More oil service companies, indigenous and foreign owned, may be closing shop this year due to government’s decision to suspend some key projects that are critical to oil and gas industry and the development of local content.
One of the local companies confirmed to BusinessDay that by March it would send at least 85 engineers to the unemployment market should the government continue to maintain its suspension on some key projects like the Nigeria Liquefied Natural Gas Train 7, Olokola gas project and the Brass LNG just to mention a few.
Some firms said they have no choice but to start reducing their staff strength because they are not getting contracts from the multinational oil companies. Some of them said the exercise has already begun because they can no longer sustain the payment of salaries without jobs. Although many of the oil service companies are involved in the cost saving measure, Nigerian companies are mainly affected.
“Investors are leaving the country because of unfavourable government policies,” an executive of a local company who did not wish to be named said.
Industry analysts said the situation is going to be worse with indigenous companies that had invested millions of dollars in upgrading their facilities on the strength of government’s drive to boost local content but are not getting jobs because of government’s policy summersault.
A company like the KBR that has shut down its Nigerian office is said to have invested $13 million in the country but has not secured any job in the last one and half years. The engineering company was supposed to have employed at least 250 Nigerian engineers that would work on its projects and execute 500,000 man hours in a year.
The suspension of activities by the government on NLNG plus train 7 and the Brass and Olokola LNGs have dealt a big blow on the company. The projects could not come on stream last year and there is little hope that the government would do something about them even in 2009.
When it established its operational base in Lagos one and half years ago it stated that the establishment of KBR Nigeria Limited will enable it to fully support its Nigerian customers and further its commitment to meeting the country’s goals for increased local content.
KBR has a 30-year history working in Nigeria and a continuous presence for the last 15 years, which includes ongoing EPC work for the country’s major LNG projects and for its first GTL facility. KBR has additionally performed work for a number of Nigeria’s refining, ammonia, as well as onshore and offshore oil and gas production and processing projects.
The Nigerian operation would have enabled KBR to build local support for its clients while ensuring close coordination with its global engineering centres. “Our decision to establish KBR Nigeria Limited is strongly aligned with our commitment to helping develop local capabilities and delivering world-class projects in Nigeria and in all of the places where we serve our clients,” said John Rose, executive vice president, KBR.
The joint venture team of KBR, JGC, Technip and Snamprogetti, was recently awarded the project specification/front end engineering and design (FEED) contract for the Nigeria LNG (NLNG) SevenPlus project, to be constructed at Bonny Island Bayelsa State. NLNG is a partnership of the Nigerian National Petroleum Company (NNPC), Shell, Total and ENI.
The inability of NNPC to make available its own counterpart funding in the join venture projects is also a factor in the exit and death of oil servicing companies that would have contributed immensely to the local content development in the oil and gas industry.
A source close to the company said it requires huge businesses to remain afloat
Another company, Foster Wheeler, closed shop in December 2007 on account of lack of patronage of its services.
Some of the companies are laying their woes on the door step of NNPC which they claimed has been too slow in approving some of the projects.
Jan72009