Oil Price Slump Frustrating Attainment Of NOGICD Objectives — Shell

Oil Price Slump Frustrating Attainment Of NOGICD Objectives — Shell

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Managing Director of the SPDC and Country Chair, Shell Companies, Nigeria, Mr. Osagie Okunbor, has disclosed that the attainment of the objectives of the Nigerian Oil and Gas Industry Content Development Act (NOGICD) is currently been frustrated by the decline in the prices of crude oil in the international market.

In his presentation at a Stakeholders’ Interactive Workshop in Calabar, tagged Nigerian Content Workshop 2016, Okunbor who was represented by NCD Manager, Mr. Austin Uzoka, stated that to tackle this challenge among others, efforts should be made to speed up the passage of the NOGICD 2010 Amendment Bill which seeks to address the shortcomings of the previous Act.

Below is a copy of his speech:

Osagie

In just 10 days, it will be exactly 6 years since the Nigerian content development act was enacted. We should be proud of the progress that has been made since the birth of the Act as reflected in the changing mind set from that which saw nothing good in “made in Nigeria” to one which now  consciously seeks the right opportunities to develop and use Nigerian goods and services in the execution of  major projects. It is therefore appropriate to start by celebrating Nigerian content achievements.

Shell Exploration & Production Companies in Nigeria are major contributors to the Nigerian economy, not only through the energy we produce and the revenues we generate for the country, but also through our supply chain and social investments. We have a long-term and continuing commitment to Nigeria, its people and the economy. We remain committed to supporting the Government’s aspirations to increase Nigerian content and the utilisation of Nigerian goods and services in our business. This commitment is manifested in the actions we continue to take to develop and support Nigerian content development.

For example, over a number of years, we supported a local company, Caverton Helicopters through audits and reviews to develop operating standards that meet Shell’s requirements and global best practices. So, in 2010, we awarded an aviation services contract to Caverton. In addition, have helped the company to expand its fleet by providing funding supportwith which the itto the companyto purchased six Augusto Westland 139 helicopters. Today, Caverton hasbecome the single-largest provider of aviation services to the oil and gas sector in the West African shelf and has evolved into a public limited liability company listed on the Nigerian Stock Exchange,thus providing an opportunity for all interested Nigerians to share in its success.

Another example is Egba Clamps Nigeria Limited identified during “Nigerian Content Day”, an exhibition organised by Shell Exploration & Production Companies in Nigeria as a platform to promote Nigerian content development and identify new opportunities to increase Nigerian content.  Through hydro and pressure testing, Shell supported the manufacturer to improve the quality of the clamps as well as facilitating ISO 9001, Standard Organisation of Nigerian (SON) and Bureau Veritas (BV) product certifications. Today, we order these clamps for use in our operations.  A similar feat has also been achieved using the same strategy to develop local sources for the manufacture of stud bolts and nuts. This was achieved working with another local vendor, Nigerian Machine Tools Company in Oshogbo.

Contractor funding is another example. Many contractors find it very challenging to secure funding and credit facilities required to execute projects to develop new capabilities at low interest rates. In this regard, Shell, in collaboration with four Nigerian banks, established the Shell Kobo Fund and subsequently the Shell Contractor Support Fund to enable local contractors to access financing at reduced interest rates, relaxed collateral requirements and reduced loan processing time. To date, over US$1 billion has been disbursed under these schemes by the banks to  more than 200 contractors.

These are just a few examples. There are so many more at both individual stakeholder and industry levels through other IOCs with support from NAPIMS. Under the leadership of the Nigerian Content Development and Monitoring Board (NCDMB), the industry has evolved a practical framework for the implementation of the NOGICD Act. We have successfully reviewed the NOGICD Act and agreed areas in need of improvement. Further legislative action is now required to pass the amendment bill into law. The oil and gas industry has also successfully aggregated funds for strategic capacity development interventions under Nigerian Content Development Fund (NCDF) managed by the Board which runs into some hundreds of millions of dollars. These achievements and many more too numerous to mention call for celebrations.

Despite these achievements, there are still a number of challenges confronting Nigerian content development in the Oil and Gas Industry. For instance, there is still need to address the significant in-country capacity gap between where we stand today in Nigeria content development and the target set in the NOGICD Act. The gap,  combined with the expired moratorium window, reduces the number of economically viable projects which means few opportunities for Nigerian content development;

limitations in the ability of the local supply chain to develop products and services at reasonable and competitive prices;

inadequate infrastructure across key sectors – particularly power which is the bedrock of industrial development;

limited access to funding by local investors particularly long-term financing for capital asset acquisition;

poor local capacity for strategic industry inputs such as steel production, power, offshore rigs etc., required to drive industrialisation;

lack of a viable market for several industry inputs (thus limiting the business case for localised production);

inadequate industry funding;

long industry contracting cycles; and

security concerns.

These challenges are made worse by the strong headwinds facing the industry with the decline in oil prices especially since Nigerian projects need to compete for limited capital with other projects around the globe. As a result, there are few projects thus less opportunities for Nigerian content development.

In conclusion, while significant progress has been made, there are a number of challenges ahead. We must come together to tackle these challenges collaboratively starting with the passage of the Nigerian Oil and Gas Industry Content Development Act, 2010 amendment bill which seeks to  address some of the shortcomings in the 2010 Act. Government will need to take the lead in addressing security and infrastructure challenges as well as creating incentives to encourage and attract more foreign investments into Nigeria.

On this note, I sincerely appreciate the opportunity to share these perspectives and I thank you all for your kind.


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