Why domestication of oil, gas projects is the right path to thread

With Nigeria significantly positioned in the comity of nations with huge oil and gas reserves, it continues to baffle industry watchers that the country continues to struggle to effectively domesticate most of the oil and gas projects which sadly is carried out by major international oil and gas companies (IOCs).

From all indications, local players in the oil and gas industry have significant economic potential and only require sound policy implementation to encourage the domestication of oil and gas projects.

Industry watchers are however concerned that the slow implementation of the policy to support the current clamour may slow that process of growth suggesting that the managers of the economy must as a matter of urgency streamline the adoption of a national policy to address the issues and save the country of huge foreign exchange loss.

They are of the opinion that Nigeria as the largest oil producer in Africa must enforce the domestication of jobs in-country by insisting that all big projects must be done in-country to create sustainable jobs for Nigerians thereby leveraging on proven Nigerian Companies.

According to them, “in order to stabilise our oil and gas industry, get more of our people employed, reduce poverty in our Land while creating more sustainable Nigerian entrepreneurs, there is urgent need to address these growing concerns”

What domestication of projects holds for Nigeria

As the clamour for value creation in the oil and gas sector intensifies, industry close watchers insist that this can only materialise on the back of a strategic implementation of the local content act.

Nigeria’s oil and gas sector between 2015 and 2016 raked in $10 billion (about N200 billion) worth of investments through the Local Content Development Policy.

Amy Jadesimi, managing director of Lagos Deep Offshore Logistics base (LADOL) told BusinessDay that enforcement of the local content act would encourage Nigerians to invest their money here in building, investing in asset and human capital development, saying that more importantly people should understand that local content should include the whole of Nigeria.

She said the idea behind the Local content act is very timely and remains incredible important to the development of not just the oil and gas industry, but capacity across other sectors of the economy.

According to her, “Local content advocacy is about creating jobs and opportunities across the country and I think that is the only way we can be able to overcome the resource curse and get into an era of positive growth which would tackle poverty and inequality in our country”.

Wumi Iledare, a Professor and director Emerald Energy Institute, University of Port Harcourt, Nigeria observes that the oil and gas industry has contributed tremendously to the overall growth of the Nigerian economy.

Iledare disclosed that the upward expansion trend in the industry has created demand for a wide array of jobs ranging from professionals such as geologists and engineers to skilled blue collar jobs such as technicians, welders and electricians.

He however maintains that the imperative for the growth and survival of the oil and gas sector in the country should be anchor on the enforcement of the national content mandate which would require technicians of all shades and grades.

According to him, “To meet this growing demand in the oil and gas industry for skilled technical workers, there is a huge need for the oil companies to patronise technical colleges to meet this demand”.

He advocated that by growing investment in technical education, there will be reduction in capital flight by the decreasing the use of expatriate staff as technician stressing that this will lead to increase in the rate of employment of youth, increase in the economic growth regionally which will in turn increase the wealth of Nigeria within the her border and grow the economy faster.

Oil and gas analysts said that Nigerian Content Policy represents a catalyst for the nation’s industrialisation because the policy has been tested as a result of the current volatility in oil prices witnessed globally.

Taking a step in the right direction

Analysts are of the view that sustainability of signed agreement on JV cash calls exit with oil companies is pivotal to this call for domestication. They argue that let sanctity of agreements be the guiding principle in dealing with projects saying that managers of the economy should avoid policy summersaults and ensure long-term view of the fiscal policies are in-place.

Bank -Anthony Okorafor, chairman of the Petroleum Technology Association of Nigeria (PETAN) is of the view that proper processes be set up for NCF use to build capacities where gaps exist.

He advocated for the leveraging of the funds to drive the change needed in NORGIC ACT, ensure the process creates value, reduces cost and allow Nigerian companies to grow and unleash their full potentials.

Okoroafor in a recent interview with BusinessDay observed that restoring sustainable peace agreement in the Niger delta should be government most important agenda at the moment.

According to him, “This environment creates high risks. If $50/bbl. becomes the new normal, countries like Nigeria with large populations, low reserves and an over dependence on oil could become severely stressed.

He further said the mono-product that Nigeria’s finances hang on is being threatened by this militancy. “95 percent of foreign exchange earnings are tied to oil and with shortened revenues in dollars’ terms; the naira will be under continuous pressure.

“E & P operators are all suffering since the export pipelines are all down for several months. This creates collateral damage for the country, the operators, service companies and all of us”, he said.

Analysts opine that the consistent delay in the passage of a robust legislation which governs exploration, production, bidding and contracting has no doubt cast a shadow of doubt over the Nigerian Federal Government’s commitment to attract investments into the sector and this has in no small ways contributed to the reluctance of potential investors to invest in the Nigerian oil and gas sector.

Experts are however quick to stress that the only workable solution out of the current situation in is for the federal government to get the fundamental aspects of legislation right in this case the petroleum industry and governance bill as this will speed up development and send the correct signal to vital investors.

Bank -Anthony Okorafor called on the Senate under the leadership of Bukola Saraki to pass the Petroleum Industry Bill which favours transparency in mining leases and licenses, taxes, royalties and respect for institutional procedures, maximize returns from gas, with large scale investment in infrastructure and also end gas flaring, build a multi-stakeholder security system to stop crude oil theft as this secures production volume and vandalisation.

“We want an environment that will attract investments, create opportunities and employment, and grow the economy. As long as the fiscal policies in the PIB are clear, consistent, auditable and sustainable, it will create what we are talking about”, he said.

KELECHI EWUZIE