The Federal Government�s aspiration to achieve 70 per cent local content in the oil and gas sector by 2010 may not be feasible, following alleged poor compliance with the guidelines governing the Local Content policy by most International Oil Companies (IOCs) operating in the country.
The Nigerian Content policy was initiated last year by the Olusegun Obasanjo administration to help develop local capacity building in the Nigerian oil and gas sector, with a view to ensuring that Nigerians participate actively in the operations in the sector.
The government had directed oil companies operating in the country to commence in-country fabrication of equipment as well as other major components used in oil exploration. The government had reasoned that the implementation of the content policy would serve as a means of dissuading capital flight � and thus aspired that 45 per cent of total contractual jobs in the industry had to be done in Nigeria and 70 per cent of the jobs done in-country by 2010.
However, almost a year after the 2006 dateline, THISDAY checks revealed that the country is yet to achieve up to 20 percent local content in the sector.
Although the Nigerian National Petroleum Corpo-ration (NNPC) has maintained that local capacity building in the industry is currently between 33 and 35 per cent, THISDAY learnt from stakeholders that most of the contractual works involving engineering services, such as Front End Engineering Design, Detailed Engineering works, as well as materials procurement are still being done outside the country contrary to the domiciliation guidelines issued by the Local Content Department (LCD) of the NNPC.
The government had hoped that local content development would ensure that the quantum or percentage of locally produced materials, personnel, goods and services rendered to the industry are increased, thereby generating more employment and economic empowerment, but this is not to be, as these IOCs were alleged to have preferred establishing Nigerian offices, which they use as cover-up, when the real services were rendered by foreign companies in Nigeria or off the shores of the country.
It was learnt that most of these multinationals were either considering the capital intensity of their businesses or the manpower ability of Nigerian companies to be able to do the job in accordance with international standard.
�From our research as businessmen and service providers, we discovered that the oil and gas operators are looking at the local content policy as just one policy that will pipe down along the line. It is not as if they don’t want to buy fully into the policy, but what they are looking at is the capital intensity of their business and the manpower ability of Nigerian companies being able to do these jobs and whether Nigerians have the technical know-how. So what they are doing is that, they are just like waiting, it is a waiting game on the part of the multinational oil producing companies,� said a stakeholder.
THISDAY checks also revealed that some multinationals like Shell and Exxonmobil are working in line with the domiciliation guidelines.
Speaking at the recent First Insurance Roundtable in Oil, Gas and Aviation Assets organised by Lagos Business School in partnership with Mutual Benefits Assurance Plc, General Manager, Nigerian Content Development, Mr. Ernest Nwapa, noted that engineering man-hours performed in Nigeria is currently two million as against 250,000 in 2004. In fabrication tonnage, he said, between 80,000-100,000 had been achieved as against 12,000 in 2004, when the content policy had not been initiated.
He also noted that 250,000 Nigerian engineers had been trained, while about 3,000 welders were to be trained.
Nwapa, who lauded the progress so far, reaffirmed the availability of the $350 million Local Content Support Fund (LCSF), which he said, was meant to finance contractual jobs given to Nigeria companies by these IOCs.
He however stated that indigenous companies were edged out by multinationals in well and drilling activity, but noted that that Nigeria is interested in welding because of its relevance in the oil and gas operation.
�A welder in the oil and gas industry is not a guy who can make burglary proof. A welder is not a guy who can do those basic things you see in the oil and gas. Some people asked me why are you wasting time on small issues, where as it is one of the fundamental things to do. The special adviser to the president, Dr. Emmanuel Egbogah, who taught the Malaysians to do that, told me at a private meeting that he likes the way I am pursuing welding, because that is where to start off. He also advised me to pursue drilling. So the issue of welding is such that we have many people who can weld, but you need to certify them through various grades so that they can become proper oil and gas welders. That is the process that costs about $4,000 to train a welder. And that is just a short-term cost.
�We are doing that, it is a programme that is starting with Petroleum Training Institute (PTI) and Niger Dock and then is going to spread to other places, Port Harcourt, Warri, Kaduna, but it is a programme that is very essential,� he said.
He stated that the NNPC is trying to ensure that these companies adhere to the Nigerian content policy, adding that the corporation, as a joint venture partner with all the International Oil Companies, controls what it does.
�So what we have tried to explain is that we have a structure, we have guidelines, when did we start? We started only in 2005 in a structured way. Local content is not a new thing, but it is only in 2005 that we have a set of guidelines. When you go to Niger Dock today, if Niger Dock said they don�t have work, it is probably true. Why is that the case? It is because under the current contracting signing, it takes 18 months to 24 months to award a contract. So when I stand here and say we have 60 per cent of work in Nigeria here, I mean that either they have been fixed into Nigeria yard, because the important thing for us is not that it goes to Niger Dock, but that it goes to a company within Nigeria. So by the time we go through a central processing, and they said they have shortlisted four Nigerian companies, it has gone to Niger Dock or Dorman Long etc, but it has been committed to a Nigerian yard.
�We are trying to shorten the long process, when this contract is awarded, and if it doesn�t go to a Nigeria yard, that is when questions can be asked. We insisted that before an international contractor gets work in Nigeria, we are saying that it must do aspect of the job in Nigeria and we have said that aspect and beyond that we have said the international company must give us an MoU in a Nigerian company or the Nigeria yard where it is going to do that,� he said.
He however stated that a monitoring unit in the Local Content Department (LCD) was drafted to monitor, on monthly basis, the extent of implementation of the policy by the IOCs.
�The only way we monitor this thing is from the Nigerians. Do you think that a Nigerian will have a job given to him and all of a sudden, you want to take the job out and he won�t complain? Now we have a guideline, the Nigerian companies know that the moment any oil company wants to play games, they will report and even if they come to us, and they felt we are not doing enough, they will go to the press. So we have a monitoring unit in the Local Content Department (LCD) that goes every month to check the extent of their commitment and that is part of our role, a major part of our role,� he disclosed, even as he said that the National Content Bill currently before the National Assembly has gone through the first and second reading and would be passed into law as soon as possible.
Nov122007