There have been some notable and measurable achievements recorded in the Nigerian Oil and Gas Industry since the inception of the Nigerian Oil and Gas Industry Content Development Act 2010. Some of what we called “recorded achievements” ordinarily should not would not be seen as achievements if players has obeyed some of rules of engagements prior to the Act.
Thank God for the Act that came some how late to regulate the industry. Prior to the Act, the Nigerian Oil and Gas Industry business both offstream and downstream was free for all for the players that are majorly foreign International Oil Companies.
Below are Some of the Major Achievements in Nigerian Oil & Gas since the inception Local Content Development Act 2010.
Prohibition of Importation of Welded Products
On e of the key achievements Local Content development has to to Nigerians is Prohibition of Importation of Welded Products. All operators, project promoters, contractors and any other entity engaged in the Nigerian oil and gas industry shall carry out all fabrication and welding activities in – country.
For example, during the construction of NLNG Train 1 to Train 6, foreigners where all over the project. Foreign contractors who where handling the projects were hiring all kids of labors from their country. Unskilled labors, most welded products were imported and many more.
Nigerian Local Contractor Development
Another key achievements of local content act is the NOGICD Act has led to a sizeable portion of the goods, services and equipment vital for the every-day running of operations to be sourced locally. The number of contracts awarded to indigenous contractors and sub-contractors has increased over the years, thereby guaranteeing increased local employment and ensuring the emergence of more local companies.
Indigenous companies are increasingly providing programmes specifically designed to support local contractors and businesses. Seplat operates their annual flagship Community Contractors’ Capacity Building programme which equips local contractors with the necessary skills to help them develop their business processes to an international standard.
Since 2014, over 300 contractors from the Delta and Imo states have benefitted from this programme. This has enabled up to 40% of host community contractors to gain technical skills which were lacking at the time they originally registered as contractors. In addition, 98% of Seplat’s contractor are Nigerian companies – in line with the provisions of the NOGICD Act. Since 2013, contracts worth up to US$1bn have been awarded to Nigerian companies.
Bidding Process for Contracts
The Act requires project promoters and operators to consider Nigerian content when evaluating any bid. Where bids are within one percent (1%) of each other at commercial stage, the bid containing the highest level of Nigerian content shall be selected provided the Nigerian content is at least five percent (5%) higher than its closest competitors.
This initiative is also emphasized through ensuring that award of contracts are not solely based on the principle of lowest bidder and allows a Nigerian indigenous company who has capacity to execute a job not to be disqualified exclusively on the basis that it is not the lowest financial bidder, provided the value does not exceed the lowest bid price by ten percent (10%).
Oil & Gas Company Ownership
Other achievements of Oil & Gas content Act is the NOGICD Act has led to a sizeable portion of 51% Ownership to Nigerian to Oil & Gas Company. This means, an Oil and Gas company is deemed to be a Nigerian company if the Equity Share Capital of company is owned by Nigerian indigenes.
Addressing Militancy and Youth Unemployment
Militancy in the Niger Delta has long been a key issue facing the oil and gas sector in Nigeria and these policies have created opportunities which has reduced levels of unrest in the region. Communities are now actively engaged through community development programmes to support local stakeholders. Seplat’s annual ‘Eye Can See’ and ‘Safe Motherhood’ programmes deliver comprehensive eye care and medical care for expectant mothers.
This two-way dialogue between Seplat and the local community alongside the Global Memorandum of Understanding (GMOU) signed in 2010 and jointly reviewed and renewed in 2016 has meant that, production downtime due to community unrest against Seplat-owned assets has been kept to a bare minimum.
The Company also has an additional graduate training programme which aims to help Nigerian graduates with no prior oil and gas industry experience to develop their knowledge of the sector and expose them to the technology used. Since 2014, the Company has spent over US$8m on employee training.
While there is still work to be done across the industry, existing data shows that pipeline vandalisation and human error related spillages have reduced in the Delta.
Employment and Training
The inclusion of Nigerians in oil operations provides a significant avenue through which skills can be acquired and subsequently the development of the industry and economy. This is substantiated through the Local Content Act which requires that for each of its operations, an operator or project promoter may retain a maximum of five percent (5%) of management positions as may be approved by the NCDMB as expatriate positions to take care of the interests of investors.
It is also made mandatory for operators in the industry to provide a viable succession plan whereby Nigerians will understudy each incumbent expatriate position for a maximum period of four (4) years, at the end of which the positions shall become Nigerianised.
Furthermore, the Act mandates that operators and companies operating in Nigeria shall only employ Nigerians in their junior and intermediate cadre or any other corresponding grades designated by the operator or company.
Another interesting provision is the requirement that all project or contracts with a budget of more than $100 million are required to contain a ‘Labour Clause” mandating a minimum % of Nigerian labour in specific cadres.
Increase In Infrastructure Development And Facility Upgrades
Until recently, activities such as engineering, welding and construction were done outside of Nigeria as there were no international standard dockyards or construction sites in place in-country. There have been huge strides in this area with industry leading construction yards built by companies such as Total, Aveon and Saipem to ensure projects can be completed in-country, providing thousands of local jobs.
A key example of this is the recent construction of the Egina Floating Production Storage and Offloading Vessel (FPSO), the largest vessel of its kind ever installed in Nigeria. 77% of the construction was completed in-country, a ground-breaking achievement for the country. This confirmed that the Nigeria’s well-equipped construction yards met international standards and were successfully managed by competent local personnel.
Gas and Support to The Power Sector
Gas supply performance relative to Domestic Gas Supply Obligation (DGSO) has greatly improved across indigenous operators including Seplat, Frontier Oil and Gas, and Energia. These companies have been heavily investing in gas production in order to capitalize on the announcement made by the Ministry of Petroleum in 2014, that the DGSO prices were to increase from $0.3/Mscf to $2.5/ Mscf.
For example, Seplat’s average daily gas supply was above 230% of its DGSO in 2017, making it one of the leading domestic suppliers of gas in the country. In addition, it currently contributes 3.5% of the total gas production in Nigeria.
The aim of the 2014 price increase was to encourage investment in-country in order to deliver the envisaged 30GW generation, up from the current 5GW level. Ultimately this will guarantee access to reliable, affordable power for local Nigerians, a vital step to achieve accelerated economic growth.
Where legal services are required to engage in any operation, business or transaction in the Nigerian Oil and Gas industry, operators are obligated to only retain the services of a Nigerian legal practitioner or a firm(s) Nigerian legal practitioners with its office located within Nigeria. This is implemented through the provision of a Legal Service Plan (LSP) to the board every six (6) months which shall extensively provide a report on the legal services utilized in the last six (6) months by expenditure, a forecast of legal services required during the next six (6) months and the projected expenditure for the services. In addition to the above a list should be provided highlighting the external solicitors utilized for legal services in the past six (6) months, the nature of work done and the expenditure made by the operator.
To engage in any form of business, operations or contract in the Nigerian Oil and Gas industry, operators and all interested parties must insure all insurable risks related to its oil and gas business with an insurance company, through an insurance broker registered in Nigeria under the provisions of the insurance Act as amended.
It is mandatory for operators to submit a Financial Services Plan (FSP), where financial services are required. Included in the FSP amongst others will be details of financial services utilized in the past six (6) months, a forecast of financial services required during the next six (6) months, projected expenditure; and the nature of financial services required.
It is also provided that operators, contractors and sub-contractors shall maintain bank accounts within Nigeria in where it shall retain a minimum of 10% of its total revenue accruing from its Nigerian operations.
Nigerian Oil and Gas Industry Content Development Act (NOGICD) 2010 and the management body Nigerian Content Development and Monitoring Board (NCDMB) has climbed a great hill but as Mandela said, “there are many more hills to climb” for the long walk is not ended.