“The thrust of Nigerian Content act goes beyond job creation …” – Ernest Nwapa

How would you rate the performance of NCDMB in light of the parameters of job creation over the years?

The thrust of the act goes beyond job creation; it goes deeper into changing the mind-set of Nigerians, where Nigerians would start believing that things can be done in Nigeria that things can be done by Nigerians and things can actually be done properly and in a sustainable manner in Nigeria. We have found that over the years the culture in the industry was a culture that promoted the importation of goods and services, and when you promote that kind of culture for a long time it does tremendous damage. The psyche of our country, our labour, our knowledge was a bit destroyed.

So the major thrust for us, as an agency of government, has been to translate that vision of Mr. President to get Nigerians participating in the oil and gas industry into actionable items. This has led us to design programmes but most of these programmes focus on creating jobs, getting Nigerians to believe that we can do these things, that we can own the assets, that we can own the company, that we can perform the services, that we can begin to control certain aspects of the technology that are deployed in doing the work.

Let’s look at the deep water logistics base issues. We hear of names like Ladol and there is of course Niger Dock. There seems to be a bit of uncertainty about where we are going with this concept and deep water operations which is the future of upstream oil and gas?

On deep water logistic bases, the major one that is in existence is actually at Onne – that is the Oil and Gas Free Trade Zone run by Orleans Investment, popularly called INTELS. It is a place that has experienced tremendous growth over the past fifteen years. It started as an arrangement with Nigerian Ports Authority and now they are investing millions of dollars on a continuous basis in both infrastructure and the people that are using the place. Over 152 companies are working there ranging from manufacturing, to storage of products, storage of drilling fluid, machining of pipes, stacking of drilling pipes all sorts of logistics activities go on there.

Other investors have also developed similar facilities. In Lagos, you have Niger Dock which was originally set up as a ship yard, but has a license to operate as a free trade zone and also do some of the logistics things that I have just described. Niger Dock has become a major fabrication yard. Now, with industry support, a lot of things are being done in Niger Dock that we could never even contemplate three or four years ago.

Ladol is another big success story, a private indigenous company that has gone out to set up a green field facility that started basically as a logistics base. They have been doing quite a few activities in terms of supporting industry activities; they have also managed to build some infrastructure on their own and that has given them the qualification to venture into doing bigger things. As we speak, they are partners to Samsung who won the Egina FPSO project and the agreement is that integration and fabrication of at least 50 percent of the tonnage of the FPSO will be done in Nigeria. That is a major step.

There are many other fabrication yards. It is important to mention companies like Aveon, Nestoil, Saipem and Ascot.

At the last count we have recorded in the past four years over $5 billion in investments either in new facilities or upgrading existing facilities.

We have seen statistics that say 80 percent of contracts in the industry are executed by Nigerian contractors; the balance of 20 is done by foreigners. However, that 80 percent only amounted to 20 percent in value terms?

The real value is in the quantum of actual spend retained in the country. So when the IOCs beat their chest and say they are doing 80 percent Nigerian content, it could be misleading. You have to situate that measurement in value terms. But this is not to minimize the progress in that field because, in actual fact, prior to this local content journey that figure was in the 20s. That has changed today. All the companies will tell you that 90 percent of their contracts are awarded to Nigerians or Nigerian companies. That in itself is progress. However, when you now ask, “how much of the, say, USD90 million that was awarded to the Nigerian company is retained in Nigerian economy?” that’s where the lower percentage comes in because the Nigeria company you gave the contract still goes to Asia or Europe to procure the equipment needed to deliver the contract.

Nigerian Content Development Fund stipulates amount of money from the oil and gas companies that goes to NDDC, TET Fund and now Nigerian Content Fund? How will all this play out in the long run?

Well, I can’t speak for other people and how they get their own fund. Our own fund is one percent of contract awarded in the oil and gas industry. Strictly speaking, that money is not coming from royalties, nor is it coming from the IOCs. It comes from the man or woman that has been awarded the contract. It is therefore our role to make sure that in designing how that fund is spent those guys who bring the money are involved and, together, we ascertain areas where improvements are needed.

What we have done with that fund is set up fund management structure using consultants and fund managers that split the fund into two distinct parts. 30 percent is for direct intervention. When you hear we are doing industrial parks we are taking money from there, when you hear we are doing pipe mills, training wielders, sending people for certification, supporting institutions, we are taking money from there. 70 percent of that fund will not be depleted, and it is for guaranteeing loans given to Nigerian firms and contractors. Anybody that gets a loan under this scheme gets a 50 percent interest rebate. The fund is effective in that it is lowering the cost of borrowing and is creating more opportunity for people to get money, and the banks are slowly coming round to it.

At Nigeria LNG (NLNG), the senior management team is entirely Nigerian and 95 percent of the workforce is also Nigerian, but it would be instructive to hear your own perspective.

The NLNG model is something everybody must replicate elsewhere. And regarding the leadership being Nigerian, that’s commendable. On Nigerian Content, NLNG has done a lot, but NLNG is a big elephant and an elephant needs to do big things – that is what I always tell them, there is a big scope for NLNG, a lot more room to do more.

We will be happy to see your LNG carriers being built and maintained in Nigeria, for instance. NLNG fleet expansion programme is one of the major targets of Nigeria content implementation, so when we see today that all the carriers are being manufactured abroad, it’s something that we are not very pleased with. But the capacity is not there to have that done in the country today, so we have worked with their project teams to insist and ensure that things that can be done in Nigeria, even in those vessels that are being constructed abroad, are done in Nigeria and shipped overseas. We would continue to monitor that to see that those things are done.