Lagos logistics base set for expansion
Facing an uphill battle, the privately–owned West African free zone and logistics hub Lagos Deep Offshore Logistics Base (Ladol) has been rapidly expanding over the past 15 years and has established itself as an important logistics base for international oil companies. It now has its long-term sights set on diversifying away from oil and gas.
GTR speaks with Ladol managing director and CEO Amy Jadesimi about how the free zone is evolving into a platform for industrialisation across West Africa, and the challenges it faces.
GTR: What is Ladol and how did it develop?
Jadesimi: Ladol is an industrial free zone. It was built out of a disused swamp inside of Apapa Port, which is probably the busiest container terminal in West Africa. It’s basically an island: we get to it over the water. We chose that location because we knew we had to be completely independent to achieve our aim, which is to create opportunities for large industrial projects to happen in Nigeria for the first time.
The largest industry in Nigeria is oil and gas, so we started with focusing on that by building a specialised logistics base. We, as the base operator, provide all the facilities through which services are delivered to our clients, as opposed to what happens in other logistics bases in Nigeria, which are basically converted government facilities and tend to be very bloated with many people doing the same thing.
GTR: Can you outline the various phases of development – what has been achieved thus far, and what are your plans for the future?
Jadesimi: The founders of Ladol started investing in the concept in 2001. They started investing on the ground in 2004, so the investment on the ground has been going on for 13 years. Phase one included a logistics base, hotel and offices, all of which were completed in 2011.
As part of phase two, Ladol has built the largest shipyard and installed the heaviest crane capacity in the region. The shipyard is currently constructing and will do the final integration of a floating production storage and offloading (FPSO) vessel for Total’s US$16bn Egina deepwater field. The vessel will be the largest to ever berth in West Africa, and the first FPSO to be fabricated and partially integrated in Nigeria, despite the fact that Nigeria has spent US$30bn or so building similar vessels in the past, without seeing much happen locally.
Also part of phase two is a 50MW gas-fired power plant, a new hotel and a liquid mud plant, which are currently being built and will be completed over the next 24 months.
For phase three, over the next decade we plan to develop the remaining infrastructure in the free zone to support non-oil and gas industrial activity. Our strategic focus is on supporting and attracting manufacturing and engineering businesses that have a multiplier effect on job creation and which use innovation to develop sustainable business models, disrupting current systems that perpetuate poverty. Phase three will also be distinctive in that the developers plan to significantly increase the level of sustainability in the design and layout of the free zone. In addition, we want to attract manufacturing and engineering companies with sustainable business plans and operations to set up in the zone to industrialise West Africa and be part of what will be one of the world’s largest growth markets.
GTR: Are there other, similar logistics bases in Nigeria?
Jadesimi: In Nigeria, no. Historically, our oil and gas has come from the Niger Delta, which is where the biggest logistics servicing facility is located. But this is a very different set up to Ladol. It is funded by the government. It is a very open design, whereby some of the facilities are in nearby towns, so you don’t have the streamlined, fully-integrated facility, where everything is done within one ecosystem.
The market Ladol is servicing is very different, which is why we set up a unique, fully-integrated facility. We are servicing the offshore and deep offshore market. Our target clients are people who are drilling in the middle of the ocean, sometimes 3,000 metres deep. This is a very expensive setup, costing US$20-30 a barrel, although we are trying to reduce that cost. And so, when you are servicing an operation like that, what we realised is that it’s better done from a location like Lagos where you can operate 24/7, you can quickly get in and out of the facility, and you need a custom-built logistics base that is very streamlined and efficient. Everything is set up by the base operator, which means we take all the capital expenditure risk and then people come and deliver their services through facilities that we have already built.
GTR: Given the global oil scenario, what fuels your confidence that Ladol’s built capacity will be utilised?
Jadesimi: The current oil price is driving a lot of business to Ladol. Oil majors have known for over a decade that for deep offshore blocks, Lagos is the optimal support location – Ladol is the embodiment of the ideal logistics base envisioned by Shell, Chevron and ExxonMobil when they first tried to build a base in Lagos. By building the base ourselves, Ladol has also demonstrated the need for international oil companies to support legitimate private sector companies in the sector to cut costs and ensure long-term stability. Interest in Nigeria’s offshore oil and gas assets is still high because Nigerian companies like Ladol and the current government policies have made Nigeria highly competitive.
GTR: How is Ladol financed?
Jadesimi: Since we have been going, for over a decade, financing has been challenging to say the least. Initially Ladol was financed with equity from ourselves. The Bank of Industry, a Nigerian bank, was the first major equity investor. We expect to go to another financing ground next year. We have also received bank loans. The financing challenges are one of the reasons why it has taken some time to get the infrastructure built.
GTR: Have you sought or achieved any kind of international financing?
Jadesimi: That is what we are doing next year. We wanted to get a few things in place, and position ourselves. With a project like Ladol, the idea of giving money to a relatively small private company to incrementally build a sustainable industrial free zone is a new one, albeit one which the development institutions are just now getting their heads around. We are talking to them.
GTR: How receptive has the Nigerian government been to what you have achieved so far and to your plans for the future?
Jadesimi: It has been an uphill battle: explaining who we are and getting over the fact that by adding value and adding transparency, particularly with our logistics activities in the oil and gas sector, we are shining a light on a lot of improper things that were happening before. To be honest, the pushback we have had over the past decade is far more than we had anticipated.
However, I would say that this government has taken a very clear position and a very clear stand. The president issued a policy recently which confirmed the fact that the maritime sector and oil and gas logistics sector was a liberal sector and that everybody had a right to participate. It even made specific reference to Ladol, commending us for our investment and basically saying that under this new government, they wanted to encourage the creation of more Ladols.
I would say it has been an uphill battle for lots of reasons. One of the most effective things we have been able to do is to educate the government and civil society and other private sector companies about the benefits that come from opening up the market to the private sector in this way. Where we are at now is a place where we will see a lot more private investment coming in over the next decade.take me back