Made-in-Nigeria OEM Manufacturing underway for the Oil and Gas Industry

As government revenues decline on the back of falling crude oil prices, efforts are underway in the oil and gas to diversify the industry through value-added manufacturing.

This is a part of efforts to deepen local content and indigenous participation in the oil and gas industry, with the local manufacturing and assembling of components, parts, OEMS and marine vessels in Nigeria.

Executive Secretary, Nigerian Content Development and Monitoring Board (NCDMB), Ernest Nwapa said at the 2014 Nigeria Indigenous Oil Summit, “we need to go deeper into the value chain, levels below ownership of assets, to create jobs and value-added manufacturing. There is the need for a robust supply chain.”

In recent times, Nigerian E&P companies have stepped up to acquire the divested assets of international oil companies (IOCs), deepening local content in the industry. Despite the changing oil and gas landscape, capital and jobs are still being exported abroad, as firms do not source for parts and equipments locally.

According to Nwapa, to reverse this, the government has partnered with General Electric to build a billion dollar manufacturing complex in Nigeria. Additionally, the Federal Government has set out plans to provide the infrastructure and facilities for local manufacturers to produce components for the industry through an oil and gas park scheme. The construction of the park is to commence in Q4 2014, with annual investments of $15 million into the park from the government.

It is estimated that Nigeria has lost $380 billion in capital flight from the oil and gas industry. Additionally, the importation of equipment and spares from India, China and other countries has crippled the local manufacturing base. It is estimated that over 10 million direct and indirect jobs have been exported to the countries from which these equipment are imported – jobs acutely needed in Nigeria.

This has meant the loss of scores of yards, facilities, shop floors, manufacturing plants and service companies – an entire industrialization platform.

It is expected that the investment in boosting local manufacturing and fabrication would mean oil and gas pipelines, valves, dies, tankers, cylinders, and even marine vessels will be sourced from Nigeria.

Nwapa pointed out that from 2015, marine vessels with a significant part of it built in Nigeria would attract a class AAA certification, which gives preference to the bidder(s) using or building these vessels.

He added that backward integration would be next step, whereby local steel mills will be rejuvenated. However, the immediate need is to create the local demand for their steel products.

The Federal Government is also partnering with Imperial College, London to develop research and development in the industry. The partnership is not to train students and professors on skills for R&D – skills we already have in Nigeria, but to help in creating the demand for research in Nigeria.

According to Nwapa, “any problem in the oil and gas industry must be solved with research done by Nigerians; otherwise the expenditure will not be approved.”

“The aim is to create demand for Nigerian research through a cultural requirement to do research in Nigeria using Nigerian research clusters”, he explains.

Nwapa decried the waste of research in Nigeria, whereby students and professors spend grants on luxury goods rather than impacting the industry, adding that this was as a result of a lack of local demand and direction for research.

It was revealed that the local content fund currently stands at $500 million.

BGL Plc and UBA Capital are the fund managers, however, the custodian banks would be evaluated to determine if they are lending out the fund. “If they do not show evidence that they are lending the money, we will take it out and put in other custodian banks”, said Nwapa.

Yinka Abraham