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Nigeria: Signing of the Nigerian Content Law

  • SOURCE: | qwesa2big
  • April 22, 2010 marked an important day in the annals of the Nigerian oil and gas industry as President Goodluck Jonathan signed into law, the Nigerian Oil and Gas Industry Content Development Bill (2010), which granted exclusive consideration to indigenous companies that demonstrate ownership of equipment, Nigerian personnel and capacity to execute jobs.

    Specifically, the law gave companies priority in the award of oil blocks, oil field licences, oil lifting licences, shipping services as well as all projects for which contracts would be awarded in the oil and gas industry; subject to fulfilment of conditions that would be specified by the petroleum minister.

    The law also provided that in the bidding for any licence, permit or interest and before carrying out any project in the Nigerian oil and gas industry, an operator “shall submit a Nigerian content plan demonstrating compliance with the Nigerian content requirements of this bill”.

    The signing of the Nigerian Content Act three years ago, no doubt, marked a turnaround in activities of indigenous contractors in the sector. The immediate result of the implementation of the law by the Nigerian Content Development and Monitoring Board (NCDMB), through the effective supervision of the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, as testified by players in the industry is the increase in the number of technology driven workspaces and capacity building by indigenous contractors who, prior to the signing, found it difficult to compete with their foreign counterparts.

    The Petroleum Technology Association of Nigeria (PETAN), the umbrella body of indigenous contractors announced recently that its membership has doubled owing to the conscientious implementation of the local content law. According to PETAN, the organisation has experts in more than 200 areas of professional competence in the oil and gas industry.

    This informed the increased number of indigenous companies and delegates that participated in the 2013 edition of the Offshore Technology Conference (OTC). The Nigerian Content Act and policies of the Petroleum ministry, PETAN said have contributed to the current support being received by indigenous companies from foreign companies and financial institutions. “This is the reason that at this year’s edition of OTC, we have 60 PETAN members and due to lack of space we were not able to accommodate all our members who signified interest in taking part in this year’s conference. Right now, we have 50 of our members in attendance. Beyond PETAN members, we have at least another fifty exhibitors. So, in all, there are over 100 Nigerian companies exhibiting in this year’s offshore technology conference,” said PETAN Chairman.

    Gains of the NCD Act

    The ongoing divestment of oil blocks formerly owned by international oil companies (IOCs) to indigenous companies has helped to grow local participation in the industry. Shell Petroleum Development Company (SPDC) and its partners recently sold their interests in four oil blocks to indigenous companies- Seplat Petroleum, Neconde Consortium led by Nestoil Plc, Shoreline Natural Resources and 45 per cent interest in OML 40 to Eland Oil & Gas Ltd and Starcrest Nigeria Energy Ltd. Also, Atlantic Energy Concept Limited acquired (OMLs) 26, 30, 34 and 42 formerly owned by the oil majors.

    The signing of the Nigerian Content Act has not only offered indigenous companies opportunities to grow their assets, but has resulted in the engagement of indigenous contractors in jobs hitherto done by foreign firms. A case in point was the engagement of Century Energy Services by Amni Petroleum Development Company Limited,

    Nigeria Petroleum Development Company and Afren Plc.
    Similarly, International Energy Services (IESL) is currently engaged in the designing of facilities for the deepwater projects of Chevron and Total Upstream Companies. The logistic base of LADOL is now busy with activities by Shell, Chevron and oil companies. The NCD law has also brought fortune to indigenous companies, which are now taking control of lucrative pipeline construction projects.

    Managing Director of OilServ, Mr. Emeka Okwuosa, who spoke on the gains of the content law, noted that Nigerian companies were now competing favourably with foreign companies.

    According to Okwuosa, the East-West Gas Pipeline project was awarded to his firm after the opening and examination of bids submitted by his company and other foreign companies, because of its steady investment in capacity building and the directive by the petroleum minister that indigenous companies be accorded due recognition in line with the Nigerian Content Act.

    He said the Engineering Procurement and Construction (EPC) project, which commenced in the last quarter of 2012, would be completed by early 2015. More so, engagement of several Nigerians as skilled and unskilled staff has helped to reduce unemployment and unrest in the Niger Delta.
    Commenting on the benefits of the law to local oil communities, the National Coordinator of Ijaw Monitoring Group, Mr. Joseph Evah, said Alison-Madueke had always insisted on engagement of indigenous contractors because “she believes that is part of the strategy to retain industry spend within the Nigerian economy and fast-track development”.

    Evah however suggested that in order to sustain these gains, it was important to have the petroleum minister’s role with regards to the Nigerian content in the oil and gas industry inserted in the Petroleum Industry Bill (PIB), which is currently awaiting passage by the national assembly.

    Benefits to Nigerian Banks

    The policies put in place by the petroleum ministry in line with the local content law have made 11 Nigerian banks to be rated among the top 200 banks in Africa. The Banker magazine, a publication of the Financial Times of London, which published the list, noted that African banks have grown rapidly in the past few years. Based on 2010 results, 19 of them have Tier 1 capital of more than $1 billion, a level that roughly marks the cut-off point for the world’s biggest 500 banks. Nigerian banks on the list include Zenith Bank, FBN, Guaranty Trust Bank, Access Bank, UBA and Fidelity Bank, First City Monument Bank, Diamond Bank, Skye Bank, Stanbic IBTC, and Ecobank.

    The local content law, also has so to say compelled the IOCs to assist local companies in sourcing for funds for their projects. Last year, the SPDC organised an interactive forum with Nigerian banks in 2012 in an effort to ensure that indigenous contractors secured funds for the execution of projects on its (Shell’s) oil fields.

    Under the arrangement, Shell will act as guarantor so that indigenous contractors will not go outside Nigeria to raise loans that could be raised locally.

    Also, the Central Bank of Nigeria (CBN) revealed recently that increased activities of indigenous companies contributed to the appreciation of the naira against the dollar and other currencies. The policies put in place by the Petroleum Ministry have also helped Nigerian Banks to receive approval of project funding by Joint Venture partners of Nigerian National Petroleum Corporation (NNPC). First Bank of Nigeria (FBN) was one of the beneficiaries of the local content policies.

    Speaking during a recent networking dinner of customers in Houston, Texas (USA), Executive Director, Corporate Banking at the FBN, Mr. Kehinde Lawanson, said the bank had participated actively in both upstream and downstream transactions in the industry. According to him, the financial support extended by the bank extend to upstream, downstream and oil and gas infrastructure development with current commitment was in excess of $3billion. The bank, he said also made a total commitment of $1.2billion in the financing of importation of refined petroleum products and export of crude on behalf of the Nigerian National Petroleum Corporation and over $650million to the funding of marginal field operations. These, according to Lawanson, were aside the bank’s substantial funding of offshore support vessels and rig acquisitions.

    The three years of implementation of the Nigerian Content Act has also resulted in the listing on some Nigerian companies on Nigerian Stock Exchange, Johannesburg Stock Exchange, London Stock Exchange and Toronto Stock Exchange. Oil industry sources said the petroleum ministry and the NCDMB encouraged the firms to list on foreign stock exchanges so as to have the financial muscles to execute projects and to be able to compete effectively with their foreign counterparts.

    Source: This Day

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