Development of Nigerian Content beyond the borders

Nigerian Content: Sailing Beyond Borders

The Nigerian Oil and Gas Industry Content Development (NOGICD) Act was enacted in 2010 to deepen indigenous capacity and promote domiciliation of skills in-country. Following the enactment of the Act, numerous opportunities have been created for Nigerians in the oil and gas space, resulting in increase in human capacity development, retention of capital in-country and job creation, especially for the teeming youth population in the country; all thanks to the Nigerian Content Development and Monitoring Board (NCDMB), the regulator of local content in Nigeria’s oil and gas industry.

Before the enactment of the Act in 2010, the Nigerian oil industry was dominated by International Oil Companies (IOCs) and other foreign companies in areas ranging from exploration and production, trading as well as service operations. Today, it is a different story as Nigerians are playing actively in the industry.

From less than 5 per cent local content in 2010, it is currently 54 per cent, according to the Executive Secretary of the NCDMB, Engr. Simbi Wabote. Disclosing this at the recently concluded Practical Nigerian Content (PNC) forum, which held in Uyo, Akwa Ibom State, he said that data was based on the Board’s monitoring and evaluation of industry activities, which brought the average in the last five years to 44 per cent Nigerian content level, adding that this performance is well above the minimum target of 42 per cent Nigerian content for 2022 the Board had projected.

As part of its 10-year strategic roadmap, NCDMB has set out to achieve a number of goals by 2027. Part of that is creation of 300,000 direct jobs; retention of $14 billion of the estimated $20 billion spend in the oil and gas industry every year, and other lofty goals. According to Wabote, the Board is on track towards achieving these goals. He said that two of the Nigerian Oil and Gas Parks (NOGAPS) under construction will be commissioned by next year, adding that NCDMB is getting into venture partnerships to create jobs for Nigerians.

As of 2021, the Board had committed a total of $332million under its commercial ventures partnership programme, and targeting to attract more project developments in-country valued at $3.7bn.

Some of the partnerships undertaken by the Board include the 5,000 barrels per day Waltersmith Modular Refinery at Ibigwe, Imo State; Azikel Refinery in Bayelsa State; and NEDO Gas Processing Company in Kwale, Delta State for the establishment of 80 million standard cubic feet per day (MMscfd) gas processing plant and a 300MMscfd Kwale Gas Gathering hub.

Other investments include the development of 5,000 metric tons LPG Storage and loading terminal facility by Triansel Gas Limited in Koko, Delta State and construction of Energy Park, inclusive of a modular refinery, power plant and 40MMscfd gas processing facility at Egbokor, Edo State by Duport Midstream as well as Rungas Group for the manufacturing of 1.2million composite LPG cylinders annually in Bayelsa and Lagos States and Butane Energy to deepen LPG utilisation in the North with the roll-out of LPG bottling plants and depots in Kano, Kaduna, Katsina, Bauchi, Nassarawa, Zamfara, Niger, Plateau, Gombe, Jigawa states and Abuja.

Also, the Board, the Nigerian National Petroleum Company (NNPC) Limited and ZED Energy Limited in June 2021 signed shareholders agreement on the construction of Brass Petroleum Products Terminal Limited (BPPT), to be located at Okpoama, Brass Local Government Area, Bayelsa State.

Success stories

• The enactment of NOGICD Act gave birth to indigenous oil and gas companies like Seplat Energy, ND Western, Eroton E&P, Aiteo E&P, among others. These companies have shown their capacity and continue to prove that Nigerian companies have what it takes to run the country’s oil and gas industry. And with the IOCs exiting from onshore and shallow-water exploration and production, divesting, and open to selling more of their assets, these indigenous companies are stepping in to take over these assets.

When some of the IOCs divested assets that were taken up by indigenous oil and gas companies, there was palpable fear among some stakeholders who thought these companies were biting more than they could chew. The notion then was that they did lacked technical know-how, expertise, and the financial resources to man the divested assets.  All that has been demystified by Seplat, ND Western, Eroton, Aiteo, among others who today have become key players in the industry.

For instance, at the time of acquisition, Seplat’s gross operated liquids production at Oil Mining Leases (OMLs) 4, 38 and 41 were 14,000 bopd. But the company, through the implementation of a focused re-development work programme and drilling campaign grew this to a peak rate of over 84,000 bopd, representing a six-fold increase and significantly ahead of the peak rate achieved by the previous operator of approximately 56,000 bopd in 1996.

The company, which is listed on both the Nigerian Exchange Limited (NGX) – formerly Nigerian Stock Exchange (NSE) – and the London Stock Exchange (LSE), also accounts for about 30 per cent of gas used by power-generating companies in Nigeria.

Similarly, ND Western Limited, one of the fastest-growing indigenous exploration and production companies in Nigeria, is an independent Nigerian oil and gas exploration and production company incorporated on April 20, 2011 as a Special Purpose Vehicle to acquire the jointly held 45 per cent participating interest of The Shell Petroleum Development Company of Nigeria, Total E&P Nigeria Limited and Nigerian Agip Oil Company Limited in Oil Mining Lease (OML) 34. ND Western is now the holder of a 45 per cent Participating Interest in OML 34, in an un-incorporated JV with Nigerian Petroleum Development Company Limited (NPDC) that holds the remaining 55 per cent interest previously held by its parent entity, the Nigerian National Petroleum Corporation.

NPDC is the Operator of the Asset. According to the company, its primary objective for the acquisition of the asset is to maximise the commercial and economic value of the full spectrum of the resources in OML 34 to include growth in oil, gas, condensate, and NGLs production.

Just like Seplat and ND Western, Heirs Oil & Gas is Africa’s largest, Nigerian oil and gas company, led by a board and management team with significant regional and global experience in production, exploration, and value creation in the resources sector.

In February 2021, Heirs Oil and Gas expanded its portfolios by making an investment of over $1billion in the acquisition of the strategic OML 17 from Shell, ENI, and Total. The investment has been described by various analysts as a very positive affirmation of confidence it has in the robustness of the Nigerian economy. Heirs Oil and Gas is the sole operator of OML 17.

For Sahara, it is a leading energy company in Africa. Its Upstream division is one of Africa’s leading independent E&P players with a diverse portfolio of 8 oil & gas assets in prolific basins across Africa and a production capacity of at least 10,000 bopd with plans to boost production to at least 100,000 bopd over the next 5 years. Its assets in Nigeria include OML 18, OML 40, OML 148, OML 228, OML 284, OPL 286.

On the service side, the success story is the same. In November 2021, Nigeria’s frontline oil services company, Global Process and Pipeline Services Ltd (GPPSL) was awarded the Forbes Best of Africa Energy and Oil Services Award 2021.

During the industry dinner and awards night, at the 2020 Nigeria International Petroleum Summit (NIPS), now NIES, which held in Abuja in February, GPPSL emerged the best pipeline services company in Africa’s oil and gas industry for the second time in a row. The company had won the same award at NIPS 2019.

African Business Review report also listed GPPSL among the top 10 fastest growing companies in Africa in March 2014. GPPSL was incorporated in 2002 but commenced operations in 2010 as a frontline oil services company, showcasing Nigerian indigenous capability on land, swamp and offshore terrains. Over the years, the company has experienced exponential growth and currently has the largest in-country pumping, process and pipeline services equipment fleet, capacity and competency.

Speaking on the extent to which the Act has helped his company in an interview with Local Content Digest in 2019, the Managing Director, Engr. Obidike Uzu said,” Before now we were not even given the opportunity to come close to the door talkless of competing. Nobody would have recognised that we can do this. The Local Content Act has given us the opportunity to say that we can.”

Also in an interview with Majorwaves while speaking on the achievements of the company, he said, “We are proud of our rapid growth and this has been attested to by African Business Review report, listing us among the top 10 fastest growing companies in Africa, as at March 2014.

“We have become a superior brand name in the pre-commissioning and pumping industry with numerous awards and we have ramped up our safety and quality operating delivery to the admiration of our clients. We are a great success story of collective collaboration of Nigerian talents that is strategically organized to harmoniously work together for the continuous development of a high standard brand in Africa.

GPPSL is the only Nigerian company focused solely on process and pipeline product service line with major projects completed in the deep-water applications. We have attracted the best hands in the industry, from the multinationals to work with us on our expansion plan into other Sub-Saharan Africa countries.”

In fabrication, the Africa Capitalworks (ACW), a Sub-Saharan Africa-focused private equity company, in 2021 made a significant equity investment in the Dorman Long Engineering Limited.

“This investment marks the start of a new journey for Dorman Long, and I am delighted in the vote of confidence executed by our partner, ACW,” said Dorman Long Managing Director, Timi Austen-Peters on the partnership.

“The hard work, focus, and dedication of our team during this process further showcases the depth of our capacity and our resilience to overcome economic challenges, including cyclical oil prices, the Covid-19 pandemic, and the business environment in Nigeria.

“We have partnered with ACW on the basis of its complementary skillset, strategic insights, and differentiated value proposition as a permanent capital vehicle. We look forward to accelerating the implementation of our growth plans and expanding our rich range of capabilities and geographical presence.”

Also, MG Vowgas, an emerging leader in Engineering, Procurement, Construction and Installation (EPCI), in the oil and gas industry, is playing a key role in fabrication.

The company’s recent acquisition and construction of its world class fabrication yard in Port Harcourt, Rivers State with a deep water loading capabilities, and a quayside, is referred to in many quarters as a giant stride.

MG Vowgas has strong capability in the following areas:  Topside facilities for — FLNG; FPSOs; TLPs and semi submersibles; SPARs; Fixed platforms. In construction, MG Vowgas has Large Topsides; FLNG / FPSO Modules; Hook up and pre-commissioning; Topside to hull integration; Barge construction; Pipeline construction and repair services.

In the same vein, Aveon Offshore Limited as of 2017 had invested over $250 million to expand its fabrication yard facilities. The Aveon fabrication yard boasts of a dedicated carbon steel workshop, duplex welding facilities, painting workshops and other workshops totaling over 800sqm with a 200 meters quayside.

The company expended over $30 million in Egina specific capex to aid its delivery of six manifolds for the project. It utilized and delivered over 3.5 million man hours on this SPS contract without any loss time incident or injury.

At the 2021 PNC forum, a testament of local capacity was demonstrated by the Managing Director, Coleman Technical Industries Limited, George Onafowokan in a presentation.

Onafowokan who took the delegates on a virtual site visit, disclosed that Coleman can do 100 per cent marine cable in-country, adding that 100 per cent of cables needed for Train 7 is guaranteed by the company to be done in-country.

Coleman has been responsible for 80 per cent of installed wire and cables production in Nigeria since the launch of its Sagamu factory. Along with Cutis Cables, Nigeria produces 70 per cent of wires, cables in West Africa. Coleman as of 2020, does 48,000 metric tonnes of copper.

Through Coleman, Nigeria is the only producer of high-voltage cables in West Africa and the sixth country to adopt the technology in Africa. The company attributes its growth in the sector to many factors, including strategic planning, commitment, perseverance, training, skilled workforce, Nigerian Content Act, and support of the NCDMB.

 

Project 100

Project 100 is an initiative of the Ministry of Petroleum Resources in partnership with the NCDMB to look holistically at 100 wholly indigenous oil and gas companies and nurture them to the next level. This, the Board, believes will enhance their capacities, support them financially through the Nigerian Content Intervention Fund (NCIF) and help them find opportunities in the industry, in collaboration with the NNPC and its subsidiary, NAPIMS (now NUIMS).

Benefits that accrue to Project 100 companies include bespoke development plans to improve critical business capabilities and access to market opportunities with oil and gas operators on industry projects. It also provides them identified access to critical industry and operational insights, information and data and participation in local oil and gas opportunity fairs and strategic events and advocacy for policy recommendations that would unlock some of the challenges identified by the beneficiaries.

Other opportunities include technical and business performance improvement capacity programmes, collaboration with critical industry stakeholders for participation in relevant global oil and gas events, R&D collaboration, opportunity to benefit from the $50m Nigerian Content R&D Fund and opportunity to access the about $500m NCI Fund, particularly the $30 million Working Capital Product, for qualified organizations.

According to Wabote,  the successful implementation of the initiative would increase contributions of the oil and gas sector to the nation’s Gross Domestic Product (GDP), create job opportunities and access to market, increase industrialization opportunities, increase retention of industry spend and substitute imports in the industry.

NOGICD Act amendment bill

At a  two-day public hearing organised by the Joint Senate Committee and House of Representatives Committee on Nigerian Content Development and Monitoring in 2020, key organisations in the oil and gas industry – the Petroleum Technology Association of Nigeria (PETAN), Petroleum Contractors Trade Section (PCTS), Oil Producers Trade Section (OPTS) and the Nigeria LNG Ltd strongly opposed the proposed Commission Bill seeking to repeal the NOGICD Act and enact Nigerian Local Content Development and Enforcement Commission Act.

The OPTS representative, Engr. Joseph Ofili argued that  amending the Act would erode the gains of the past years of Nigerian Content implementation and return the industry to ground zero with regards to Local Content implementation.

Also, the PETAN Chairman, Nicolas Odinuwe posited that it would be a big mistake to repeal the NOGICD Act which had been acclaimed by several stakeholders to be very successful, adding that the best thing to do would be to fine-tune a few areas to make it more effective.

The stakeholders also advised against raising the percentage of the NCD Fund from the current one per cent to two per cent as proposed in the amendment of the NOGIDC Act.

The NCDF is deducted from the value of contracts awarded in the oil and gas industry and was pegged at one per cent by the NOGICD Act of 2010.

Wabote in his submission contended that the one per cent NCDF deduction should be maintained “given the pressure that the global oil and gas companies are facing with cost escalations and price reductions in the industry. With prudent management of the NCDF and the full cooperation of the operating companies, we believe Local Content shall continue to operate efficiently and grow.”

Stakeholders insisted that the NOGICD act should remain the way it is while the learnings from successes and failures  should be used to perfect another new bill.

“We must all put our efforts to ensure that local content is reflected in all facet of our economy. This cannot be overemphasized as it is a national priority for our dear President to diversify to other sectors of the economy from our mainstay – oil and gas, thereby increasing revenue generation and creating employment for our teeming youths,” said the Minister of State for Petroleum Resources, Chief Timipre Sylva.

“We are here today to talk about the possibility of broadening the Nigerian content opportunities and by leveraging linkages opportunities to other sectors of the economy.

“It is also important to note that the drive for local content growths in the oil and gas sector, have been tremendous as a result of collective efforts.  Prior to 2010 when the Nigerian Oil and Gas Content Industry Development Act was enacted, Nigerian content was less than 2 per cent , but today, it is about 30 per cent.  And projected to get to 70 per cent by 2027, as enshrined in the 10-year Strategic Roadmap of NCDMB. I want to add that the success of the NOGICD Act 2010 was by no means done by the NCDMB alone. It has been the collective effort of all industry stakeholders. Therefore, the compilation and implementation of Nigerian content across major sectors of our economy, appeals for sustainable partnership in our drive.”

Other two bills before the National Assembly include the Nigerian Content Development and Enforcement Bill (2020) and the Nigerian Content Development and Enforcement Commission Bill (2020).

The Nigerian Content Development and Enforcement Bill is for the development, regulation and enforcement of Nigerian Content in all sectors of the country’s economy, except oil and gas industry sector and for related matters. This is expected to create more opportunities for Nigerians, consolidate the economy and deepen local capacity.

Place of local content in regional integration

Nigeria through the NCDMB has built a reputation embellished with innovation and excellence, which has earned it not just respect, but has made it a model for other oil producing countries in Africa.

A legal expert on structuring, local content, documentation and negotiation of oil, gas and petrochemical transactions, Dr. NJ Ayuk, in June 2020 during a Webinar hosted by Majorwaves  enjoined Nigerian oil and gas services firms to take advantage of opportunities in Equatorial Guinea, Mozambique and other Africa countries post Covid-19.

Elaborating on the importance of regional integration in post Covid-19 Africa, he noted that the African Continental Free Trade Area (AfCFTA) has a pivotal role to play but bemoaned the difficulty it will face if the local content laws of participating countries were not harmonised.

“Nigeria for example, has competent services firms but finds it difficult operating in fellow African countries because of local content laws” he said while urging Nigeria to lead the campaign for regional content law.

The AfCFTA agreement is the largest free trade area in the world based on the number of countries participating the pact. The pact connects 1.3 billion people across 55 countries with a combined gross domestic product (GDP) valued at S$3.4 trillion. It has the potential to lift 30 million people out of extreme poverty, according to the World Bank.

Highlighting the need for regional content while speaking on a panel at the 2022 PNC, the Managing Director of Tenaris Nigeria, Rosario Osobase, advocated for institutional framework that will drive regional content in Africa.

“I believe that the foundation will usually be a sustainable framework. And the framework should be towards institutions,” she said.

Osobase noted that Nigeria already has a model that can be adopted, citing what the NCDMB has been doing.

“The first thing that needs to be in place to support the process of a company such as ours institutionalizing or expanding beyond the shores of one country into regional deployment would be institutional framework that enable that on the backdrop of capacity.

“The way we need to look at the framework is first: in Nigeria, we have a successful model, thanks to the Nigerian Content Development and Monitoring Board, that has driven local content that we are seeing 54 per cent success story as at 2022. So, this is good!

“We need to extend this kind of institution out of Nigeria, to make it regionally viable and regionally sustainable for large scale industrialization,” she said.

On her part, the Chief Operating Officer of MicCom Cables and Wires, Bukola Adubi, said that the government has an important role to play in terms of breaking barriers.

“Ideally, AfCFTA should be fantastic for us as a country. For cable industry, we are seen as one of the industries in Nigeria that is already set up fantastically. If you ask anyone, they will tell you that ‘Made in Nigeria’ cables are fantastic. But then, it will make sense that we are able to transcend beyond Nigeria. It will make sense that our members (Cable Manufacturers Association of Nigeria) are able to go into Ghana; are able to go into Ivory Coast; and they are able to go to Senegal,” Adubi said.

“But then, my fear is with even the ECOWAS trade liberalisation scheme, it doesn’t work. And the reason it doesn’t work is because there are so many issues regarding the government policies – the tariffs. There is supposed to be free trading as it were. First and foremost, the government has a huge role to play in terms of breaking barriers.”

Having built excess capacity in-country, stakeholders in the oil and gas industry think it is high time the country began to export capacity to other countries in Africa like Angola, Equatorial Guinea, Ghana, The Gambia, Mozambique, Senegal, among others.