NIGERIAN LOCAL CONTENT

What is the meaning of local content?

Definition of local content: When a foreign company makes products in a country, the materials, parts etc that have been made in that country rather than imported. A minimum level of local content is sometimes a requirement under trade laws when giving foreign companies the right to manufacture in a particular place

What is NCDMB?

NCDMB means: NIGERIAN CONTENT DEVELOPMENT AND MONITORING BOARD

The Nigerian Content Development and Monitoring Board (NCDMB) is a federal government body. NCDMB was established by the Nigerian Oil and Gas Industry Content Development (NOGICD) Act which came into effect on April 22, 2010.

What is NOGIC JQS?

NOGIC JQS means: NIGERIAN OIL & GAS INDUSTRY CONTENT JOINT QUALIFICATION SYSTEM.

The NOGIC JQS (Nigerian Oil and Gas Industry Content Joint Qualification System) is an Electronic Platform for Data Consolidation on all major activities in the Nigerian Oil and Gas Industry.

The NOGIC JQS was created in line with section 55 of the NOGIC Act which states that the Board shall establish, maintain and operate a joint qualification system (JQS) in consultation with industry stakeholders which shall be administered in accordance with provisions set out in the regulations to be made by the Minister in accordance with the provisions of this Act.
The NOGIC JQS is managed by the Nigerian Content Development and Monitoring Board, NCDMB.

WHAT IS LOCAL CONTENT IN NIGERIAN PETROLEUM INDUSTRY?

Definition       

Nigerian Content is the quantum of composite value added or created in the Nigerian economy through the utilization of Nigerian human and material resources for the provision of goods and services to the petroleum industry within acceptable quality, health, safety and environment standards in order to stimulate the development of indigenous capabilities.

Despite huge investments made by the Federal Government of Nigeria in the oil and gas sector of the economy, an average of $10 billionUSD per annum, its contribution to GDP growth has been minimal. This is largely due to low Nigerian Content in the industry, evident from the over 80% of work value carried out abroad. This has led to a dearth in jobs, skills development, capacity building / utilization and lack of sustained national economic development.

To address the situation, the Federal government has set Nigerian Content targets for the oil and gas industry of 45% by 2006 and 70% by 2010 respectively. In addition, presidential directives have been issued with the aim of domesticating a significant portion of economic derivatives from the oil and gas industry. To deliver on these directives and targets, the Nigerian National Petroleum Corporation (NNPC) has put in place a comprehensive Nigerian Content development strategy currently being rolled out in the industry

NNPC’S VISION FOR NIGERIAN CONTENT

NNPC’s “Nigerian Content” vision is to transform the oil and gas industry into the economic engine for job creation and national growth by developing in-country capacity and indigenous capabilities. In this way a greater proportion of the work will be done in Nigeria with active participation of all sectors of the economy and ultimately Nigeria will be positioned as the hub for service delivery within the West African sub-region and beyond.

THE THRUST OF THE NIGERIAN CONTENT POLICY

The Nigerian Content Policy seeks to promote a framework that guarantees active participation of Nigerians in oil and gas activities without compromising standards. The policy also focuses on the promotion of value addition in Nigeria through the utilization of local raw materials, products and services in order to stimulate growth of indigenous capacity. The Federal Government is optimistic that its policy will result in steady measurable and sustainable growth of Nigerian Content throughout the oil and gas industry.

KEY LEVELS FOR SUCCESSFUL NIGERIAN CONTENT IMPLEMENTATION

Short term directives have been issued by the NNPC to all stakeholders in the industry indicating the scope of work on all E&P projects that must be executed in Nigeria.

These are as follows:

  1. FEED and detailed engineering design for all projects is to be domiciled in Nigeria.
  1. Project Management Teams  and  Procurement  Centres  for  all  projectsin  the Nigerian Oil and Gas industry must be located in Nigeria.
  1. Henceforth, all operators  and  project  promoters  must  forecast  procurement items  required  for  projects  and  operational  activities  and  forward  the  Materials List  NCD  on  or  before  31st  January  of  every  year.  Also,  a  Master  Procurement Plan  (MPP)  for  ongoing  and  approved  projects  should  be  submitted  to  the Nigerian Content Division of NNPC on or before 31st January of every year.
  1. Fabrication and integration of all fixed (offshore and onshore) platforms weighing up to 10,000 Tons are to be carried out in Nigeria. For the fixed platforms (offshore and onshore) greater than 10,000 Tons, all items in directive 5, pressure vessels and integration of the topside modules are to be carried out in Nigeria.
  1. Henceforth, fabrication of all piles, decks, anchors, buoys, jackets, pipe racks, bridges, flare booms and storage tanks including all galvanizing works for LNG and process plants are to be done in Nigeria.
  1. Henceforth, all flow-lines and risers must be fixed and must be fabricated in Nigeria except for special cases to be demonstrated and approved by NCD.
  1. Henceforth, Assembling, testing and commissioning of all Subsea valves, Christmas trees, wellheads and system integration tests are to be carried out in Nigeria.
  1. All FPSO contract packages are to be bid on the basis of carrying out topside integration in Nigeria. A minimum of 50% of the total tonnage of FPSO topside modules must be fabricated in Nigeria.
  1. All third party services relating to fabricationand construction including but not limited to NDT, mechanical tests, PWHT as well as certification of welding procedures and welders must be carried out in Nigeria. Nigerian Institute of Welding must certify all such tests in collaboration with international accreditation bodies
  1. All operators and  project  promoters  must  ensure  that  recommendations  for contract   awards   in   respect   of   all   major   projects   being   forwarded   to NNPC/constituted  boards  of  such  oil  and  gas  companies  for  approval  must include  evidence of  binding  agreement  by  the  main  contractor  with  Nigerian Content Subcontractor(s). Such agreements shall indicate the cost and detailed scope  including  total  man-hours  for  engineering,  tonnage  and  man-hours  of fabrication and relevant defining parameters for materials to be procured locally as well as other services.

11.Henceforth,  all  low  voltage  Earthing  cables  of  450/750  V  grade  and  Control, Power, Lighting Cables of 600/1000 V grade must be  purchased from Nigerian cable manufacturers.

12.Henceforth,   all   Line-pipes,   sacrificial   anodes,   Electrical   switchgear   paints, ropes,  pigs,  heat  exchangers  and  any  other  locally  manufactured  material  and equipment must be sourced from in-country manufacturers.

13.All carbon steel pressure vessels shall be fabricated in Nigeria.

14..All  seismic  data  acquisition  projects,  all  seismic  data  processing  projects,  all reservoir  management  studies  and  all  data  management  and  storage  services are to be carried out in Nigeria.

15.Henceforth,    all    waste    management,    onshore    and    swamp    integrated completions, onshore and swamp well simulations, onshore fluid and mud solids control, onshore measurement while drilling (MWD), logging while drilling (LWD) and  directional  drilling  (DD)  activities  are  to  be  performed  by  indigenous  or indigenous companies having genuine alliances with multinational companies.

16.Henceforth,  coating  of  all  Line-pipes  and  threading  of  all  oil  country  tubular goods (OCTG) are to be carried out in Nigeria.

17.Henceforth,  all  concrete  barges  and  concrete  floating  platforms  are  to  befabricated in-country.

  1. Henceforth, operation and maintenance of offshore production units, FPSO and FSO in particular, are to be performed by Nigerian companies.
  1. All international codes and standards used in the industry are to be harmonized to support utilization  of  locally  manufactured  products  such  as  paints,  cables, steel pipes, rods, sections, ropes etc and to improve capacity utilization in local industries.  Clauses  that  create  impediments  for/exclude  participation  of  local companies should not be included in any ITT
  1. Operators and project   promoters   must   ensure   that   recommendations   for contract  award  for  all  drilling  contracts  shall  include  a  binding  agreement  at Technical  Evaluation  stage  for  the  sourcing  of  Barite  and  Bentonite  form  local manufacturers.

21.Henceforth,  all  projects  and  operations  in  the  Oil  and  Gas  industry  must demonstrate  strict  compliance  with  provisions  in  the  insurance  Act  2003  and submit  a  certificate  of  compliance  issued  by  NAICOM  to  NCD  as  part  of technical evaluation requirements for insurance or reinsurance Contracts.

22.In  this  respect,  NAICOM  verified  Gross  underwriting  capacity  of  Nigerian Registered  Insurance  companies  must  be  fully  utilized  to  maximize  Nigerian Content before ceding risk offshore.

23.Henceforth,  all  projects  and  operations  in  the  Oil  and  Gas  industry  must demonstrate strict compliance with provisions of the Cabotage Act.

24.All  operators  and  service  providers  must  make  provisions  for  targeted  training and  understudy  programs  to  maximize  utilization  of  Nigerian  personnel  in  all areas  of  their  operations.  All  operators  must  therefore  submit  detailed  training plans for each project and their operations

IMPLEMENTATION FRAMEWORK       

A  number  of  key  initiatives  have  been  put  in  place  to  coordinate  national  efforts  to achieve the Governments Nigerian Content targets and objectives, these include: A draft Nigerian Content Development Bill has been submitted by NNPC to the Federal government.  The  regulation  which  is  the  responsibility  of  the  Directorate  of  Petroleum Resources (DPR) will be in place once the bill is enacted.

An   organizational   framework   that   will   ensure   the   implementation   of   the   policy:

The Nigerian Content Division (NCD) is headed by a Group General Manager and was set  up  in  March  2005  under  the  NNPC  Group Managing Director’s (GMD) office. The division is sufficiently empowered to work with industry stakeholders and relevant arms of government to develop strategies, drive implementation and ensure compliance with directives by the oil companies.

The Nigerian Content Consultative Forum (NCCF) was also inaugurated with 8 sectoral working  committees  covering  the  fabrication,  engineering,  manufacturing,  petroleum engineering & subsurface banking & insurance, and shipping & logistics, sub sectors.

The   Joint   Qualification   System   (JQS)   is   being   introduced   to   facilitate   the   E&P contracting  process  in  the  oil  and  gas  industry.  JQS  will  provide  a  databank  of available  of  goods  and  services  suppliers  to  the  Nigerian  petroleum  industry  and streamline  the  prequalification process.  The  system  will  be  launched  early  2006  and open  up  genuine  opportunities  for  qualified  local  contractors  to  participate  in  the  oil and gas sector.

NCD STRUCTURE & OBJECTIVE

The Nigerian Content Division comprises of three (3) Departments:

  1. Capacity Building
  2. Planning
  3. Monitoring

These departments collectively are charged with the following responsibilities:

  • Study best practices and advise NNPC Management on Nigerian Content.
  • Obtain applicable data from industry and plan for new opportunities.
  • Develop strategies   for   Capacity   building,   skill   competency   and   supplier enhancement.
  • Drive Nigerian Content implementation and monitor compliance.
  • Coordinate sectoral working committees.

These primary objectives are achieved through:

CAPACITY BUILDING THROUGH INTERVENTION PROJECTS

The NCD is gathering data and developing interventions in consultation with the NCCF and  Operators  to  achieve  Federal  government  targets  of  45%  by  2006  and  70%  by 2010.  Currently  the  NCD  has  developed  over  20  intervention  projects  to  bridge  local capacity  gaps  in  the  industry.  These  projects  range  from  infrastructure  upgrades, resource training and certification, information management and financing.

COMPLIANCE MONITORING OF ALL ACTIVITIES

A coordination procedure which governs Nigerian content activities of stakeholders in the  industry  has  been  put  in  place.  In  addition,  the  Nigerian  Content  Division  will  be actively  involved  in  the  review  of  ITTs,  evaluation  of  bids,  and  monitoring  of  projects during implementation to ensure NC compliance. Provisions are also made in the draft bill for sanctions against defaulters.

ALIGNMENT OF KEY INDUSTRY STAKEHOLDERS

Expectedly,  the  NNPC  has  achieved  buy-in  and  support  for  the  Nigerian  Content programme from Operators and other stakeholders:

Oil  companies  are  of  the  NCCF  and  actively  participate  in  monthly  meetings  of  the committees to discuss and review capacity building programs.

In accordance with the industry coordination procedures, dedicated Nigerian Content offices  have  been  set  up  in  all  operator  companies  and  managers  appointed  to coordinate company NC activities.

NCD ACTION PLANS UNDERTAKEN TO BUILD CAPACITY INCLUDE:

  • Training of 1000 engineers in basic engineering design in 2006 in collaboration with PTDF.
  • Current status: 300 engineers to be trained per quarter
  • Facilitating certification and training of over 1000 welders.
  • Current status:  National  welder  database  being  set  up;  collaboration  with  PTI and global certifying bodies is ongoing.
  • Working with  industry stakeholders  to  enable  local  manufacture  of  steel  plate and pipes
  • Current status: A business case has been drawn up and is being presented to prospective investors
  • Working with  PTDF  and  INTSOK  to  commence  upgrade  of  selected  fabrication yards in readiness for increased local fabrication.
  • NCD is driving the launch of the Nigerian Content Support Fund (NCSF) to make available to  local  service  providers  funds  for  execution  of  contracts  at  low  and competitive interest rates.
  • NCD is developing a Nigerian Content capacity database.

GOALS & ASPIRATIONS       

Expectations from the Nigerian Content Programme

In  the  short  term,  the  industry  directives  and  intervention  projects  are  expected  to create several thousand jobs for engineers, welders and other professionals as well as artisans in the Engineering, Procurement and Construction phase of projects.

With  requirements  for  utilization  of  locally  manufactured  goods  and  equipment,  major investments  in  infrastructure  are  expected  and  local  manufacturing  industry  will  be reinvigorated.

Plans for building the required capacity for the Nigerian companies in the industry

Capacity building is one of the key plans for achieving government targets and this is being pursued through:

A  survey  of  available  capacity  and  identification  of  needs  for  new  projects  and operations;

  • Identifying new opportunities for local suppliers;
  • Training of Nigerians in targeted areas of competency and acquisition of technological and managerial capability;
  • Development of infrastructure and upgrade of facilities;
  • Local business and supplier enhancement
  • Project financing and funding of local businesses

GOALS OF THE NIGERIAN CONTENT DIVISION ARE;

  • To achieve 45% local content in oil and gas spend by 2006
  • To achieve 70% local content value in the provision of materials, services and equipment to the local oil and gas industry by 2010
  • To create an economic engine for growth, driving employment, wealth creation and improved linkage between the Oil and Gas industry and other sectors of the Nigerian economy
  • The division is working to enable a transformed Oil and Gas industry with well-developed in-country capacity and local capabilities, a competitive supply and services sector and ultimately, the hub for energy service delivery in Africa

NCCF GROUPS

The Nigerian Content Consultative Forum (NCCF) comprises of representation from Oil and Gas industry, organized private sector, (MAN), Bankers Committee and Nigerian Society of Engineers amongst others.

Each forum holds monthly working sessions for respective industry sectors to obtain input and feedback for planning and implementing the Nigerian Content agenda

The sectoral committees also Interface with Nigerian companies and International Oil companies for early identification of opportunities, capacity gaps and required competencies for upcoming projects.

Source: http://www.nigcontent.com/

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NIGERIAN LOCAL CONTENT

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