Guest of the week

Free trade agreement: Nigeria is at advantage to export oil,gas capacities to African countries – Wabote

In this interview at the occasion of the 9th Practical Nigerian Content, the Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB), Engr. Simbi Wabote speaks on the benefits the LNG Train 7 project will accrue to Nigerians and the Country’s economy at large. He commented on the need to expedite the passage of the Petroleum Industry Bill (PIB) into law. He further commented on the benefits of the undersigned African Continental Free Trade Agreement (AfCFTA) among other matters of concern. Excerpt:

What in your perspective are the benefits of LNG Train 7 project to  Nigerians and the Country’seconomy?

Firstly, to the Nigerian economy, I will say it will bring a lot more to the economy; more taxes will be paid because the more they expand, the more tax regime that they bring into the country. Since it was established by expanding, of course that will increase it. To the economy, it means a lot. It means to Nigerians in particular, the creation of jobs. Like you also heard, you have about 10,000 direct jobs that will be created as a result of the train 7 projects. What that translates to is almost 40,000 indirect induced jobs that will be created.

It has been over 10 years since we built the last train, and this of course will rejuvenate the economy. It is not just the LNG train itself, it is also the upstream projects that will also come as a result of the train 7 project. So, we expect a lot more in terms of activities in the economy, employment, revenue generation, and also to a large extent quelling the restiveness that you have in the Niger Delta, so its contribution is quite enormous in that regard.

 What measures are you putting in place to address the complaint of the Nigerian Content in accessibility of funds by indigenous Operators?

Actually, the only issue that has been brought to my notice with regards to the NCIF fund is success. I have not received any complaints. Besides,  it is  not operators that are applying for the fund. It is the contractors that provide self service that are applying for the fund. As at today, Bank of Industry (BOI) is approaching Nigerian Contents Development and Monitoring Board (NCDMB) requesting for additional funds because with the approvals that they have, they have already exhausted the funds.

One thing you need to be wary about is that if you take these statistics of failed loans with commercial banks, it is quite enormous, and when people saw this fund, as usual with Nigerians, they thought it was free money and they wanted to use the same process with which they collected money from the banks. They could not pay to access these funds. I said no, because this is a revolving loan where all of us would benefit from. So, you must go through the stringent requirement in order to access the fund. People like free money  they will not pay for. Today, you know about AMCON and the debt profile that they have been able to accumulate by purchasing failed businesses and failed loans from some of this people who could not pay.

So, we will not fall into that trap. We will continue to remain stringent. Those who are not leveraged, those who are not exposed in terms of borrowing, and those who have legitimate businesses have actually benefited from the fund and are clamoring for more funds. So, we rather deal with those ones than we deal with the ones that want free money that do not meet the requirement. So, all we hear is success and not complaint.

What is the government doing about resolving the agitations surrounding changes in legal standards or to give  confidence in the Deepwater offshore?

I am happy you made the point that it is a legislation review that is long overdue. Most of the investors and international operators are businessmen, who are here to maximize profits as far as their business is concerned. So, any attempt to make them pay what government is due will create some level of resistance as it were. So, there is nothing wrong with the PSC Act that has been amended. According to the minister, it then provides an opportunity for us all to work together in order to pass the Petroleum Industry Bill (PIB) as early as next year, such that any sort of agitation or any sort of misunderstanding that they have, we should be able to take that on board, as we sign it into law; the bigger PIB as it were.

So, it is a normal process all over the world where you want to change legislation. There  must be agitation. I give you an example. Look at Britain and the Brexit arrangements that they want to do. It wants to alter their union with the European Union and you see the debate back and forth. So, it is a normal process. It is not anything extra ordinary. I sincerely believe that those concerns will be addressed in a mutually beneficial way, because as a country, we need to review our legislation from time to time. Some of these things we wrote them when we had no understanding of the new frontier in terms of the deep offshore that these IOCs were getting into.

Today, we are better informed. With technology, we are also very much aware and with what are happening globally, where the information is available everywhere. We are now in a position to say, we have come of age and we want to relook at some of those agreements that we entered into. So the agitations are normal. But I sincerely believe that we will resolve this issue in a mutually beneficial way if indeed there is an issue.

 Is there any level of engagement the NCDMB will enter with multinationals to establish their own presence to create some level of inclusive orientation?

At least, NCDMB, try to also lead by example. Some of the things we ask industry players to do, we also try to do them ourselves and that is why you can see the structure that you are in here today. If you move around the building, and you even look at the tiles in the building 99 per cent of those tiles were procured in Nigeria.

The contractor that has built this edifice is an indigenous contractor. We have the right level of supervision and the rest of it all.

So, back to your question is that we have shown the example that some of these things we put in these communities are possible and we hope that the IOCs and the indigenous players we know that are establishing their presence in the communities where they explore and exploit as it happen will create some level of sanity and peaceful coexistence. But these are not things you force. These are things you discuss, and you create the enabling environment because what is important is the enabling environment. I am one of those who believe that if you create the environment, they will come. But if you have a hostile environment where security is a challenge; infrastructure is a challenge; people cannot even get hotels to stay; people cannot even get water to drink; you cannot legislate that force and that process. It has to be a collaborative effort between the state government, the communities, and the local government, with the operating companies to have that harmonious relationship and presence in order to do their work.

 What are you doing about the Geophysical companies?

I think, if I understand your question very well, geophysical companies usually become active when it comes to their exploration activities as such. Quite rightly so, we have not been investing heavily in exploration for the past couple of years and there are two schools of thoughts in that regard. Some people think you have accumulated enough reserves, and you have not been able to exploit that reserve as much as possible. What is the use investing further in exploration? There is another school of thoughts that believes that you have to have a reserve additional ratio as you are exploiting the hydrocarbon, you are adding to it. So, it is either here or there, and I know that the government through NNPC has been pushing for more exploration activities which will involve geophysical companies to actively participate but I think they lowly in their businesses, because of the lack of exploration in the industry, and what are we doing about it? We continue to make the point with an NNPC to say, look, we need to encourage the international companies and local companies to engage more in exploration in order to increase our reserve base.

At some point, I recall that why exploration activity picked up, there was some kind of bonus that was paid to discoveries in terms of exploration; I do not know if it does exist. So, I think it is something we need to perhaps look at in order to encourage more exploration but like the data I shared, during the panel session, we have almost about 40 billion reserve and we are producing just 2.3 million barrels of oil per day. Angola has about 17 billion reserved and they are doing 1.7 million. So they have high capacity utilization than us in Nigeria.

The United States has almost about 28 billion barrels, but they are producing 12 million barrels of oil per day. So, you could see the capacity utilization in that regard. So,that is where why the two schools of thought coming to say you have 40 billion barrels of proven reserve and  production is just 2.3 million barrels, Why do we have to spend a lot more money to continue to discover reserves.  But on the other hand, you can also argue that Saudi Arabia has about 268 billion barrels of proven reserves, and they are producing just about 14 million barrels of oil per day.

So, the capacity utilization also is perhaps not in that regard; but then look at their population. They are not as big as Nigeria, with about 200 million people compared to about 70 million people in Saudi Arabia. So, we need to do more in terms of exploiting the already discovered hydrocarbon.

What is your take on the Nigerian content and the African content and the successes in Nigeria?

Like you know, we have signed the African Continental Free Trade Agreement (AfCFTA) which of course opens up every border in Africa. When it comes to effect in order for us to trade within ourselves and the benefit of that is that there will be easy movement of manufactured goods, and produced goods from country to country.

The advantage of what we have done in Nigerian content is to be able to export some of the capacities that we have developed here in terms of manufacturing, fabrication and being able to do things in the oil and gas sector.

So, it is something we pursue and as NCDMB, we  are also advocating for how we do regional linkages, in terms of the capacity that we have developed here, we have been very active in supporting most of the African countries, in order for them to understand how we’ve been able to develop our Nigerian content.

Gabon has been here to learn from us. Uganda was here with a large contingent, who also learned what we are doing. So, is Angola also trying to copy what we are doing as well as Ghana and the rest. So, that emulation is going around in Africa and I think when the Free Trade Agreement comes into play, Nigeria have a huge advantage in terms of how we are pushing, particularly in the oil and gas sector. That is why the clamor in Nigeria today is to extend all the achievements in the oil and gas sector to gas, to local content to all other sector for us to take advantage of that free trade agreement that is signed.

 What are the situation standards in terms of the execution of the major projects?

Let me try to situate the question in terms of giving out the major projects. It is the IOCs that are giving out the major projects. I guess that is what you mean, by in terms of executing the major projects. It is most Nigerian companies that are executing the major projects. I think that is where we want to be because the international companies have the cash, they have to bring it in, and then we add value in the process being the ones to execute the project as it were. So, I think it is a comfortable position to be in at this time.

 How are you going to forge interagency collaboration to harmonize regulation in enforcing law implementation?

I think I have capacity to manage that and manage bigger things than that. But I think what the legislators are thinking is that, part of the statutory provisions is not to allow for proliferation of regulatory agencies within all sectors. You do not want to hear that there is a local content board for construction; there is a local content board for ICE;, it becomes spaghetti and makes nonsense of the entire vision of wanting to localize things in the country.

So, I think what the legislators are thinking is under one umbrella. You can bring local content where you then have divisions to say on that one umbrella; you then have a division of local content in charge of construction, a division in charge of ICT, a division in charge of oil and gas. I think in that way, you will have one body responsible for regulation, but each of those divisions has its peculiarities. So, in amending the Act, you take those peculiarities into consideration in order to implement with a view not to create an over regulatory regime. That is the whole idea, so that you create a lot of flexibility for those to exist, but you do not go to the nuts and bolts in order to stifle the progress of those sectors but you just want to bring the regulation under one umbrella and not to create a spaghetti.

I think that is the thinking behind it. On the issue of whether they want to repeal it, it is a different discussion with the National Assembly, and I guess, when they get stakeholders they will also understand some of the do’s and don’ts and the push backs associated with the methodology with which they want to get back. So, that would be a lot of stakeholders’ interaction to see how the synergy at the end of the day

What are the benefits of local contents in Nigeria?

As a matter of fact, local content will only accelerate the reduction in cost of production and I think in the next couple of weeks, we will talk a lot more about train 7 and what local content is being able to do to drive costs down. There are lots of examples of companies that have reduced their costs by veggie or patronising local contractors. Chevron is one of them, one of their big projects with marine platform; they were able to reduce the cost as much as 40 per cent, which is much more beyond the 5 per cent.

You just take even the issue of expatriates in any operating company versus Nigeria, you can agree with me that salary today of expatriates will be 10 times higher than yours. So, in you, you can see the disparity, which will reduce the cost. So, there is no gainsaying that local content source reduce costs.

Yes, in certain instances, there has to be an initial investment, which will probably be high, but continuously it comes down low. Another example I will give you is the Integration Facility that you have today in Lagos by Samsung, which was built on the back of Egina. In the next project, if they want to integrate in Nigeria, almost about $300 million will be saved in building that kind of facility for integration. So, you see the ultimate effect, the ripple effect of local content is to reduce costs at the end of the day.

Look at this structure as an example which was built by local contractor. By that we finish and commission; we will compare the cost of this and with some of that buildings that have been built in this country by some of the international companies, and you see the benefit of local content.

 During your keynote address, you mentioned intend on areas of focus on next year. Can you highlight these areas for the benefit of our stakeholders?

Of course, our focus is in line with our 10 year strategy road-map. We started in 2017 by launching the 10 year strategic roadmap and within the 10 year strategic roadmap, we have the short, medium and long term goals that we hope to achieve and during my speech, I talked about the short time and program that we have, which is one to two years, then another five years of medium and then 10 years as a long term.

If you go back to the strategy  you will discover that we have almost closed out all that we said we will do within the part of the next two years with a few of them left that will carry over to next year.

Next year, is to then look at the next tranche, in terms of strategy game plan, and most of it is to expand our participation in the downstream sector of the economy. Talking about the modular refineries, the LPG penetration, that we hope to push a lot harder and come next year; we talk about industry collaboration. We wish to enhance our collaboration with the operators as well as other government entities as it were.

We talked about establishing a reward system for those who are really disrupting the local content agenda, positive disruption, as it were. So they will also be rewarded. Our capacity building efforts in terms of STEM education, encouraging It will also be enhanced, will also play actively in the vocational education sector, which is the gap that we see that today you do not have a good enough and qualified artisans in our various sphere. So, we hope to really push that as fast as we can.

But, by and large, it is all that we intend to do is in line with the roadmap, and we do not deviate from it and we are not an organization of proposals but we focuse on the plan that we have aligned in order to implement them strictly without stepping out of them because we think these are good plans and if we remain focused, we will achieve the 70 per cent by the year 2027.

 We have seen an increase in the participation of PNC over the years despite accommodation challenges and all the challenges faced. Whatin your opinion is fueling this interest?

In my opinion, it is the belief of stakeholders in terms of the programs and plans that we have in NCDMB. Secondly, there is trust in our being able to drive local content in the industry in a transparent manner and I think also the respect that will be able to achieve with the industry itself is driving them to want to associate. But most importantly, is also the pragmatic nature with which we have been implementing local content agenda.

Actually, there has been interest of industry stakeholders, because they have seen a lot of transparency, they have seen a lot of opportunity that we create, and want to associate with the board.

So, that continues to draw them if you like it to the organization because of integrity, focus, and determination and passion to make a difference in the Nigerian economy. I think that is why they associated with NCDMB.

What are the projects around after hearing about winning new logos; how much effort they put into this?

Well, at least “train 7” is almost half. By the grace of God we believe that come December we will probably take fit and on train 7.  There are also other upstream projects like the HI, HA, and HK. These are huge upstream projects that are supposed to be developed to supply gas to train 7. So, it would be a trigger for other projects. The Bonga Southwest like you know is another project. I also walked on Bonga Southwest as a staff of shell. For quite a while it have been that we will cross that threshold, but every time we try, we face some little challenges.

But, I sincerely believe that Snepco is serious about wanting to do Bonga Southwest. But of course, like with eveary other project, if you look at the gestation period of even the train 7 we are talking about, people talked about it for 30 years before he became a reality. So, oil and gas sector projects take some time. I am hoping and believing that by next year, we will also be talking about FID in Bonga Southwest, if we are able to get on the round table and look at some of the challenges and some of the issues that I think Snepco as an organization had in regards to pushing that project forward. But we try to talk to governments; we are not government but a regulatory agency. We will try to talk to their partners, NNPC, and other agency of government on the need to look at some issues in order that we continue to have foreign direct investment in the oil and gas sector. So it is a continuous process, and we believe that we will cross that when we get there.

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