigerian National Petroleum Corporation (NNPC) to resolve its PSC dispute, saying it now had “a clear commercial framework for a potential BSWA final investment decision”.

In late May, Nigeria's Minister of Petroleum Ibe Kachikwu said: “We’ll be looking to better terms than the previous (PSCs).” He said old PSCs which gave an 80:20 profit split in favour of oil companies is “a non-starter”, pointing out that a 60:40 split would be desired by Abuja.

The PSC covering OML 118, which holds the bulk of BSWA, is due to expire in 2023.

“The Shell model,” said Kachikwu, “will be the basis of what we do with all other PSC contractors.”

One well-placed source said: “I just cannot see (a final investment decision) — it’s a lot of capex,” adding that project partner Eni’s internal target date for project sanction is beyond 2021.

Nevertheless, if the project is sanctioned next year, first oil could flow in 2023 at the earliest, although 2024 would be a more likely target.

The 800-million-barrel field straddles Shell-controlled OML 118 and Chevron-operated OMLs 132 and 140, where the structure is known as Aparo.

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