…Laud NCDMB for effective local content implementation
…Minister identifies divestments by foreign companies as opportunity for developing in-country capacity
International Oil companies and indigenous players in the Nigerian Oil and Gas industry have decried multiple taxation and bottle necks as factors discouraging increased investments in Nigeria’s Petroleum industry.
At the ongoing Practical Nigerian Content Forum holding in Yenagoa, Bayelsa held in partnership with the Nigerian Content Development and Monitoring Board (NCDMB), the IOCs and indigenous players spoke during a panel session on “Providing an Enabling Environment for Investment in the Energy Sector.”
The Panel had Dr. Ernest Nwapa, Pioneer Executive Secretary of the NCDMB as the moderator, Oritsemeyiwa A. Eyesan Executive Vice President, Upstream of the NNPC Limited represented by the Chief Upstream Investment officer, Mr Bala Wunti, Richard Kennedy,Chairman & Managing Director, Chevron Nigeria/Mid-Africa Business Unit represented by Dr Cosmas Iwueze, Matthieu Bouyer, Managing Director & Chief Executive,TotalEnergies EP Nigeria Limited, Elohor Aiboni, Managing Director Shell Nigeria Exploration and Production Company and Mr Abdulrazaq Isa, Chairman IPPG and CEO Waltersmith Petroman Oil Limited as panelists.
The stakeholders lauded the NCDMB for its role in effectively implementing local content regulations in the industry and praised the leadership of the board.
Speaking at the forum, Mr Abdulrazaq Isa said, “While we proudly recognise the major role that local content implementation has played in advancing our oil and gas sector, we must also be mindful of ensuring that our local content policies are constantly evaluated to ensure that they are continually fit-for-purpose and not counter-productive to our long-term industry growth and cost targets.
“Our industry continues to face growing pressures to remain profitable and cost-efficient as it faces competition from other investment destinations. To this extent, I would like to encourage the NCDMB to review certain aspects of our legislation that may potentially work against the competitiveness of Nigeria’s oil & gas sector in the global marketplace.
“A case in point is the Human Capital Development training requirements wherein industry participants are required to set aside 3 percent of project cost (projects above $1million) to conduct local content training. While this is undoubtedly a laudable initiative, we must consider that it amounts to a multiplication of levies as industry participants are already equally required to contribute a separate 1% of total costs as NCD levy.
“This invariably leads to higher project costs especially as the training is not allowed to be provided directly to company staff and service providers. Due to this and other contractual or administrative reasons, the process of complying with local content requirements has, on many occasions, proven to significantly increase the overall cost of delivering projects in Nigeria.
“Again, this unintended outcome requires some detailed review in order to ensure that we are not losing new investments to emerging investment destinations in the process of driving our local content agenda.
“Most critically, because of the strict local content requirements, we have gradually seen a reduction in the presence of leading international oil & gas service providers, many of whom are leaving Nigeria in droves. Unfortunately, while we continue to prioritise local content development, we must recognize that these international players have a key role to play in ensuring technology transfer and knowledge sharing that our local players can benefit from.
“You will agree with me that our local players still lack the requisite skills to adequately support our deep offshore operations and other specialised operations.
“Therefore, our recommendation is that ways should be sought to modify local content requirements to ensure that the industry remains globally competitive and sustainable.”
The IPPG Chairman also identified that the problem of dual regulation is contributing to increased costs while also suggesting the creation of a single regulator.
He said the creation of the PIA 2021 came with high expectations for the regulators to be enablers of the business; however, the dual regulation has stifled investments and increased bureaucracy.
Also speaking, Dr Cosmas who represented the Managing Director of Chevron Nigeria Limited emphasised that: “Every investor wants to reduce costs. We want to ensure we are not spending so much time on a project.”
“Another issue is the plethora of fees. Every regulator has a fee that they charge and this is discouraging investments. If the fees are reduced, this will retain investors’ confidence to invest in the sector.”
Managing Director Shell Nigeria Exploration and Production Company, Elohor Aiboni, said, “We are where we are now, we have two regulatory bodies. What can we do about it? There have to be clear roles and responsibilities defined for each regulatory body so we don’t have them tripping over themselves.”
“Just like we have IPPG, OPTS, the regulators should also have a body where they can come together to discuss. There is absolutely no reason why a country would have several regulations coming in and the industry is finding it difficult to implement.
“Not only does it make it difficult for implementation, we have got taxes coming from the different regulators. It makes the cost of doing business expensive. It is something we can sit down to look at and identify what is most efficient.”
Commenting on the contract cycle for the completion of projects, Elohor identified bottlenecks and bureaucracy between government MDAs as one of the factors delaying projects.
Recall that the Nigerian Content Development and Monitoring Board (NCDMB), Nigerian National Petroleum Company Limited (NNPCL) and five IOCs signed a Memorandum of Understanding (MoU) to optimise the contracting cycle in the oil and gas industry and spur the speedy development of new oil and gas projects, contributing to increased oil production and improved national economy. The overall goal of the MoU is to conclude the oil and gas industry’s tendering to contract award processes within six months.
On the way forward to address the concerns raised by the stakeholders, Ernest Nwapa called for a roundtable where stakeholders in the industry can meet with the regulator to address the complaints from stakeholders.
He noted that meeting stakeholders in different clusters with differing interests is counterproductive.
Nwapa along with other stakeholders at the forum also tasked the NCDMB ES to within three months convene a meeting of all concerned stakeholders and regulators to address the issues raised.
TotalEnergies MD, Matthieu Bouyer also adopted the motion for stakeholders to have a united front in meeting with the government.
Chief Upstream Investment officer of the NNPC Limited, Bala Wunti also stated that: “One thing with regulations is that they must facilitate and enable business. The industry in itself is yet to create a collaborative platform where we can look at the industry and identify challenges objectively. The industry must have one voice. Bring all the regulators in one room and debate with them on the policy direction.”
“To create the platform will enable us achieve critical thinking. We must be able to collaborate and be flexible. We must communicate this and have a changed mindset. The regulators must be enabled to do their job just as we are able to do our own job.”
Lending his voice to the conversation, the NCDMB ES, Engr.Simbi Wabote said, “It is always easy to blame the regulators but even amongst the operators, they don’t align. The IOCs want the decommissioning fees to be warehoused outside the country, IPPG want it warehoused within the country. They both go in to meet with the regulator and the regulator gets confused. Until we come together to have the conversation on a round-table, we won’t make progress.”
Wabote also responded to the IPPG on the Human Capital Development (HCD) fund mandated by the NOGICD act 2010
According to Wabote, “Nigeria’s human capacity index is low. Most of the divestments to the IPPG companies were done by the IOCs and when the IOCs divested, they divested the human capital and these people are aging.
“Somewhere along the line these people will fade away. The idea behind the fund is thus for companies to devise a strategy to deploy the fund to build capacity. That is why the NCDMB collaborated with the PTDF to develop a facility in Port-Harcourt. We went to the IPPG to use whatever HCD fund they have to develop the centre.
“When you want to employ the young ones you say they don’t have experience, how will they gain the experience? Using that fund, NCDMB does not touch it but it is for you to build the capacity of Nigerians to manage the business you have inherited from the IOCs. It is for the indigenous companies to use the funds to feed the industry with human capacity.”
…Minister identifies divestments by foreign companies as opportunity for developing in-country capacity
The Federal Government through the Minister of Petroleum Resources (Oil), Heineken Lokpobiri has argued that divestments by foreign companies in the oil and gas industry presents opportunities for strategic partnerships and capacity building of indigenous players.
The country has recorded international oil companies divesting from Nigerian crude oil and gas, selling off their assets and seeking other revenue streams. Nigeria currently has five international oil companies still operating in the country: Shell Producing Development Company, Chevron, TotalEnergies, ExxonMobil and Eni.
Represented by the Permanent Secretary of the Ministry, Amb.Gabriel Aduda at the 12th Practical Nigerian Content Forum hosted by the Nigerian Content Development and Monitoring Board (NCDMB) in Yenagoa urged stakeholders to remain calm and not be alarmed by divestments hitting the oil and gas industry.
According to him, divestments come along with opportunities and these opportunities must be given attention.
“We recognise that divestment presents various challenges but also presents opportunities for local capacity building and technology transfer,” he said.
Aduda recognised that the industry must embrace challenges posed by divestments to promote diversification.
He identified that the stakeholders must forge ahead with a vision where the oil and gas industry serves as a catalyst for socio economic development.