Nigerian oil services firms are set to gain the most from plans to increase local participation in the industry but funding their growth could prove a challenge, executives and government officials said on Thursday.
Wide-ranging reform plans for Africa’s biggest oil and gas industry include measures to encourage greater involvement by Nigerian companies as the OPEC member tries to leverage greater benefit from its natural resources. “The real opportunities are in service companies. IOCs (International Oil Companies) outsource most of this work to foreign companies,” Ernest Nwapa, General Manager of Capacity Building at state-run oil firm NNPC told a conference in Abuja.
Nigeria’s oil is mostly pumped by foreign oil majors, including Royal Dutch Shell (RDSa.L), Exxon Mobil (XOM.N) and Total (TOTF.PA), in partnership with NNPC.
The building of infrastructure, including oil rigs and pipelines, is often contracted to foreign companies. But an ambitious Petroleum Industry Bill (PIB) is currently before parliament which could redefine the country’s decades-old relationship with its foreign partners and allow Nigerian firms greater involvement.
“The focus of the government is to encourage smaller, local companies,” Pedro Van Meurs, an adviser to the government on the PIB, told the three-day conference
Nigeria’s Acting President, Goodluck Jonathan, also spoke about the focus on local industry.
“I want to reassure Nigerians and our foreign partners of our unwavering commitment to pursuing the reform in this sector with an eye on our national interest primarily,” he said at the opening ceremony on Monday. [ID:nLDE61L2FG]
Foreign oil companies have largely been supportive of the government’s desire to increase local participation in the industry, not least because a lack of community involvement has fuelled resentment in the restive Niger Delta.
Years of attacks by militants in the wetland region have prevented Nigeria from pumping much above two-thirds of its 3 million barrels per day oil production capacity in recent years.
“It is not difficult for local companies to penetrate the oil and gas industry. Systems are in place and it is getting better,” said Olubunmi Obembe, General Manager of Nigerian Content for Total Exploration and Production Nigeria.
Obembe said local firms faced issues over funding when competing against foreign companies for business because oil contract negotiations are long, requiring extended loans.
“Funding can be a problem. The financial system in Nigeria is not mature enough, banks borrow for the short-term and so they can only lend short-term,” he said.