Executive Secretary, Nigerian Content Development Monitoring Board, Simbi Wabote
The Nigerian Oil & Gas Industry Content Development (NOGICD) Act was enacted to promote increased Nigerian participation in the petroleum industry. What’s the progress report so far?
WABOTE: Before the enactment of the NOGICD Act in 2010, out of the $20billion industry spend, less than 3 per cent was retained in Nigeria.
Practically, everything was done outside Nigeria. As a former staff of the Shell Petroleum Development Company for over 25 years, I know what I am talking about.
As of today, Nigeria has been able to claw back about $5 billion in-country out of the $20 billion.
NCDMB core mandates were to develop local capacities and monitor the Nigerian oil and gas industry to ensure greater participation of indigenous companies.
On assumption of office as the Executive Secretary of NCDMB on November 1, 2016, one of the first framework we developed was the Nigerian Content 10-Year Strategic Roadmap, with short, medium, and long-term targets to increase Nigerian Content performance from 28 percent to 70 percent by 2027.
The 10-Year-Roadmap has five pillars, namely Technical Capability Development, Compliance and Enforcement, Enabling Business Environment, Organisation Capability, and Sectorial and Regional Market Linkage.
The roadmap has four enablers, namely funding, regulatory environment, collaboration and stakeholders’ engagement and research and development.
In the past two and half years, NCDMB has deployed and driven several impactful initiatives geared towards achieving the key milestones in the 10-Year Road Map in support of the Economic Recovery and Growth Plan (ERGP) of President Muhammadu Buhari’s Administration.
As you know, prior to the implementation of the Act, all welding activities were done outside the country. There was no single world class welding facility in Nigeria.
Today, we have about five world class welding yards, with Nigerians fabricating about 60,000 metric tons per annum in-country.
There is the Nigerdock welding facility in Lagos; Samsung facility in the LADOL Concession; PWT in Port Harcourt; Aveon in Port Harcourt, and Saipem in Port Harcourt.
One can say the key rewards from the implementation of the 10-year roadmap are the creation of 300,000 jobs from industry activities and the retention of $14 billion in-country out of the $20billion annual industry spend.
Again, in the Egina Floating Production Storage Offloading (FPSO) facility that came into production late last year, Nigerian companies fabricated in-country six out of the 18 modules as well as integrated the world largest FPSO in Nigeria. That in itself is a huge achievement for our oil and gas industry.
What’s more, even the paints used in the entire Egina project was produced in Nigeria. We even exported paints to Korea for use in painting the hull and other modules fabricated in South Korea.
Today, 95 per cent of the oil and gas service companies, be it onshore or swamp drilling, well intervention and simulation activities, are by Nigerians. These were the exclusive reserve of the multi-nationals like Schlumberger, Halliburton and others.
Nigerians have since taken over those responsibilities in the land and swamp areas, in terms of drilling operations.
On the upstream sector, the same multi-nationals were operating all the fields the country had.
Today, we have Nigerians operating those oil fields. For instance, Seplat, a Nigerian company bought over from Shell the acreage they are now operating. When they took over from Shell, the field was producing about 20,000 barrels per day.
Today, Seplat is doing about 75,000 barrels per day. Same thing with AITEO, a wholly-owned Nigerian exploration and production company.
The other ones are Eroton, ND Western, and First E&P. They account for almost 25 to 30 per cent of the country’s total oil production, not to talk of the domestic gas production in the country.
Also, the marginal oil fields are operated by Nigerians, adding molecules to the crude oil barrels in the oil and gas sector.
That’s why other African countries have been coming to learn how Nigeria has done, from service provision to upstream activities to the downstream.
Nigeria has continued to provide leadership and guidance to other African nations that want to understudy Nigerian Content implementation.
In the past two months, we hosted delegations from the Petroleum Ministries of Uganda and Gabon. We advised them on how to institute and implement a successful Local Content regime in their jurisdictions.
For some time, there has been this lingering feud between LADOL and Samsung? But, since the issue has to do with local content, what is NCDMB doing to get it resolved?
WABOTE: Yes, we are aware of the feud. NCDMB is actively on the driving seat to get the matter resolved. But, let me limit what I say about what we are doing. Until we achieve that, we will not be able to communicate what we are doing. But, I assure you, in the next one month, the public will at least know where we are on the matter. I am confident that we will resolve that issue.
The NOGICD Act mandates oil and gas companies to remit one per cent of the value of contracts awarded in the upstream sector of the industry to the Nigerian Content Development Fund. So far, what’s the update on those remittances?
WABOTE: On the remittances to the NCD Funds, we deployed chartered accounting firms to carry out forensic audit of the remittances.
The forensic audit, which started in November 2018, revealed huge amounts of non-remittances from operating and service companies.
At the moment, some companies have owned up to their indebtedness and have started addressing their infractions. But, there are a few companies that have remained recalcitrant.
We have concluded plans to hand over such companies to the Economic and Financial Crimes Commission for prosecution.
How much is involved? And which companies are affected?
WABOTE: We are on the process to recover the money. We are not there yet to be able to determine who those companies are and how much they are owing us.
When we conclude the process, I believe by November this year, we will be in a position to communicate to the public, including their plan to pay us back.
We will also inform the public what we are doing with the recalcitrant ones, in terms of their prosecution in court. Give us till November to be able to give you a complete picture.
At the end of the day, we might not report those who have realised their mistakes and paid back. It is only the recalcitrant ones that would be prosecuted.
If a man accepts his guilt and offer to pay back what he owes, there is no need trying to ridicule him in public any more.
What about the NCD Fund? How does it work? How does the BOI come in?
WABOTE: Very well! Sometime in 2017, the NCDMB established the Nigerian Content Intervention Fund. It is a $200 million fund made available to the Bank of Industry (BOI) to manage on our behalf, because NCDMB is not a bank as an entity.
The NCDMB has five product lines within the $200 million revolving fund. One of them is project financing. The other ones are contract financing, manufacturing, loan refinancing and community contractors refinancing.
It has 8 per cent interest rate year on year. This cannot change regardless of prevailing inflation rate. The obligor has a maximum of $10 million he can apply for, so that it can go round. It is not free money. It’s strictly money the borrower must pay back.
That is why, before the BOI disburses the money, it must get a bank guarantee from a commercial banks. The BOI is partly owned by the CBN. With such bank guarantees, there would not be a situation where some of the agencies have huge debts. CBN will also help NCDMB recover those monies.
So far, out of the $200 million, we have disbursed $160 million to competent Nigerian companies.
Part of the challenge is for the BOI to use part of that fund to attract counterpart funding in and outside the country to build capacity to support businesses.
Despite the Nigerian Content law, it appears the industry is still grappling with the challenge of expatriate quota. How is the Board handling this?
WABOTE: In terms of expatriate quota, I can tell you with certainty that it has gone down drastically. We have data on what it used to be and what it is today.
There has been tremendous achievements, in terms of reducing the number of experts coming into Nigeria’s oil and gas sector in the name of expatriates.
The NCDMB rejected about 1,494 expatriate quota applications since the beginning of this year. The Board felt we have Nigerians who have that capability to do the work.
Don’t forget the oil and gas industry itself is not a huge employer of labour, because of the technology being deployed. Where there is this infiltration of experts is in the construction, ICT and other sectors, we think it is important to address.
But, it is important to clarify that Nigerian content is not about ‘Nigerianisation’. So many people make that mistake to say they visited a company and saw experts. That’s not the intent of the Nigerian content policy.
The oil and gas industry is highly technology intensive area. And some of the technologies, Nigeria does not have. We need a mix of these experts and Nigerians to deliver projects and push the frontiers of oil exploration and exploitation.
Egina project, for instance, is about two kilometers of water depth. Human beings cannot get there. Only robots and the like that do. The underwater map of Egina looks like a complete city, in terms of the trees.
So, we need those highly technical people to continue to work with Nigeria to develop the industry.
From when the Nigerian content Act came into being in 2010 to today, Nigeria has reduced the expatriates’ population in the business to about 80 per cent.
For instance Shell, in the 1990s, all Nigerians were in mid-level management. There were lots of expatriates everywhere. Today, about 95 per cent of staff of Shell are Nigerians.
Another example is Bonny NLNG. Almost about 90 per cent of the staff in Bonny NLNG today are Nigerians, including the managing director, also of SPDC.
That shows the tremendous gains the NCDMB has made. In other companies, the statistics are the same. We have the numbers in the Act that those companies are allowed to bring into the country for investment purposes.
However, we also have a challenge with most of the Nigerian companies the NCDMB is struggling with to ensure compliance with the expatriate quota. The IOCs do everything they can to comply with the provisions of the Act.
If they can’t, they take a waiver. But, the local service providers the NCDMB has given opportunity to take advantage of the Act, to a large extent, are the ones we have had to struggle with, in terms of compliance.
Why is the Board reluctant to wield the big stick against local contractors who refuse to comply with the provisions of local content law?
WABOTE: Let’s look at it this way. In the US, there are several layers of security, including the FBI and others, yet crime still happens in that country. So wielding the stick might not be the way forward.
In terms of NCDMB activities, people try to circumvent the process. When we find them out, we take necessary actions. We got into the persuasive mode, because we want to build that capacity first. That is where you say we are reluctant. We are not reluctant. We are careful.
The truth is that between when the Act was established, and the requirements contained there-in, if we apply the law like the Bible, oil production will stop for a couple of years, to enable us build up capacity before.
So, we have to use the carrot and stick method to build up that capacity. If one reads the Act itself, it says all fabrications must happen in-country. It also says all steel products must be purchased in-country. If the NCDMB insists that all fabrications and steel products be done in-country, would we have any project? The answer is no.
We know what the country suffers without a functional steel mill. What about logistics, infrastructures like power. With these, our cost on project will hit the roof.
Every project has economic value. If the project cost becomes more than the return on investment, would anyone put his money? Because of the knowledge of the industry, we try to balance the process in a win-win situation to continue the exploration and exploitation of hydrocarbon.
If the NCDMB uses the Act as a Bible, we will kill the petroleum industry. We must apply some level of intelligence and continue to be persuasive and ensure progress with the process.
The NCDMB’s primary mandate is to promote local content in the petroleum industry. But, it appears the Board sometimes gets involved in refineries and other downstream industry activities. Why?
WABOTE: Let me clarify this. Our name is the Nigerian Content Development Monitoring Board. Often people look at the activities of regulatory agencies from the perspective of monitoring only.
That’s is why the authors of the Act also talked about development. One has to join in the development of the sector.
But, as regulators, one does not get involved in areas that would become a competition among other regulators. That is why the NCDMB narrows itself to catalysing some of these government initiatives. All what the NCDMB is doing is being a catalyst in the process.
That is an area we have recorded a major achievement. For instance, under the Technical Capability pillar, the Board has provided equity investments to catalyse the establishment of 5,000 barrels per day modular refinery by Waltersmith Refining & Petrochemical Company Limited in Ibigwe, Imo State.
The other is the 12,000 barrels per day Hydroskimming Modular refinery by Azikel Petroleum Limited at Obunagha, Gbarain, Bayelsa State.
The Waltersmith refinery is on track for completion in May 2020, while the Azikel Refinery would be completed in 2021.
We expect about 300,000 litres of diesel daily, in addition to various volumes of naphtha, kerosene, and fuel oil from Waltersmith, while Azikel will produce about 1.5million litres, or 50 trucks of petrol daily, including 170,000 litres of diesel, and other products.
Both modular refineries have huge prospects for jobs creation, value retention, petroleum products availability and the development of in-country capability. They fit perfectly with NCDMB’s vision to serve as a catalyst for the development of Nigeria’s oil and gas sector.
Beyond our support for modular refineries, we have also progressed discussions with investors on the establishment of liquefied petroleum gas (LPG) cylinders manufacturing plant, LPG depots, and gas processing facilities.
What has NCDMB got to do with NIMASA?
WABOTE: Over the past two years, we have established collaborative relationships with various agencies. One of such agencies is NIMASA. The others the Nigeria Customs Service, EFCC, NNPC, NAPIMS, Nigeria Immigration Service, FAAN, Oil and Gas Free Zone Authority (OGFZA), National Judicial Council and others.
We have set joint committees with some of them and we plan to consolidate on them going forward.
In the NCDMB Act, there is a provision that covers the need for the two agencies to collaborate on the sea time training.
NIMASA had in the past trained some Nigerians on cadetship, both in the Maritime Academy, Oron and Lagos. But, they were not given sea time experience.
Some of these candidates are to be selected from NIMASA for deployment for the sea time experience. That is the collaboration we are talking about.
We also have a kind of committee set up between myself and the DG of NIMASA to meet quarterly to see how to collaborate.
Recently, NIMASA announced that it would not allow some categories of vessels to come into the country if they are not manufactured in-country. That is a way of promoting local content in the maritime industry.
We are also looking at how we can collaborate to look at some of our manufacturing facilities here in Nigeria.
We used to build some of the boats and security vessels in Port Harcourt. But, that went belly-up because of the importation of these vessels into the country.