Indigenous oil firms record new strides in local content development

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Rig workersFor several decades, the international oil companies, IOCs dominated the petroleum industry, especially the upstream sector, involving exploration and production of crude oil and natural gas. UDEME AKPAN reports that indigenous operators have intensified efforts to play more active roles.

It was the International Oil Companies, IOCs, that championed oil exploration and production in Nigeria. Consequently, the firms such as Shell D’Arcy, the forerunner of the present Shell Petroleum Development Company, Mobil, Agip, Amosea and others dominated the scene from the 1950s to the present despite efforts of a few indigenous firms to play active roles at least for a reason. There was no legislation to encourage indigenous participation in the important industry.

Investigations showed that what existed were mere declarations and policies. For instance, the administration of late General Sani Abacha which had Chief Dan Etete as Minister of Petroleum Resources introduced a policy targeted at ensuring that engineering design was domiciled in the nation. Under the policy, operators were to compile and forward a list of items required for different projects to Nigeria Content Division of Nigerian National Petroleum Corporation, NNPC in January of every year.

The policy directed that assembling, testing and commissioning of all subsea valves, Christmas trees, well heads and system integration tests should be done locally. A minimum of 50 percent of total tonnage of FPSO topside modules were to be fabricated in the country. Operators and service providers were to make provision for training and understudy programmes to maximise the involvement of indigenous personnel.

Furthermore, operators and project promoters were to ensure that recommendations for contract awards in respect of all major projects forwarded to NNPC/constituted boards of such oil and gas companies for approval included evidence of binding agreement by the main contractor with Nigerian Content Subcontractor(s). The agreements were expected to indicate the cost and detailed scope including total man-hours for engineering, tonnage and man-hours of fabrication and relevant defining parameters for materials to be procured locally as well as other services.

The Federal Government’s directive that captured these and other issues stated, “Henceforth, all waste management, onshore and swamp integrated completions, onshore and swamp well simulations, onshore fluid and mud solids control, onshore measurement while drilling (MWD), logging while drilling (LWD) and directional drilling (DD) activities are to be performed by indigenous or indigenous companies having genuine alliances with multinational companies.

It stated, “Henceforth, coating of all Line-pipes and threading of all oil country tubular goods (OCTG) are to be carried out in Nigeria. Henceforth, all concrete barges and concrete floating platforms are to be fabricated in-country. Henceforth, operation and maintenance of offshore production units, FPSO and FSO in particular, are to be performed by Nigerian companies. All international codes and standards used in the industry are to be harmonised to support utilisation of locally manufactured products such as paints, cables, steel pipes, rods, sections, ropes etc and to improve capacity utilisation in local industries. Clauses that create impediments for/exclude participation of local companies should not be included in any ITT.”

Findings showed that many IOCs did not respect them. Consequently, the active participation of indigenous operators suffered a setback until the President Goodluck Jonathan administration emerged with the Local Content Act in 2010. This culminated in the making of bold steps. Take Oando Energy Services, OES as an example. The firm has completed the refurbishing of and upgrading a state-of-the-art swamp rig christened ‘OES RESPECT’ in readiness for drilling operations.

The Chief Executive Officer, Oando Group Plc. Mr. Omamofe Boyo who enumerated the achievements of the Group stated that the company aspires to see itself as a continuous beacon in showcasing proper Nigerian Content Development and institution in Nigeria. He stated that OES RESPECT is one of the four rigs in its kitty as three others are currently being deployed for Shell and Agip JV operations in swamp locations. The Group’s Chief Executive stated, “Now with all the challenges we have in the land and swamp, there is a tendency for these areas to be neglected, there is a tendency for the IOCs to depart from these areas and leave them fallow.

The Managing Director, Mr. Bamidele Badejo was delightful to be involved in the drilling and completion services particularly as a result of increasing demand for such assets. He narrated that the Rig, before it was formally owned by Transocean and named “Searex VI”. To ensure continued drilling operations and in demonstration of the Federal Government’s directive to increase oil production and reserves, Oando Energy Services purchased the asset with funds from Nigerian banks.

He stated that following the acquisition, despite numerous attempts to secure a long term contract for the rig, efforts proved futile due to interested operators’ requests for an upgrade of the existing equipment to higher specifications. Badejo stated that OES remains assured that the Board’s implementation strategy on Rig Acquisition and Ownership by Nigerian companies will further deepen the aspirations of indigenous participation in the Nigerian Oil and Gas Industry and hopes the Board will intervene in the contracting process in order to ameliorate the financial exposure to OES as it relates to the acquisition, refurbishment and upgrade of OES RESPECT.

Noting the feat, the Executive Secretary of the Nigerian Content Development and Monitoring Board, NCDMB, Engr. Ernest Nwapa expressed government’s commitment to encourage Nigerians to own such assets. He stated that the challenges facing the oil and gas industry and the attendant proactive approach of the various arms of government to manage scarce resources, keep Nigerians working to make sure that assets bought by Nigerians do not get taken away by default in loan repayment thereby losing supporting businesses around those assets.

He frowned at the ugly trend whereby a facility like this is ready to work but not finding work to do and charged IOCs to remove the constraints thereby asking service operators to point to the Board what is to be done to remove such constraints in order to pay sufficient attention to the intricacies of managing assets in Nigeria.

However, there are indications that local content would continue to bear fruits in the coming years. For instance, the Nigeria Liquefied Natural Gas Limited, NLNG Limited has launched a $1 billion local vendors financing scheme to enable its registered contractors and vendors have access to bank loans at competitive terms. The company has also signed a Memorandum of Understanding, MoU with five participating banks – Access Bank, First Bank of Nigeria, Standard Chartered Bank, United Bank for Africa and Zenith Bank to start the scheme.

Registered NLNG contractors are expected to approach the banks and apply for loans by presenting a work order, purchase order or contract document from the NLNG. The Managing Director of NLNG Limited, Mr. Babs Omotowa, said the financing scheme, which was a demonstration of the company’s commitment to boost local content.

He stated, “This is just a step, and in the right direction. The success of any local contractor is linked to larger and smaller businesses around it in the value chain. We need to further develop initiatives as an enabler or platform to develop the value chain and maximize the opportunities of the future, especially with huge projects in sight such as the federal government’s Gas Master Plan initiative and Train 7.

Omotowa stated, “NLNG recognises the many challenges limiting the sustainable growth and development of local content in Nigeria, a key one being lack of access to adequate funds. A significant number of willing contractors struggle to get financing. Banks in Nigeria often find it challenging acceding to loan applications from local contractors with little or doubtful assurances of repayment. An enterprise may have little track record, credit history or illiquid collateral and thus risks are therefore perceived to be high and this makes it more difficult for local contractors to find finance.

However, other firms have also recorded meaningful strides. For instance, Vandrezzer Energy Services Limited has completed the construction of a first-of-its-kind Wellhead Monopod Jacket in her IML-90 Field Development Project which comprises the engineering designing, fabrication, construction and installation of a wellhead platform complete with jackets and a concrete-coated pipeline for some offshore operations.

The Managing Director of the firm, Mr. Joe Udofia remarked that, “I must promptly ascribe our astronomical growth to the Nigerian Content Development Initiative as a Federal Government policy established through the Nigerian Content Development and Monitoring Board to positively reposition our indigenous companies among which Vandrezzer is a leading brand.

He stated, “The Initiative has been proven as practicable and effective in deed and I must enjoin you all to understand and commend Vandrezzer’s Consistent Compliance to the Nigerian Content Development Initiative. Right from our inception, we have been a reputable beneficiary of the initiative when we started operations over 5 years ago operating then as a subcontractor to Nigeria’s foremost foreign direct investor, Shell Petroleum Development Company of Nigeria, SPDC.

He stated, “I recall vividly how we were selected by SPDC in 2009 to attend the Shell/UKTI Engagement Programme held in London as part of her commitment towards the development of her promising indigenous contractors. This opportunity and exposure proved to be a key stride in our growth profile and spurred us on towards greater achievements. I seize this opportunity to say a big thank you to SPDC for her commitment to the development of indigenous contractors; most of all for the opportunity and for believing in Vandrezzer.”

Already, the implementation of the Nigerian Content Act by the Federal Government has attracted $5billion worth of investments into the economy and created about 38,000 jobs, since 2009. It is against this backdrop that stakeholders call for more support for local content development as a strategy for sustainable development of the nation’s economy.

[Udeme Akpan, National Mirror]
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