As local content grows in the oil and gas sector

The emergence of eighteen Nigerian companies in the Nigerian National Petroleum Corporation (NNPC) 2017/2018 crude oil lifting contracts is good news for increased local content participation in the oil and gas sector.

Already, industry operators are applauding the move and encouraging the national oil companies as well other institutions to deepen local capacity in the sector. The advantages are obvious.

In 2013, Nigerian Content Development and Monitoring Board (NCDMB) claimed Nigeria’s economy lost over $100billion in five decades by allowing crude oil to be carried exclusively by foreign off takers.

NNPC’s 2017/2018 crude term contract has increased the quantum of Nigerian content in the lifting of Nigerian crude oil raising prospects that in-country capacity will increase until it meets international standards.

Some of these local companies include Oando, Sahara Energy, MRS Oil and Gas, AA Rano, Bono, Masters Energy, Eterna Oil and Gas, Cassiva Energy, Hyde Energy and Brittania U. Others are North West Petroleum, Optima Energy, AMG Petroenergy, Arkiren Oil and Gas Limited, Shoreline Limited, Entourage Oil, Setana Energy and Prudent Energy.

A further comparison between the present contract and last year’s indicates that crude allocations to Nigerian firms rose sharply from 405,000 bpd to 576,000bpd.Overseas refiners were allocated 160,000 bpd in the present crude oil term lifting contract as against 240,000 bpd it allocated last year.

A total of two hundred and twenty four (224) bids were submitted by companies seeking to purchase and lift Nigerian crude oil grades for the period 2017/2018.

According to industry sources, operators in the Nigerian oil and gas industry has increased compliance to local content directive from less than 3 per cent in 2010, when the law to increase in-country capacity in the energy sector was enacted, to over 30 per cent.

The current increase is attributed to increased drive for project design in-country to enforcement of local content law. From front-end to detailed engineering design, operators have brought back design to Nigeria.

This has led to the establishment of a lot of design companies to deliver value to the sector and even the various international oil companies have set up their own design team with which they provided those services.

But local content development is not just in oil and gas. We are glad that NCDMB is thinking along the same lines. Recently, the organisation has been calling for diversification of focus on Nigerian content beyond the petroleum industry in order to give local companies much needed fillip.

Interestingly, last month, the National Office for Technology Acquisition and Promotion (NOTAP) said it saved Nigeria N192 billion through technology transfer agreements between 2010 and 2016.

Danazumi Ibrahim, director general of the agency said this while highlighting the agency’s performance in 2016 in Abuja.

Ibrahim said the money would have gone out of Nigeria in capital flight but for the careful scrutiny embarked by the agency ensuring that contracts have enough local content input. He said N188.2bn was saved between 2010 and 2014, while about N4bn was saved between 2015 and 2016. Developing in-country capacity is a task that requires a creative balancing act. While foreign investments are being encouraged on the one hand, local capacity needs to be enhanced.

NCDMB would work hard to improve monitoring and enforcement to address complaints by local operators who accuse International Oil Companies of awarding contracts Nigerian companies have competences in to foreign firms using Nigerian proxies.

This is cheering news and we hope all the agencies involved will work towards ensuring greater local content in all sectors in Nigeria. At this time of soaring unemployment rate, increased emphasis on local participation will create jobs for Nigerians.