Energy

Nigerian content implementation: Why indigenous service firms will drive down cost — Investigation

Kachikwu

By Samuel Ibiyemi

A survey conducted by a Group of Industry Experts under the aegis of “Oil & Gas Grassroot Volunteers” have revealed that the engagement of Indigenous companies holds the key to  solving current challenges, reduce cost of production and end unrest in the Niger Delta.

It will be recalled that Yinka Folawiyo Peteoleum ( YPF) recently announced the engagement of  an indigenous oil services group, Century Energy Services Limited (CESL), a subsidiary of Century Group in raising the bar on Nigerian Content development in the streaming of Aje field, an offshore oil concession which brings Lagos State into the league of oil producing states in the country.It is equally on records that Aje field is also the first and only oilfield in Nigeria where exploration and appraisal activities have been undertaken solely by indigenous Nigerian companies without the direct involvement of an international oil company (IOC).

The survey by Oil & Gas Grassroot Volunteers  which contained direct response from 270 active professionals   including geologists, bankers and engineers shows that 80 per cent of 270 respondents supported the engagement of indigenous companies in order to drive down cost being blamed  for the high cost of crude oil production per barrel in Nigeria. This  currently ranges between $28 and $31 per barrel.Engineers among the respondents claimed that from the field experience  of jobs executed for International Oil Companies ( IOCs), engagement of indigenous  companies helped to reduce cost by 50 per cent.

The findings of the survey report shows equally that jobs executed by indigenous service companies for IOCs and Independent indigenous  producers recently helped to cut down on budget. The oper ating  producing companies  include Shell Petroleum Development Company ( SPDC), Amni Petroleum Development Company, Oriental and Nigeria Agip Oil Company.

The respondents in the survey agreed that for the implementation of Nigerian Content to be successful, indigenous companies must be sustained  with projects so as to create jobs for youths and end militancy in the Niger Delta. With low overhead cost compared with foreign service firms having high overhead, the report shows that cost per barrel of producing oil  which ranges between $28 and $31 will be brought down below $20 per barrel. Other benefits of sustaining jobs for local service companies include investing foreign exchange earnings from project execution within Nigerian economy compared with repatriation of income  by foreign service providers  executed back to their home countries.

Ensuring proper implementation of Nigerian Content Act according to the report requires replication of milestones recorded by local operating firms such as Yinka Folawiyo,Nestoil, Amni and Oriental as benchmark.This is because these local companies are unique in the ability to mange local companies,  create jobs, re-invest dividends in further development of fields in Nigerian oil industry, manage host communities and  were able to raise fund directly through Nigerian banks to increase relevance of Nigerian banks in the international financial services community.

The survey therefore recommends  that local service providers engaged by these local producers should be adopted in driving down cost, create jobs and reduce unemployment particularly in the oil communities of the Niger Delta. The survey shows that engaging them will make Nigeria to become the hub of oil and gas industry experts for services in the global oil and gas industry particularly in oil producing countries without African region.

This further revealed that if there is reduction in production cost, volume of oil being produced in Nigeria will increase which will enable the Federal Government to earn additional revenue from oil sales at a time of low oil prices needed for  investment in new exploration and production activities..

Further analysis of the report shows that jobs executed by CESL in the Niger Delta for companies like Amni contributed to job creation directly and indirectly in the local oil communities of Niger Delta which serves as a success story adopted for the engagement by YPF outside the Niger Delta.

In a presentation at the monthly technical session of the Nigerian Association of Petroleum Explorationists ( NAPE), Yinka Folawiyo Petroleum ( YPF)recognized important roles being played by indigenous contractors  led by Century Energy Services Limited ( CESL)  on Aje field of OML 113, Others include Delta Afrik,Ariosh, Hdrodive and Geoscape.  According to him, “As a company, we believe and have absolute commitment to indigenous capacity building/utilization as a vital catalyst in driving the Nigerian E&P Landscape.”

Hdrodive and Geoscape.  According to him, “As a company, we believe and have absolute commitment to indigenous capacity building/utilization as a vital catalyst in driving the Nigerian E&P Landscape.”

Award of contracts to indigenous service companies according to  our respondents will help to replicate  capacity building milestones recorded by Century Group in execution of contracts for Nigeria Petroleum Development Company ( NPDC), a subsidiary of Nigerian Petroleum Development Company ( NNPC). The huge investment in building capacity of its local employees by the Group  was made possible according to investigation  through partnering of International Companies in training and acquisition of modern technology for application. Some of these partners include Bumi Armada Berhad (Owners of FPSOs, FSOs and a large fleet of offshore support vessels, expertise in engineering and modification); Dharmattan Nigeria Limited ( Subsurface evaluation and reservoir management specialist company) among others.

Through these partners,  respondents testified that  Century Group has  also created over 20,000  jobs  who are now professionals in various oil and gas fields. This is also beside over 50,000 indirect jobs created through the engagement of mainly sub-contractors from host oil communities.

Investigation also revealed that the strategy adopted by Century Group as a follow up to the response of our respondents helped clients of the Group to execute their jobs at a lower price and eliminate youth restiveness within  host communities of the project’s location. The respondents therefore suggested that increasing patronage of indigenous companies will help to eliminate vandalism which led to the loss of over  $100 billion( N2 trillion) in 2016

 Another example of success story by indigenous companies which is now a reference point  is a job carried out by an indigenous company,Nestoil Group on one of the fields of SPDC, our survey revealed that $1.1billion Nembe creek Cawthorne Channel Trunkline  was completed for the Nigerian National Petroleum Corporation/Shell Petroleum Development Company Joint Venture with four million man hours without any injury.

Besides, wide acceptance of milestones recorded by indigenous service companies was linked with a testimony by the   Managing Director of  Energia Limited in a special interview published in Business Year 2015 edition. The CEO of Energia claimed that a marginal field, Ebendo and Obodoeti marginal fields  awarded in the 2003 bidding rounds in a joint venture with Oando by the Department of Petroleum Resources (DPR), with Energia Limited as the designated Operator in a 55/45 split in favor of Energia was successfully developed leading to the first oil in December 2009 after Energia’s in-house technology group, in collaboration with other local contractors, revamped an already abandoned  well of Total Exploration and Prduction ( E&P) Nigeria.

 In an interview with Data Jaja in Century Group on Local Content drive, she stated that “    Nigerians should begin to embrace, more than ever before,  the need to use Local expertise across board to deliver cost effective solutions”.

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