The Nigerian Content Development and Monitoring Board (NCDMB) was set to boost the participation of indigenous companies in the oil and gas sector, but many years down the line, not much success has been recorded in this regards. This article seeks to explore the role the NCDMB had played over the years and the recent strategies it had deployed to achieve its core mandate.
Seven years after its establishment, the Nigerian Content Development and Monitoring Board (NCDMB) is yet to fulfil one of its core mandate, which is to deepen indigenous participation in the petroleum industry. Stakeholders are unanimous in their views that local content development in the Nigerian oil and gas industry still remained unsatisfactorily low and continued to inhibit the growth potential of the industry.
The NCDMB was established following the signing into law of the Nigerian Content Act on April 22, 2010. Saddled with the responsibility of increasing indigenous participation in the oil and gas industry, build the capacity and competencies of indigenous operators, create linkages to other sectors of the national economy and also boost industry contributions to the growth of Nigeria’s Gross Domestic Product; the board has recorded significant milestones in the implementation of the Nigerian Content Policy.
However, despite these achievements, it is obvious that a lot still needed to be done in achieving the ideals of the Nigerian Content Act. This is especially as the NCDMB had recently stated that indigenous participation in the nation’s oil and gas industry had increased to a meager 35 per cent in the past six years.
Also, Mr. Lee Maeba, Former Chairman, Senate Committee on Petroleum Resources, Upstream, and sponsor of the Nigerian Content Bill, stated that from inception of the NCDMB in 2010 to 2016, not much has been achieved in the area of compliance. As a result, according to Maeba, Nigerian companies are not deriving the optimum benefit of the Nigerian Content Act.
However, to address the shortcomings recorded in the implementation of the Nigerian Content initiative, the NCDMB had adopted a number of strategies.
Executive Secretary of the NCDMB, Mr. Simbi Wabote, said the strategies which are aimed at increasing national capacity in terms of local content, would help create an enabling environment to attract investors and protect investments made through compliance oversight.
One of the strategies, he said, includes stakeholder collaboration to overcome key challenges in the area of macro-economic issues, skills gap, weak sectoral linkages and weak manufacturing base, inadequate critical infrastructure and policy inconsistency, among others.
Other strategies, Wabote said also include the fast-track establishment of five oil and gas parks and the organization of Nigerian Content Opportunities Fair to showcase available capacity in-country; showcase opportunities in upstream, midstream and downstream sectors and provide multinationals the opportunity to link up and utilize in-country capabilities.
He further stated that the Board is planning a series of Research and Development fair and intends to support the completion of ongoing third party investments, which he said, would have a number of positive impact in the area of Job creation for teeming youths; increase in-country Engineering and Fabrication work scope significantly; and bring down the cost of in-country manufacture/ assembly of equipment, component parts and spare parts.
He also stated that one of the strategies include streamlining the contracting cycle to six months, adding that it is setting a 100 days turn-around target provided documents are in compliance with the Act.
In addition, the Executive Secretary noted that the tenth strategy involved undertaking an internal restructuring of the NCDMB, through the adoption of leading practices to transform NCDMB into a performance driven organization; and the adoption of a 10-year road map to institutionalize long term planning, among others.
Again, the NCDMB highlighted some of the success stories of the Nigerian Content initiative to include in the areas of coating paints, line pipes, put at about 670,000 metric tonnes per annum; barite processing, engineering design, platforms fabrication and pipe coatings.
Other successes recorded are in cables production, marine and pressure vessels, swamp rig, machine shop and training simulator.
In line with this, Wabote said the NCDMB had developed a Community Content Guideline which provides pragmatic steps for incorporating and engaging community contractors as a critical delivery point for Nigerian content development.
He declared that the guideline was borne out of the necessity to boost peace and security in the Niger-Delta and address the lingering squabbles between host communities and operating and service companies over participation in oil and gas activities. “We have also already aligned our Capacity Development Initiatives to support the delivery of the aspirations encapsulated in the Petroleum Industry Roadmap,” he explained.
In addition Wabote stated that with the Council of the NCDMB in place and the calibre of members of the Governing Council, the Board is well positioned to fast track implementation of its flagship projects, like the Nigerian Oil and Gas Parks Scheme (NOGAPS), Polaku Pipemill and accelerated disbursement of the Nigerian Content Development Fund (NCDF) to deserving oil and gas service companies.
Furthermore, he disclosed that one question that he had had to answer repeatedly in the last 100 days had to do with the Nigerian Content Development Fund (NCDF), adding that in the last seven years, the NCDF had grown to nearly $600 million but only three service companies successfully accessed the Fund. “Despite the healthy growth of the Fund, we are frustrated that it has not significantly addressed the purpose for which it was established by the Act,” he lamented.
However, he stated that within the last 100 days, the NCDMB had worked on various strategies geared to improve access to the Fund, adding that it is hopeful that clear modalities that will guide the utilization of the Fund would be out within the next 100 days.
To this end, Wabote said, “Oil and gas companies that default in their deduction and remittance of one percent of the value of contracts they executed in the upstream sector would henceforth be disqualified from participating in tenders for new contracts. We also announced plans to conduct a forensic audit of the industry to track and recover due payments on the NCDF held by some companies.”
He added that the Board’s compliance monitoring had focused largely on the upstream sector operations of the industry, mainly because of the higher percentage spend in the sub-sector.
Specifically, Wabote disclosed that this year, it had undertaken a reorganization of its monitoring structures and will pay much more attention to the implementation of Nigerian Content in the midstream and downstream sectors of the industry.
In addition to efforts at expanding indigenous capacity, the NCDMB also introduced a new policy for Floating, Production, Storage and Offloading (FPSO) platforms construction in Nigeria, stating that henceforth, greater percentage of the vessels would be fabricated in the country.
Wabote declared that this was in light of the successes recorded by indigenous companies in the fabrication of modules for FPSOs and would be a reversal of the trend, whereby, over 60 per cent of the modules for the vessels are fabricated overseas, with a handful fabricated in-country.
According to him, international oil companies and promoters of new deepwater projects in Nigeria must deliver Nigerian Content milestones that would exceed in-country integration of Floating, Production, Storage and Offloading (FPSO) platforms.
This, he noted, was because Total Nigeria’s Egina Deepwater project which would be integrated at the LADOL Free Trade Zone had become the benchmark for Nigerian Content on deepwater projects, adding that going forward, forthcoming projects have to break new records.
The Executive Secretary disclosed that in-country integration of the Egina FPSO and fabrication of six modules of the vessel created 5,000 direct jobs and 5,000 indirect jobs, arguing that increased domiciliation of future FPSO projects through the fabrication of more modules would create additional jobs, estimated to reach 30,000, he added.
According to Wabote, the Board would not rest on its oars with regards to the implementation of the Nigerian Content Act, adding that new projects must look at doing FPSO integration and more as the country seek to add something to its achievements. He said, “Six modules of the Egina FPSO were fabricated in-country across some yards, whereas 12 modules were welded at Samsung’s base, Geoje, South Korea. For next FPSO, more modules must be fabricated locally.”
Wabote, however, expressed delight with the level of investment and the utilization of local workforce, while he described the project as an example of possibilities. He assured that the Board would continue to work with industry stakeholders to develop new projects and domicile more work in-country.
The Executive Secretary had visited the facilities of some indigenous companies to get first-hand information of their operations and challenges. Among the companies are Dover Engineering, JC International and Thompson and Grace Limited, all located at Port Harcourt, Rivers State.
He explained that his visits to oil and gas facilities across the country were aimed at assessing capacities and confirming that Nigerian companies have firm footing in their areas of operations, adding that information gathered from the visits would be used during tenders and in planning for capacity development.
Wabote also promised to enlighten international oil companies and project promoters on existing in-country capacities and ensure their utilization during projects.
He also noted that experts in offshore designs, FSPO designs and detailed engineering were in high demand and engineering companies must develop strategies to retain them so their competences will not be lost.
On his own part, Senator Lee Maeba expressed confidence that the Nigerian Oil and Gas Industry Content Development Act, will achieve sustainable development of the nation’s economy through the stimulation of industrial development, growth of local capacities, building of a skilled national workforce and the creation of a competitive supplier base.
According to him, to achieve the laudable benefits of the Act, however, it is vital that the government continually collaborate with industry stakeholders to ensure the effective implementation and enforcement of the provision of the Act.
He said, “It is also important to ensure that these benefits are realized by local companies participating directly in the oil and gas operations, rather than through farming it out to foreign partners due to lack of financial or technical expertise. Indigenous companies must live up to the expectations of the Act by maximizing local capacity.
“Finally, it is imperative that the interests of various stakeholders are protected continuously to guarantee the economic drive and growth that will result in local capacity building and return on investment for both operators and their alliance partners and Nigerian individuals and companies.”
Maeba stated that one of his reasons for sponsoring the Local Content Bill was due to the fact that the economic opportunities expected from the oil and gas industry for our people since oil was discovered in commercial quantities in the Niger Delta has still not materialised after 53 years.
He added that of the total contracts awarded by operators in the industry, put at more than $1.8 billion per annum, only a paltry five per cent is given to Nigerian indigenous companies, while far less than two per cent of this five per cent are done by business owners from the oil prospecting Niger Delta region.
In addition, other reasons he said, include the fact that “Contracts signed by the Federal Government of Nigeria with the oil operators and their alliance partners whether as oil Petroleum Sharing contracts (PSCs) or as Joint Ventures (JVs) contains provisions for training and employment of Nigerians, but oil companies never implement these agreements.
“Jobs that could be given to Nigerian indigenous companies are given to foreign companies for example French International Companies gives job to only French counterparts, American oil majors give to only Americans etc.
“Jobs that can be perfectly done in Nigeria are taken outside and done in Europe, America, Korea, Japan, China etc. this has induced so much pressure on the value of the Naira in the Foreign Exchange Market.”
Maeba declared that Nigerian Indigenous service companies stand to benefit tremendously from the provisions of the Nigerian Local Content Act, especially as they are one of the key targets of the Nigerian content policy.
He said the indigenous companies would benefit in the area of skill development and capacity building; principles of first consideration; regulation and enabling framework; full and fair opportunity in bid processes and opportunities for indigenous service companies.
It is expected that in the next couple of years, the effect of all the initiatives introduced by the NCDMB and suggestions put forward by critical stakeholders would begin to yield positive results and bring about a significant increase in indigenous participation in the oil and gas industry.