November 2021, Vol. 248, No. 11
Features
In Africa, COVID-19 Jolts Dangote Pipeline’s Timelines
By Shem Oirere, Africa Correspondent
The unprecedented COVID-19 outbreak has disrupted project timelines of the 731-mile (1,177-km) Dangote subsea pipeline in Nigeria, with one of the contractors saying the delay has come with financial implications.
China’s Offshore Oil Engineering Co. Ltd. (COOEC), which is installing the sub-sea pipeline through its Nigeria subsidiary, COOEC Nigeria Ltd., said the company’s overall income from its overseas projects fell by 25% in 2020 compared to the previous year, showing an overall loss “mainly because Dangote Project in Nigeria caused a loss of RMB 541 million [$84 million].”
Moreover, COOEC said the Nigeria subsidiary gained revenues of $28 million (RMB 180 million) in 2020, operating profits of $82 million (526 million RMB), reflecting a decrease of $54 million (RMB 349 million) on a year-on-year basis, significantly impacting the company’s consolidated net profits.
“The main reason was that the Dangote Project in Nigeria being executed by the Company was severely affected by the pandemic in this period, with the project period extended and the expected total cost increased, resulting in an additional loss of RMB 541 million ($84 million) this year,” it said.
By the end of 2020, COOEC said an estimated 11 submarine pipelines, with a total length of about 66 miles (107 km), had been laid and the associated underwater production system has been installed as part of the $17 billion integrated fertilizer, petrochemical and refinery complex project being developed by Dangote Group.
The complex, when fully completed, will produce 10.4 million tons (mt) of gasoline, 4.6 mt of diesel, and 4 mt of jet fuel annually. Other products will include 690,000 tons of polypropylene, 240,000 tons of propane, 32,000 tons of sulfur, and 500,000 tons of carbon black feed every year.
According to Edwin Devakumar, Dangote Group executive director, Strategy, Capital Projects and Portfolio Development, the overall integrated project completion is at 89.5%, taking into account “engineering, procurement and construction.”
He also observed the project “has incurred some delays due to the COVID-19 pandemic.”
“At the current rate of progress, the mechanical completion is now expected to be accomplished by fourth quarter [of 2021] and commissioning is expected to commence immediately,” he said during a recent presser.
The Dangote pipeline component of the project, estimated to cost $2.5 billion, is expected to connect Nigeria’s oil and gas-rich Niger Delta to other West Africa markets and generate gas demands of over 2.5 Bscf/d, according to a brief by the US International Trade Administration (ITA).
COOEC was involved in the transportation and installation of the subsea pipelines in water depths of up to 131 feet (40 meters). Initial design had indicated that at least six of the pipelines are 24 inches in diameter, while the diameter of three were 48 inches.
Previously, Shanghai Dredging Company Ltd. (SDC), another Chinese contractor involved in the Dangote project, had subcontracted Netherlands-based engineering and consultancy firm CDR International to carry out a siltation assessment of the pipeline and determine the level of siltation after the pipeline trench excavation.
The pipeline project is a dual subsea infrastructure, each 366 miles (588.5 km) long, to deliver up to 3 Bcf/d (85 MMcm/d) of gas daily.
It is expected that the pipeline will bring gas from Bonny Island in the restive Niger Delta, where global oil and gas companies such as Royal Dutch Shell, Total and ENI have footprints, to Olokola and from Olokola to Lekki Free Trade Zone in Nigeria’s commercial capital of Lagos.
One of the advantages Dangote would reap from opting for a subsea pipeline is that the gas infrastructure avoids passing through some locations in Warri, Ondo and Ogun States within the Niger Delta, where frequent attacks by armed groups targeting and vandalizing pipelines are common.
Vandalism, said Anglo-Dutch multinational professional services firm KPMG, is a significant challenge in Nigeria’s downstream sector, especially on oil and gas pipelines.
In 2020, 451 line breaks were reported on pipelines operated by Nigerian Pipelines and Storage Company (NPSC), out of which 349 were a result of vandalism, while 102 cases were due to system deterioration like rupture and weld failure, according to NPSC. This led to a loss of an equivalent of 4.4 MMcf/d (124,617 cubic meters) of petroleum products.
“Pipeline vandalism has troubled operators, as its incidence has continued to erode value and hinder operational efficiency,” KPMG said.
“The value erosion includes loss of revenue from product theft, the extra cost of repairs and in some instances reconstructing vandalized pipelines and the overall increased cost of engaging security operatives to guard pipelines and personnel,” it added.
By early 2020, just before the outbreak and spread of COVID-19, COOEC managed to successfully install the first pipeline end manifold (PLEM), “thus winning the first battle in the Atlantic.”
“Waters off Nigeria are open and greatly affected by long waves, which is the acid test for the barge berthing and lifting of structures,” COOEC said.
The successful installation of the first PLEM paved way for the next generation of PLEMs, COOEC said, with a target of “completing the installation of all five PLEMs as soon as possible and creating achievement again at the forefront of the Belt and Road, a Chinese global infrastructure development strategy targeting investment in 70 countries.”
The Dangote integrated gas pipeline, oil refinery, petrochemical complex and fertilizer plant infrastructure is being developed on part of the 2,700 hectares of land reclaimed by Dutch maritime engineering firm Jan De Nul Group.
The company, which was contracted to backfill at least 2,400 hectares of the land, said initially the major challenge was “dredging 30 million cubic meters in only 9.5 months (later extended to 50 million cubic meters).”
However, the contractor deployed some of its largest trailing hopper dredgers, such as Leiv Eiriksson and Cristóbal Colón, each with a hopper capacity of 1.6 million cubic feet (45,307 cubic meters).
Preceding the deployment of these dredgers, Jan De Nul assigned trailing hopper dredger Gerardus Mercator to create a 3.1-mile (5-km) access channel to size for both mega-hoppers.
“Because of the sensitivity of the lagoon area, we absolutely had to prevent saltwater to flow into neighboring waters by pumping the salty process water back to the Atlantic Ocean, (with) a battery of five specialized pumps that ran day and night.”
“With their high-performance pumping capacity, both mega-hoppers bridged a discharge distance of more than 7.5 km [4.7 miles] to cover the whole site, with a total of more than 50 million square meters of sand extracted and compacted in accordance with the client’s wishes,” it added.
Jan De Nul said it transported to Nigeria more than 4 miles (7 km) of sinker pipes, 18.6 miles (30 km) of land pipes and more than 130 dump trucks and other pieces of heavy equipment for the project.
When fully completed and commissioned, the Dangote gas pipeline is also expected to support ongoing drive to further reduce gas flaring that declined 5% globally to 5 Tcf (142 Bcm) in 2020 from the 5.3 Tcf (150 Bcm) recorded in 2019.
Nigeria is the seventh top gas flaring country after Russia, Iraq, Iran, the United States, Algeria and Venezuela.
However, the World Bank commends the West Africa nation on making progress over the last 15 years by steadily reducing its flaring by 70% within that period.
“Flaring has declined from over 25 Bcm [883 Bcf] in 2000 to close to 7 Bcm [247 Bcf] in 2020, while oil production has remained essentially flat at around 2 million barrels a day,” the bank said.
Downstream and midstream investors such as Dangote Group, through the Nigerian Gas Flare Commercialization program policy, have been given priority by the Government of Nigeria when it comes to investments in gas infrastructure, development and services.
Completion of the Dangote pipeline later this year would come hot on the heels of the inauguration of the first phase of the 382-mile (614-km) Ajaokuta-Kaduna-Kano (AKK) gas pipeline valued at $2.8 billion.
Currently, Nigeria’s pipeline market consists of pipelines running across the country for a length of 3,181 miles (5,120 km), moving various hydrocarbon products using mainline and booster pumps.
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