ChevronTexaco promoting Nigerian program to develop local engineering centers

ChevronTexaco Corp. continues to emphasize development of local engineering expertise and technology-transfer efforts as it pursues several major oil and gas projects in Nigeria.

For the past 2 decades, ChevronTexaco has awarded contracts for work on its projects to world-class engineering companies in collaboration with indigenous companies in Nigeria. The country currently has no local-content requirements, making it difficult for indigenous engineering talent to get a foothold on the local market.

Company officials consider such joint-venture collaboration and technology-transfer programs as key to developing a domestic engineering capability in Nigeria's oil and gas sector. The longer-term goal is to establish high-quality, low-cost engineering centers to serve West Africa and other markets.

In 1962, predecessor Gulf Oil Corp. had demonstrated its commitment to developing indigenous expertise by creating an educational grant program in Nigeria. The Nigerian Petroleum Development and Trust Fund (PDTF) was established in 1973 as an offshoot of the grant program, which was later absorbed by the PDTF.

With the West Africa gas pipeline, Escravos gas gathering and liquids fractionation (EGP) Phase 3 gas utilization scheme, and a gas-to-liquids plant (see related story, p. 31), as well as Agbami oil field development, under way and a goal of zero flaring of natural gas by 2008, ChevronTexaco is in the process of qualifying three or four engineering companies for tenders or contract work orders to execute "in-country" engineering projects. Ideally, these companies would work in JVs with internationally recognized engineering firms. Chevron- Texaco was expected to make initial contract awards, based on commercial terms, at yearend 2003.

Aside from the major projects, to encourage the development of in-country engineering capacity, smaller projects aggregating a total value of $150 million will be awarded as community development projects to design and build schools, clinics, and other local facilities. To date, 16 such contracts have been awarded recently to small local companies, which ChevronTexaco hopes to nurture to a level where they could execute bigger, more challenging projects.

Evolving program

ChevronTexaco's Nigerian "in country" engineering initiative has evolved over the past decade. Initially, the company's engineering design office in Escravos has been staffed mainly by employees with Zurich-based engineering giant ABB Group, since 1992. Following the construction phase of EGP Phase 1, that office has focused on 26 offshore platform upgrades. The Escravos office also supports small-facilities engineering projects and drilling programs.

Subsequently, ChevronTexaco, ABB, and local company NETCO entered into a partnership in which NETCO personnel would work alongside ABB staff to engage in less-complicated engineering projects. This 3 year contract was to end in 2002 but was extended another year to allow NETCO to better make the transition into its own engineering services contracts.

Under a third stage, the program calls for a comprehensive strategy to ensure that domestic engineering experience is developed via 1) provision of in-house support staff to complement local contractor resources, 2) a flexible and creative contracting policy, 3) brainstorming sessions to implement the best ideas, and 4) encouragement of development of local engineering contractors with enough capacity to succeed.

Pluses and minuses

ChevronTexaco staff engineer Lanre Alabi recently ticked off the pluses and minuses for efforts to develop a robust engineering capability in Nigeria.

Among the pluses are Nigeria's world-class gas and deepwater oil projects, comparatively cheap labor costs, wide support for increased local content, established universities with potential to produce quality graduates, good interest by international engineering firms, an internationally accepted open tender contracting process, and client companies willing to "hold the hands" of service providers to overcome the learning curve.

Among the challenges are experience of less than 5 years for most local engineering design firms; a lack of adequate infrastructure; a dearth of veteran professionals, leading to meager institutional knowledge; insufficient understanding of "design liability" among local engineering firms; inability to guarantee base workload for contractors; shortcomings in the educational sector affecting quality of engineering graduates; a need to strengthen professional engineer accreditation oversight; insufficient collaboration among client companies, service providers, and educational institutions to align expectations with results; a daunting business climate in Nigeria that affects willingness of new foreign partners needed for technology transfer; and minimal investment in state-of-the-art training tools.