Russian-Ukrainian war affected LNG movement around the world – NSLM boss
Mr. Abdul-Kadir Ahmed, Managing Director/Chief Executive Officer (MD/CEO), NLNG Ship Management Limited (NSML), which is the maritime subsidiary of NLNG, is responsible for the technical and crew management of the fleet from BGT and NLNG’s marine terminal at Bonny Island. In this interview, he explained how the Russian-Ukrainian war is affecting shipping in Nigeria and by extension around the world.
HWhat is the impact of the pandemic and now the Russian invasion on the global shipping trade and the Nigerian shipping industry?
As countries still struggle to recover from the pandemic, the economic impact could be very destructive, depending on how long the conflict takes, coupled with the scope and extent of the sanctions imposed.
I pay tribute to seafarers for keeping the world alive through the pandemic. Ironically, they are not given much. Over the past two years, the world would have been the worst place if seafarers had not shown the resilience, dedication and professionalism to keep working.
Even in a normal environment, working at sea is very difficult, but under the pandemic it was 10 times more difficult. Crew changes have been suspended, people have been at sea for eight to ten months without returning to their families; they couldn’t travel, they had to do things themselves that normally you would have others do for you in terms of maintenance, ship repairs and other things on board.
Seafarers for me, beyond medical personnel, are the next ones that have really kept us moving and bubbling through COVID-19 and beyond. It is important that we continue to celebrate our own seafarers.
With regard to the conflict between Ukraine and Russia, there are the real and potential effects of the war. The real impact of the conflict is that many seafarers come from Russia and Ukraine; we have a few on our fleet.
One can best imagine the feelings of the Ukrainian sailors who are on board our ships or any other ships and their families trapped in the conflict zone.
There are those who have to go home, but the replacement cannot move to relieve them because of the war.
All of this has had a significant impact on the operations and movement of ships, even around our coastal waters. We are beginning to see the impact in terms of the availability of seafarers.
A structural deficiency is already emerging within the industry as it has had a negative impact on the availability of qualified seafarers.
If the Ukrainian crisis drags on, we may not have qualified sailors to man the ships, as there may not be any available.
The company is isolated enough for us to work together. The Russian-Ukrainian crisis is long gone, but it has impacted both crude supplies and the price of gas. The price of gas has been multiplied by 10 in Europe; oil prices are over 100 and although this is an opportunity, in our own case it is very expensive as we import all of our diesel needs.
For example, people didn’t realize until they read that Russia supplies over 40% of diesel to Europe and that doesn’t happen anymore. No wonder the price of diesel has gone up and isn’t going down anytime soon.
Apart from that, from our point of view and from the point of view of navigation, it is really the human impact that we feel and we had to reach out to all our Ukrainian workers. We had to hire them because it’s not easy. Their families are in danger and they are on ships.
It is expected that being on board, they are supposed to be 100% alert. In our own case, we have opened for those who want to go home; we have provided support for them to return home to rejoin their family and for those who want to relocate their family, we have also provided support because it is our family.
Insecurity has been a major challenge for shipping in Nigeria, so the global shipping community views the country as a hotspot. How has this affected the movement of products from your operating base to market and around the world?
NIMASA’s Deep Blue project has done a lot; it’s a brilliant idea and its implementation has done a lot to combat insecurity. But we are not there yet. But at least it’s a step in the right direction.
Insecurity and piracy are a major risk in maritime transport. The impact is twofold. The first is what you see, which is crews in danger, ships hijacked, those physical things that happen when there’s a piracy attack – people killed, crews kidnapped and cargo lost, ransom payment and others.
Behind all this, there are things that people do not see, but this has an impact on the competitiveness of players operating in this environment.
In NSML, we first have to deal with the rising cost of insurance. In addition, we have to pay the crew’s high-risk area allowance; we have to put all kinds of protective equipment on the ships and we have to have escort boats to escort the ships in and out.
All of this costs money. You pay the insurance premium, which is very high, even double what you can get elsewhere. People don’t see this, but it dramatically increases the cost of shipping operations in those areas.
The risk for us is that if we are not competitive, the business cannot be sustained because others are producing, selling and delivering LNG and we would like to be able to do so competitively. Unfortunately, depending on which part of the coin you are, the LNG industry has become a competitive industry. People are buying cargo and looking at the price – where they are going to get the best and cheapest price. Cargoes are the same and shipping is on top of that.
The world is starting to shift the focus from crude oil to gas and other energy sources. Do you plan to increase your fleet as capacity increases?
We are an integrated marine services company – technical vessel management is one aspect of the business; we don’t own the ships, we manage them.
As far as we are concerned, we want to increase the number of ships in our management, not just LNG. We want to be able to offer that top-notch technical vessel management that others would trust us to basically manage their vessels.
LNG is not just in Nigeria, we have Equatorial Guinea, Angola, Algeria, Mozambique and a number of countries that are developing LNG plants and they will need to be shipped. This does not mean that these entities will own the vessels because the LNG business is also changing, the buyers are also investors because you are lifting your cargoes on a delivered ex ship (DES) basis or a free on board basis ( FOB); ultimately everyone needs shipping.
We are in a unique position, regardless of who owns the vessels, we are ready and available to manage their vessels and that is the aspiration, beyond just managing the vessels that NLNG owns and charters today.
NSML has the policy called “Nigerianization”, where are you in terms of implementation?
This is very important to us, we are a Nigerian company and for this reason, in line with our vision to support the growth and development of the Nigerian maritime sector, we cannot be a Nigerian company with a pool of predominantly foreign seafarers.
We have made a particular decision to ensure that we will eventually achieve, as a first step, 100% capacity to manage and operate our vessels. However, because we are also international and the shipping business is international, you don’t want to localize yourself too much and we are in the context of our parent company’s business, which is international – supplying cargo internationally .
It’s important that we have cross-fertilization of the cultural mix, so we always have a mix of crews from India, Philippines, Ukraine, Russia and Croatia. The whole Nigerianization plan is to achieve 85% by the end of 2022.
At the end of 2021, we were at 84.6%; we know we will reach 85 percent. As for the ratings, a significant number are Nigerians, but we have a few people from the Philippines, but that’s, again, because of our cross-fertilization and seafaring mix.
Are you considering owning a shipyard as it will be a big boost to the Nigerian economy?
Yes, it will be a big boost for the Nigerian economy, a lot of currency savings, a lot of capacity development, technical know-how and a lot of investment.
Dubai Global Shipyard employs over 40,000 people. It is possible, however, it is important to recognize that this is an entire value chain and we would like to be part of every value chain.