Why local content in Nigeria’s oil, gas industry is low – Executive Secretary, NCDMB
- Created: Friday, 21 April 2017 08:01
PT: Your introductory remarks focused virtually on your successes in the last 100 days. What about your failures?
Wabote: I also mentioned some of the key frustrations and failures since I assumed office. I spoke about how people have not been able to access the Nigerian Content Development Fund meant for capacity development in the oil and gas industry. Since the establishment of the fund six years ago, significant progress should have been recorded with its use.
Before my appointment, when I was on the other side of the industry, I used to wonder what was happening that people were unable to access the fund.
Regrettably, I like to report that only three Nigerian vendors have been able to access the fund so far. For me, not being able to put that fund to use is a failure.
Second, not being able to check the use of the fund is also a failure on our part. That is why we are trying to take stock, by conducting a baseline study on Nigerian content implementation; to know where we are today in the implementation of the Act in the past six years.
Sincerely, we have not been able to implement the Act in its totality in line with the intent of those who wrote the law.
We will press pause to review how far we have been able to implement the Act; know where we made progress; identify the gaps and where we need to up the game.
I believe until we do that, we cannot beat our chest and say these are areas we have really succeeded. As soon as we finish that process, Nigerians would be adequately informed.
But we must recall that when I was appointed, there was a crash in crude oil prices since 2014. Prices only began to recover gradually from November 2016.
Within the period of slump, there has been very little industry activities, as operators and government were finding it difficult to fund new projects, while existing contracts were being renegotiated downwards.
Without ongoing and new projects, there hardly can be talk about Nigerian content.
PT: The contracting cycle of two years on the average has been a huge issue. How long does it take currently to complete a contracting cycle in the industry?
Wabote: I can tell you without mincing words that has reduced to a large extent from where the industry was when this management came on board. This was one of the issues the Minister of State for Petroleum Resources, Ibe Kachikwu, took on bullishly, to see how that process could be reduced.
Are we where we want to be at the moment? No! But a lot of progress has been made. For sure, we have seen some of the contracts move just within one year cycle.
But the minister had set a target of six months. I think all agencies in the industry associated with that process are working very hard to see that we achieve that.
Don’t forget these things cannot happen overnight. They will take time. But the most important thing is the focus and drive to ensure they happen.
PT: How many Nigerian companies would you say have been products of Nigerian content in the last 100 days?
Wabote: Since assumption of office, I have been going round the country to commission one project or the other.
For instance, in December 2016, we were in Onne Oil and Gas Processing Free Zone to commission the Solewant Pipe Coating Plant.
Around the same period, we were in the Lekki Free Trade Zone to commission a multi-million-dollar state of the art steel pipe mill facility by Yulong.
A fortnight ago, I was at the Nigerian Machine Tools, Oshogbo, to look at the facilities set up there to manufacture bolts, studs, flanges in the oil and gas industry.
Now, most Nigerian oil and gas companies are elated, because most of the contracts that hitherto go to multinationals are now given to Nigerian companies.
In fact, most of the international oil companies are trying to compile the number of contracts they have given Nigerian companies in the past 100 days.
Indeed, there are successes here and there in terms of companies benefiting from the policy.
PT: The limited number of Nigerian companies as products of the policy may be consequent upon lack of training and capacity building. What is the relationship between NCDMB, Oil and Gas Trainers Association of Nigeria, OGTAN, and other independent training service providers in the oil and gas sector?
Wabote: We have a very good relationship with OGTAN. I thought NCDMB, OGTAN and other training organisations have done tremendously well in terms of human capacity development. Part of the challenge we currently have is not the number of Nigerians we train, but the jobs those we train would eventually go into.
That is why we are working hard to see that projects come on stream. The truth is that if there is no project, there is no local content.
We have to encourage projects to come on stream, so that all those Nigerians we have trained currently roaming the streets will get what to do. I am beginning to see light at the end of the tunnel. I believe industry activities will pick up in the next couple of years, and most of those we have trained will have opportunity to practice the training they acquired from NCDMB.
I must reiterate OGTAN and NCDMB are working hand in hand. OGTAN is even one of the organisations mentioned in the Act. So, we do not have any choice than to continue to work with it, to increase capacity development for our people for the present and the future.
PT: You said one of the key failures of the Board was its inability to get companies to access the Nigerian Content Development Fund. What is really the issue with the Fund? Why is it so difficult to access it?
Wabote: I have said it before. Last year we had in the fund about $600 million. It should have been more. That is why I also spoke about forensic audit, to see who is holding our money somewhere, so that they should bring it out for us to make up the numbers in our purse.
But, let me emphasise, it is not true that no operator has accessed the fund so far.
I can mention those that have benefitted from this fund. They include Lagos Deep Offshore Logistics, LADOL, Starz and Vandrezzer. Is that enough? Of course not! That’s where my frustration comes.
I sincerely believe we must use this fund to support the oil and gas industry to grow. In terms of how the banks are leveraged to make funds available to local companies, particularly in the oil and gas industry, you may be right. That has remained a big challenge.
If we have this fund, why can’t we put it to use to support the industry and the contractors and stakeholders who actually contribute to that fund?
That’s why we are working hard to see that in the shortest possible time we bring transparency to the fund implementation.
Because the fund is not free or a charity fund, if people borrow money, they should be able to pay back so that others can benefit from it. It is not exclusively for one group of individuals.
So, we must make sure we put everything right, such that once the fund is given out, the NCDMB would be able to work with whoever the money was given to ensure it would be paid back.
We are trying to work out a transparent process, to ensure there is a clear line of sight as to when the money would be paid back by the fund borrowers. That is why it is taking a bit of time.
But be rest assured that very soon, Nigerians would not be asking questions about the fund, but how many people have benefitted from it.
PT: What’s the update on the plan to develop the Nigerian Oil and Gas Parks Scheme, NOGAPS?
Wabote: We have been talking about industrial parks for the past couple of years. My responsibility is to ensure we accelerate its implementation and make it happen. We want to take it from the drawing board to reality.
So, it is not a secret scheme. Publicity has been carried out locally and internationally. Even the Minister of State for Petroleum Resources has also spoken about the scheme in most of his addresses.
The whole idea behind it is to create sites and services such that manufacturers and service providers in the oil and gas industry will be able to establish themselves within that park environment and also create steady power supply for them using the gas infrastructure that we have.
That way, it would bring down their cost of doing business and enable them to compete in the oil and gas industry.
PT: Monitoring the international oil companies’ implementation of the Act is key to the success of the policy. How many defaulters have so far been identified and sanctioned?
Wabote: It will be difficult to say here the companies that have defaulted in the implementation of the Nigerian Content Act. But, are there defaulters? Yes! What are the numbers? I am sorry I cannot give you the numbers.
PT: Why is that difficult?
Wabote: If you read through the Act itself, there is a mechanism for doing so. That is why there are so many cases in court. People often default or run foul of the law.
So, in an Act like that, yes there will be defaulters out of ignorance or total disregard for the rule of law itself. The monitoring units of the NCDMB are well equal to the task.
We have gotten defaulters. We are taking them through the process and ensure that they comply as well as penalties for non-compliance. It is an ongoing exercise. Even Nigerian companies that you would think will comply with the Act are also defaulting.
PT: The question is: why are you not sanctioning such defaulters?
Wabote: We are going after them. I will not begin to list defaulters here. But, just to answer your question. Are there defaulters? Yes. Are we doing anything about them? Of course, we are following up on them.
PT: How many expatriates are still doing jobs Nigerians can do in the oil and gas industry? Why?
Wabote: Let me make something clear here. The whole idea about Nigerian content in the oil and gas industry is not about indigenisation.
The intent is not to say everybody should go back to their country and allow Nigerians to provide the services themselves. These foreign companies bring investments into the country. They have a right to protect their investment.
But the point about Nigerian content is that where one has capacities existing in-country, the NCDMB will not approve for one to bring in experts. The Board rigorously monitors that. Where the expertise does not exist, the Board ensures there are Nigerians to understudy the experts, such that when they leave a Nigerian could replace them.
Most of the companies, particularly the IOCs and service providers, who adhere to this policy, ensure every expatriate quota application they submit, the Board demands to see a succession plan of that positon that will be filled by a Nigerian in the next four years, because most expatriate applications last for four years.
I am a product of an IOC. I was out of Nigeria for six years. In the foreign country, I gave them my expertise, such that I will increase my competence and expertise in what I do. If the law was to say no foreigner was wanted into their country, they would have shut the door against me.
Most Nigerians are out there in various countries enhancing their capacities and also giving their expertise. In some of those companies, there are exchange programmes, where Nigerians are sent out and foreigners are brought in to understand the peculiar challenges in the Nigerian environment.
Every country’s conditions vary, depending on their reservoir characteristics, security challenges and operational focus on either oil or gas.
Just to be clear, the Board is very prudent and committed to ensuring that capacities existing in Nigeria are not taken up by expatriates. But our intention is not to say that there will not be any expatriate in our oil and gas operations. The whole idea is to add value to Nigeria’s oil and gas industry.
PT: How is the Board ensuring that the IOCs maintain the level of Nigerian content in the high profile projects that they handle in the industry?
Wabote: We are currently holding discussions with all the operators in the oil and gas industry –Shell, ExxonMobil, Chevron, Agip, to ensure that major projects coming in the next couple of years will meet or surpass what Total was able to do in the Egina project, in terms of local content in compliance with the Act.
PT: What is the level of Nigerian content in the oil and gas industry today?
Wabote: When we started with the 23 directives as far back as seven to eight years ago before the law was eventually passed, when the measurement was taken, Nigerian content was only three per cent.
The focus then was more of revenue generation, as opposed to in-country value addition. Monies were collected based on taxes.
Today, Nigerian content is around 28 per cent. Is it where we want to be? Of course, no. We are working hard to increase that.
That is why I said we have to take stock to see where we are today in terms of the implementation of the law, identify the gaps and go after them, to help the Board increase the Nigerian content in our oil and gas industry.
Nigerian content is not the same thing as awarding contracts to Nigerian companies. If this is drilled down, as to the actual value of the Nigerian content, in terms of the equipment, kits, we will not get anywhere, because those Nigerian companies have to buy those products and services in-country to encourage manufacturing and job creation.
PT: How does the Board measure its staff productivity, viz-a-viz its mandate?
Wabote: One of the things we set out to do as a Board was to ensure that we build in our staff capacity and competence and bring, if not at par with what obtains in the oil and gas industry, at least within a minimum in the level of training and capacity development in the industry.
We have set out clear targets for every department and directorate within the NCDMB. There is a clear dashboard on what needs to be achieved and key performance indicators to measure performance.
At the end of the year, everyone will see clearly where they have performed and they have not. This never existed before. We want to focus squarely on that to ensure staff are accountable to people and be productive. Our staff are all energized to deliver value to the NCDMB
Credit: Premium Times