NOGintelligence Local Content Edition 2014 by NOGintelligence Magazine

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MIDSTREAM

www.NOGintelligence.com

DOWNSTREAM

Vol. 2 Issue 2

REGULATORY

FINANCIAL

Local Content Edition

4 YEARS OF NIGERIAN CONTENT:

ACHIEVEMENTS AND CHALLENGES ERNEST NWAPA, EXECUTIVE SECRETARY, NIGERIAN CONTENT DEVELOPMENT & MANAGEMENT BOARD:

CONTENTS

Editor’s Message

Letters to Editor

4 Events

4 Years of Nigerian Content

Upstream News

Midstream News

Downstream News

Regulatory News

Financial News

Industry Moves

Cover Story

29 Progress of Local Content: Comment

COVER STORY: Executive Secretary, NCDMB, Ernest Nwapa: “What I would like to achieve this year”

Guide to the Nigerian Oil and Gas Industry Content Development Act

4 Years of Nigerian Content Development

Interview: Dr Oluwole Oluleye, Executive Secretary, PTDF

42 Nigerian Content Compliance by International Oil Companies INTERVIEW: Oluleye Oluwole, Executive Secretary, PTDF

Showcasing Indigenous Oil and Gas Expertise

A Model Approach to Community Relations

46 Developing a Strategy for Local Content Implementation 48

The Nigerian National Resource Charter Benchmarking Exercise

Oil and Gas Circuit

54 Showcasing Indigenous Content Oil and Gas Expertise

EDITOR’S MESSAGE Dear Readers Welcome to another edition of NOGintelligence magazine, covering January and February in the Nigerian oil and gas industry. This edition is focused on local content. Indigenous companies are finally coming into their own in this industry, thanks to the determined resolve of the Executive Secretary of the Nigerian Content Management and Development Board (NCDMB) and the firm support of the Minister of Petroleum to pursue the local content agenda. This edition allows us to get to grips with the law and also look at what’s going on in the industry on that score. Our cover story is based on an interview with Ernest Nwapa, the Executive Secretary of NCDMB in which he reveals exclusively to NOGintelligence what is uppermost on his agenda for 2014. We also have an interview with Oluwole Oluleye, the Executive Secretary of the Petroleum Technology Development Fund, which is responsible for developing local technological manpower. He tells us more about what the PTDF is doing to advance the technology transfer agenda. We look at the progress of Nigerian Content Development in the oil and gas industry from different perspectives. First we look at three years of Nigerian content development through the eyes of NCDMB. In addition we have some commentary from Wale Shonibare, MD of UBA Capital Group who looks at the topic from the financial advisory perspective, while Tominiyi Owolabi, partner at Olaniwun Ajayi looks at things from the legal angle. Meanwhile, Ify Anazonwu-Akerele, the DG of the Nigerian Chamber of Shipping gives us a maritime perspective while Tunde Kusamotu, a lawyer and the founder of the Nigerian Content advocacy group, Borderless, takes a close look at what the IOCs are doing about Nigerian content, asking the question whether IOCs are cooking the books. We have a brief guide to NOGIC, the law that governs Nigerian content in the oil and gas

sector. We are also able to clarify the issue of what 50% ownership means in relation to local content law. We also take the opportunity in this special edition to showcase some of the leading Nigerian companies involved in the oil and gas industry especially those working upstream, downstream, in oil services including support vessels and base logistics. I very much hope that this will be a very useful compendium of Nigerian local content in the oil and gas industry. I predict that this edition will be a keeper. Outside of local content issues, we bring you news from the different oil and gas sectors – upstream, midstream, downstream, financial and regulatory. We have also started a new section for Letters to the Editor. Seasoned lawyer, Yemi Akinsanya responds to the article by the law

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firm of Adepetun Caxton Martins Agbor in the last issue taking on the issue of Ministerial Consent for licence/lease assignments. Do write to us if you have any comment on any of the articles in any issue of our magazine. We also have a new section to cover new senior executive hires, fires and movers. Do let us know if anyone from your firms is leaving so that we can chronicle the movement of senior industry executives in the industry. Our next edition will bring you all the news and events from OTC in Houston as NOGintelligence takes front stage with Oando in a special industry briefing for diaspora professionals. Do make sure you get our next issue in which we have a very exciting announcement about an event we are planning for later on in the year.

LETTER

DEAR EDITOR Response to “The Ministerial Consent Issue” I have read with interest the commentary of one of our major law firms, in your 2013 Annual Review, with respect to the decision of the Federal High Court in the Moni Pulo and Brass Petroleum case. The Federal High Court in that case confirmed the requirement of HMPR’s consent for a shareholder to take 100% control ownership of a Company (which holds interest in an oil block) that it previously owned 50%, or otherwise. It is regrettable that the decision in the Moni Pulo and Brass Petroleum case may have never been appealed. Several issues remain unsettled. Chief among these is the circumstances, if any, under which the shareholders of a company, rightly or validly, are regarded jointly and/ or severally, as the holders of its assets instead of, or in addition to, the company itself. The principle that a company has its own corporate personality, separate and distinct from that of its incorporators and shareholders is one that is fundamentally established in the jurisprudence of corporate law. Since its inception, it has been consistently recognized, upheld and reflected in court decisions and legislation. Judicial interpretation of the provisions of any law or regulation ought, as much as possible, to assume that the legislature would not intend to overturn such a fundamental legal principle without expressly and unequivocally stating so in the relevant statute. In the circumstances under consideration, lifting the veil of incorporation of a company should only be preferred where there is sufficient evidence to establish: i) either that the purported transfer of shares was expressed actually as an assignment of the licence; or ii) such intent could reasonably be implied or presumed in the pertinent circumstances; or iii) both. This should be a matter of fact to be established by appropriate evidence. Absent the foregoing, the Honourable Minister for Petroleum Resources (HMPR) should not be allowed the right to look beyond the holder-company to its shareholders. The Government should not be allowed, or encouraged, in its quest for maximum revenue to jettison established principles of law so readily. This kind of

with respect to Petroleum companies only. It is veritably inconsistent with public interest and policy. HMPR’s power to terminate or cancel a Licence, where a company falls into the control of companies or persons unacceptable to Government, is a different issue altogether. The requirement for notification in this case, is simply one of the essential tools that enable HMPR exercise the necessary over-sight.

capriciousness is one of the things that discourage investors, as it would have the effect of increasing the contingent cost and burden of operating in the country. If subsequent decisions and executive actions follow the trend of the aforementioned decision in this case, it would be tantamount to a transfer to HMPR – or duplicating in HMPR’s office - of the supervisory and regulatory function of the Corporate Affairs Commission (“CAC”) of Nigeria and the Securities and Exchange Commission (“SEC”). These autonomous bodies are charged with the responsibility to regulate the formation and management of companies in Nigeria and the corporate financial transactions like mergers, acquisitions, takeovers and other forms of business combinations. With all due respect, we submit that HMPR does not have the competence or the capability to assume such supervisory or regulatory role. For the same reason, reference to “Takeover” and “Assignment” in the Petroleum Regulations ought to be construed as a takeover of the operations of the Oil Prospecting Licence or Oil Mining Lease rather than the takeover of one company by the other. Takeover of a company should not ordinarily be deemed or construed so as to amount to a takeover of its Nigerian oil assets, requiring HMPR’s prior consent or liable to transfer fees. As previously mentioned, this would be tantamount to a blanket transfer, from CAC and SEC to HMPR, of the responsibility for the supervision and regulation of companies, even if it should be construed as being

Based on the foregoing, it is thus a little disturbing that the purport of the draft proposed PIB to regard mergers and acquisitions as assignments, thus expressly requiring HMPR’s consent, follows the trend of the decision in the Moni Pulo case. However, all should not still be considered lost. We submit that, against the background of the Golden or Mischief rules of interpretation, the PIB’s provisions must be construed in the light of our thoughts as herein expressed. Accordingly, regardless of said provision, if passed in the present form, it should be found that HMPR’s consent is necessary only where there is sufficient evidence that the pertinent mergers, acquisitions and other such acts of corporate re-organization and restructuring were being done as a means of assignment or even as ruse for avoiding the consent requirement. Where the facts and circumstances show that they were done strictly in the ordinary course of corporate commercial activity, the right conclusion should be that HMPR’s consent is not required. In such circumstances, it should be sufficient only that HMPR is advised. This view, which we submit should be the correct position, would serve to make the law, when passed, less discouraging or repugnant to potential investors in the country’s Petroleum sector. On the contrary, it will reflect a commitment to fair practices that advance the nation’s marketplace and make it better able to attract investment inflows. ‘Yemi Akisanya Principal, Adeyemi Akisanya Associates Lagos, Nigeria yemi@adeyemi-akisanya.com

EVENTS SUB-SAHARAN AFRICA OIL AND GAS THE 11TH MAGHREB, CONFERENCE MEDITERRANEAN, MIDEAST Houston, Texas UPSTREAM CONFERENCE 2014 1-2 May 2014 http://www. energycorporateafrica.com/

OIL TECHNOLOGY CONFERENCE Houston, USA 5-8 May www.otcnet.org

AFRICA LPG TRADE SUMMIT Accra, Ghana 7-9 May 2014 www.cmtevents.com

PLATTS GLOBAL CRUDE OIL SUMMIT London, UK 13-14 May http://events.platts.com/crudeoil-summit-2014

Nicosia, Cyprus 19-21 May 2014 http://www.glopac-partners.com

11TH AFRICAN INDEPENDENTS FORUM London, England 2-3 June 2014 http://www.petro21.com/events

OIL AND GAS STRATEGIC RECRUITMENT FORUM Aberdeen, UK 03 June 2014 http://www.oghr.co.uk/events/ recruitment

SOMALIA OIL AND GAS Somalia 9 June 2014 http://www.somalia-oil-gas.com

FPSO AFRICA Lagos, UK 9-11 June http://www.FPSO-Africa.com

EAST AFRICA OIL AND GAS SUMMIT London, England 10-12 June http://eastafrica-oil-gas.com

21ST WORLD PETROLEUM CONGRESS Moscow, Russia 15-19 June http://www.21wpc.com/

EVENTS

REFINING TECHNOLOGY AFRICA

2ND AFRICA OIL & GAS, FINANCE AND INVESTMENT FORUM

Cape Town, South Africa 23-26 June 2014 http://www. refiningtechnologyafrica.com

Dubai, UAE 23 - 24 September 2014 www.aogfi.com

AFRICA OFFSHORE CONGRESS

THE AFRICA OIL & GAS EXPO

Abuja, Nigeria 25-26 June 2014 www.africa-offshore.org

4TH UPSTREAM AND DOWNSTREAM EXPO AND CONFERENCE Abuja, Nigeria 26-28 August www.oilandgasexppos.com

Johannesburg, South Africa 9-10 October http://www.africaoilexpo.com

21ST AFRICA OIL WEEK Cape Town, South Africa 3-7 November 2014 http://www.petro21.com/events

32ND ANNUAL INTERNATIONAL CONFERENCE OF THE NIGERIAN ASSOCIATION OF PETROLEUM EXPLORATIONISTS Lagos, Nigeria 09-13 November 2014 www.nape.org.ng

PRACTICAL NIGERIAN CONTENT Yenagoa, Nigeria 18-20 November http://www.ncipnc.com/

MOZAMBIQUE GAS SUMMIT Maputo, Mozambique 2-5 December 2014 http://www.mozambique-gassummit.com/

UPSTREAM NEWS

MARGINAL FIELDS LICENSING ROUND As the new year began, the marginal fields licensing round was uppermost on the minds of many in the industry. At the end of November, some 10 years after the marginal fields experiment began, the Honourable Minister for Petroleum Resources, Diezani Alison-Madueke announced the kick off of the second marginal field bid round. There was great excitement as George Osahon, the Director of the Department of Petroleum Resources (DPR) set off on a 4-city road show to acquaint the investing public with the process for this new licensing round. He outlined the process, contained in a set of guidelines under which fractional ownership was to be the only way to qualification. Application forms were promised for the 16th of December but that date came and went and nothing happened. After NOGintelligence pressed the DPR for some information, a statement was released on the DPR website saying:

The prolific Niger Delta continues to deliver value to foreign investors with the announcement that Aim listed Eland Oil & Gas PLC has commenced production from the Opuama oil field on oil mining licence (OML) 40, located onshore. Eland Oil and Gas announced a few months earlier that it expected to start production at its Opuama field in oil mining lease (OML) 40. The Scottish company said then that it had finished testing the final section of the 12inch export pipeline after successfully rebuilding a flow station tied to the field. The field had been shut in for more than 7 years. Following successful testing and commissioning of the field facilities, oil production from the Opuama field began on 4 February 2014. The company was able to bring the field to production after successfully re-commissioning existing infrastructure and re-opening two existing wells. Gross output from the two wells is expected to stabilise in aggregate at around 2,500 barrels of oil per day (bopd),

“Prospective applicants are assured that the time frame earlier set for the Exercise remains unchanged.” Now, the notice has been changed to say “The modalities on the impending Marginal Field Bid Round shall soon be uploaded on this site in due course.” As we went to press, no new information had been released.

There is a lot of speculation about the reasons for halting the process but none of those NOGintelligence spoke to, was prepared to go on the record. However, NOGintelligence gathered from sources within DPR that there are disputes with at least two of the international oil companies (IOC’s) over which marginal fields are to be included. There are also murmurings that there is an ongoing attempt by political cronies to hijack some of the fields for themselves and take them outside the licensing round. DPR is remaining silent about the reason for the delay. Whatever the truth of the

a significant increase on the aggregate 1,500 bopd reported on shut-in in 2006 by previous operator Shell. The crude oil produced will be delivered to the Shell Forcados export terminal via Eland’s recently re-commissioned flowstation and export pipeline, with a capacity to export up to 30,000 barrels a day. The operator of the field is Nigerian Petroleum Development Corporation (NPDC), which holds a 55 per cent interest. The remaining 45 per cent interest is held by Eland’s joint venture company, Elcrest Exploration and Production Nigeria Ltd. The company plans to ramp up production through development drilling in 2014 in the Opuama field, which contains 54.2 million barrels of recoverable oil reserves, and had been in operation for just over 30 years before it was shut-in by Shell in 2006 in a

matter, the fact is that the process, which the DPR Director proudly proclaimed would be transparent now appears cloaked in opacity. The first marginal fields bid round was in 2003. Only 8 out of 24 fields awarded in that licensing round are currently producing. Part of the problem, which the former Director of DPR, Osten Olorunshola highlighted at the NOGintelligence official launch, was that some of the fields awarded were “quite frankly unbankable.” He gave the assurance that for the next marginal fields round, care would be taken to ensure that all the fields were “good assets” that would enable awardees to raise finance successfully. It seems that until the situation is resolved in Abuja, the marginal fields licensing programme remains on hold. Until when, no one knows.

controlled shut down of the facilities. Funding is assured, as production will trigger the drawdown of the company’s $22 million debt facility and cash flow reinvestment to fund development drilling. Eland’s shares were up 4.9% at 108p in early trading on the morning of the announcement on the 5th of February. City brokers Northland Capital rated Eland as a “buy” with a 161p price target, nearly 60% above the current price of 103p per share at that time. Eland CEO, Les Blair said: “The commencement of production on OML 40 has been much anticipated by management and investors alike, and indeed by all stakeholders.”

UPSTREAM XXXXXXXXX NEWS Dually listed Heritage Oil provided an operational update, which shows that it has been able to increase production significantly. By the end of 2013 production had reached over 50,000 barrels of oil per day (bpd) from oil mining lease (OML) 30 in which it has an interest.

The company is also happy with cash flow after four liftings in Q4 2013 generated net revenues of around $170 million to Heritage while total revenues for the year were roughly USD465 million. Liftings should take place on a monthly basis from now, the company noted.

The company, which is listed on the main board of the London Stock Exchange, said they were able to reach that level of production as a result of continued maintenance and rehabilitation programmes. The company also credits the recommencement of production from Uzere West Field in December 2013 for contributing to their good fortune. The field had been shut in for over two years. Net production to Heritage in Q4 2013 averaged approximately 13,300 bpd.

Heritage also revealed that Shoreline Power Company, its joint venture partner in Shoreline Natural Resources (SNR) is to acquire a 30 per cent economic interest in SNR. The interest of the partners in OML 30 is held by SNR. Following the completion of the deal, for which it is to receive a consideration of $31.5 million, Heritage will have a 30.71 per cent working interest in OML 30.

The company expects to further increase production during the first half of the year as it continues its maintenance programme including the installation of gas compressors, statutory inspection and testing of all pressure vessels and inspection of all wellheads and pipelines completed to support well optimisation activities.

Oando PLC, Nigeria’s leading indigenous energy group, listed on both the Nigerian and Johannesburg Stock Exchange has not completed final closure of the mammoth $1.79 billion ConocoPhillips acquisition. The company is waiting or Ministerial Consent to the acquisition before they can do a final closure. In its final fundraising drive, Oando revealed early this year that it had secured $800 million in loans, which enabled it to do a financial closure of the acquisition of the choice assets. That sum is made up of: a) a $350 million corporate facility agreement with a syndicate of Nigerian lenders, as well as FBN Capital Ltd and FCMB Capital Markets Ltd as the mandated lead arrangers. b) a $450 million reserves based lending by a group of Nigerian and international banks including Standard Chartered Bank, BNP Paribas and the Standard Bank of South Africa Ltd. In addition to the funding above, on the 28th of January, Oando announced a private placement on the Toronto Stock Exchange where it is listed, from which the company was expecting to gross proceeds of up to $50,000,000. The rest of the funding came from a convertible loan from Oando Plc, the 94.6 per cent owner of OER. When Ministerial Consent is obtained for the final closure of the transaction, Oando will take over ConocoPhillips’ interests in all its Nigerian assets, which include interests in onshore OMLs 60, 61, 62 and 63; offshore OMLs 131 and 214 (both in deepwater).

Oil Theft According to the Governor of Delta State, Governor Emmanuel Uduaghan, oil theft has been significantly reduced, down to 40,000 barrels of oil per day earlier this year from 100,000 previously. He explained that when oil theft was at its peak, between 80,000 and 100,000 barrels was being stolen with a shut-in of about 300,000 barrels due to damage to two major pipelines. The two pipelines are now functioning and, he said, oil theft had reduced significantly and that he expects the figure to be reduced even more over time. Not surprisingly, many are questioning the reliability of these statistics.

In a strategic move, Oando has also acquired the entire issued share capital of Medal Oil Company Limited, which owns a 5 per cent interest in oil mining lease (OML) 131, for a purchase price of US$5,000,000. The purchase price will be satisfied by the issuance of an additional 3,491,082 units in its latest private placement on the TSX. Oando chose to acquire Medal Oil’s 5% equity interest in OML 131 so that on closure of the $1.79 billion acquisition of ConocoPhillips assets, it will become the 100 per cent owner of OML 131. Oando, Conoco-Phillips, their advisers, and it seems the rest of the industry await the Ministerial Consent that will bring the longrunning saga to a final closure.

XXXXXXXX

UPSTREAM NEWS OPEC’s oil output fell in December to its lowest since May 2011 after continued production disruption in Libya, Iraq and reduction in Saudi Arabian supply according to a Reuters survey. An increase in Nigerian and Iranian production did not improve the position, with output averaging 29.53 million barrels per day (bpd), down from 29.64 million bpd in November, according to the survey. In 2013, Nigeria’s crude oil reserves represented just 3.1 per cent of the total reserves of the Organisation of Petroleum Exporting Countries (OPEC,) a report has said. The report showed that the country’s proven reserves stood at 37.1billion last year out of the 1200 billion reserves of the organization.

Italian energy company Eni closed the flow stations on Tebidaba-Brass pipeline following a fire. The fire is believed to have been caused by pipeline sabotage. An Eni spokesman said that the company was losing 3,500 barrels per day of its 20 per cent share of the joint venture operation.

In a move that is likely to have indigenous companies quaking in their boots, Africa’s richest man, Aliko Dangote, is eyeing up the International Oil Company (IOC) divestments. Dangote group is mulling over increased investment upstream according to Dangote Group’s Group Executive Director, Devakumar Edwin. Speaking to Bloomberg, he said: “We’re seriously thinking of investing in oil blocks both for gas and oil.”

refinery will need large supplies of crude oil to maintain capacity on completion.

Dangote Group has primarily been involved in cement and sugar but last year announced that it was going to build a $9 billion oil refinery that will also have a petrochemical complex. The 400,000 barrels per day (bpd)

Dangote already has a limited investment in the upstream sector. They have a 9 % Investment in Block I in Joint Development Zone (JDZ) of Nigeria Sao-Tome along with Chevron Texaco and Exxon Mobil, a 10 % Investment in Block III in JDZ of Nigeria along with Anadakko as Operator and a 6 % Investment in OPL 315 with Statoil and Petrobas as operators. This news means he will soon become a big upstream player.

Unsurprisingly, the man who does nothing in half measures now wants to control his own oil supply by investing in oil blocks that will provide much needed access to crude oil. There is an added element. His cement factories also need vast supplies of energy and so investing in gas rich fields will give him gas supply to power his plants.

Houston based independent Camac Energy founded by Nigerian, Kase Lawal, announced an important update on Oyo field located offshore and straddling their oil mining leases (OML) 120 and 121. The company and its operator partner, US company, Allied Energy, have entered into a one-year $100m contract with Oslo-listed rig contractor, Northern Offshore to hire the Energy Searcher drillship. Camac’s Chief Executive Officer Kase Lawal said the move became necessary “to help execute the company’s transformational development and exploration programme in 2014 and beyond.” The rig is to be delivered to the Oyo field in OML 120 in time to start drilling during the first half of this year. The Energy Searcher is equipped to operate in water depths of up to 2500 feet and to drill to total depths of up to 25,000 feet. The partners had previously contracted Transocean’s Sedneth 701 semi-submersible rig for the drilling but problems were encountered compounding the much-delayed development of Oyo field sold by Italy’s Eni in 2012.

UPSTREAM NEWS Chief Tunde Afolabi executed a major boardroom coup to takeover the chairmanship of indigenous major, Amni International Petroleum and Development Company. One of the most successful indigenous upstream players, Amni International had retired army colonel, Sanni Bello as its chairman and Professor Edozien as its vice chairman. Now, in an astonishing move, which took the industry by surprise, Chief Afolabi, who remains the Managing Director, now becomes Chairman of the board. Afolabi is said to have paid $150 million each to Bello and Edozien for their shares in the company, although there is no confirmation of the amount. Tunde Afolabi is a professional Geologist with over 30 years of oil and gas exploration and production experience from international companies. He is a past President of the Nigerian Association of Petroleum Explorationists (NAPE). Amni is producing from its interests in two oil mining leases. Oil mining lease (OML) 112, the former OPL 469, located in the Eastern Niger Delta and covering 437 sq km, was

granted in 1993 to the company on a sole risk basis just after its formation. OML 117 (formerly OPL 237) also in the Eastern Niger Delta and covering just 50 sq km was awarded to Amni in 1994. French international oil company (IOC) Total farmed into the two blocks in 2005 under which it acquired a 40 per cent interest. Under the terms of the agreement, Total relinquished its rights to the crude oil from the known reservoirs of IMA in April 2007. That means that Amni is entitled to 100% of the crude oil from these reservoirs and bears all royalties and taxes due in relation to “Ima oil”. Under the agreement, Amni is carried through the development of gas reserves (2C: 1.6TCF) until production. Total will then recover costs out of revenues from gas production. The Okoro and Setu East Fields are located in OML 112, with the two fields separated by 6.5km in a water depth of 5m to 14m. Total relinquished its right to participate in the Okoro/ Setu fields, allowing Amni and Afren Energy Resources Limited (as Contractor) to enter into a Production Sharing and Technical Services Agreement in March 2006, facilitating field development.

ExxonMobil is to begin 4D seismic acquisition operations in the Usan Field in OML 138 from mid February. ExxonMobil will use the MV Tastman in the operation, which is expected to last till mid April 2014. 4D seismic has been slow to get off the ground since its inception some 35 years ago, remaining a much smaller sector than the 3D from which it sprang. The technique has now come of age and is being used increasingly on the world

London Stock Exchange listed Afren has issued its latest operations update which reveals that it expects to deliver record financial results for 2013. The update showed it achieved sales revenue of around US$1.65 billion and operating cash flow in excess of US$1.1 billion. The company says this was driven by a year-on-year 14% increase in like-for-like net production, principally from the Ebok on oil mining lease (OML) 67 offshore and Okoro fields on OML 113 shallow offshore. Afren recorded total gross production of 59,926 boepd in 2013, with net production of 47,112 boepd. Afren and its partners will commence development of the Okoro Further Field Development, Ebok North Fault Block and Okwok (also on OML 67) in 2014. These are all expected to generate high margin cash flow for the Company. Afren is expecting gross production of approximately 62,000 bopd in 2014 (approximately 40,000 bopd net to Afren), a small increase over 2013, but this takes into account the shut down that will occur during the installation of an additional platform, as well as cost recovery on Ebok. The arrival of a rig on onshore OML 26 will also add to the slow-down in production. Afren’s Nigerian experience has been a runaway success, which has continued with the Ogo discovery on OPL 310 last year. The discovery on the offshore OPL was the largest global discovery in 2013 with P50 gross recoverable resources of 774 mmboe. The Company will now acquire 3D seismic ahead of appraisal and further exploration drilling.

stage and now, also in Nigeria, as a valid and valuable reservoir management tool. Its advantages have been most clearly seen in applications to monitor fluid movement and differentiating between the drained and undrained portions of a reservoir, typically within clastic rocks offshore. The Nigerian Maritime Administration and Safety Agency (NIMASA) has issued a marine notice to all ship operators, all masters of ships, all boat operators

and all ship agents in connection with the Usan Field 4D seismic acquisition exercise. The Marine Notice warns that during the operation, the MV Tastman will be towing 10 streamers of 600m long with 50m separation between the streamers. The vessels will also have in tow, 2 seismic sources (air guns) for collection of seismic data. Three other auxiliary vessels (one support and 2 guard vessels) will be involved in the seismic operation.

LOCAL CONTENT ACHIEVEMENTS PRE-NIGERIAN

Capital retention

New direct job opportunities

CONTENT IMPLEMENTATION

$191 billion

POST-NIGERIAN

300,000 0

CONTENT IMPLEMENTATION

2,000,000 $380 billion

65%

95% Capital flight

Over 95% of industry spend abroad

Over 65% of industry spend domiciled

Lost job opportunities

PERFORMANCE LEVELS:

NIGERIAN CONTENT DEVELOPMENT FUND MODEL:

‘PA RTI

n pro ue portion of val

35%

o Acquisition and preparation of site for pilot pipe mill o Part funding of NOGIPS

ac ts a

NTEN

rde d

T’

to Nigerian comp

12% -

s nie

18%

sed

t ‘R EA rac proportion of cont

A RI I G E su m s

sp O N T en t o E N T’ nN s igerian made good

o Environmental remediation and geo-science training

70%

Guarantee

o Provide partial guarantee for loans to finance contracts o Softer terms o Build supplier capacity

EQUIPMENT COMPONENT MANUFACTURING INITIATIVE (ECMI):

CR O MA

G NI tr AL f con o

Direct Intervention

line pipes, umbillicals pumps, etc

icro

87%

70% as ed o

NIGERIAN CONTENT MEASUREMENT:

• Engineering – 90% • Fabrication – 50% • Manufacturing – 7%

flanges, chemicals, PPEs, nuts and bolts, etc

MIDSTREAM NEWS

REFINERIES

$ALE

The Federal Government made a dramatic U-turn over the sale of the nationâ&#x20AC;&#x2122;s refineries, insisting that it had no plans to put the refineries up for sale. This came only a few weeks after the Minister of Petroleum said that the refineries were up for grabs. The Bureau of Public Enterprise also confirmed the proposed sale after the Ministerâ&#x20AC;&#x2122;s admission that the four refineries, with a combined capacity of 445,000 barrels per day were to be sold following decades of mismanagement. Already, oil workers under the aegis of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the

Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) were lining up to take industrial action over the proposed sale, which they said is against the national interest.

The Federal Government seems to have had a change of mind after a statement from the Presidency revealed that the President has not approved the sale and that the government now has no intention of selling the refineries. The oil workers who were vehemently opposed to the sale are taking credit for the U-turn by the Government over the sale of the refineries. However, NOGintelligence sources say that this may not be the end of

the matter. They say that the Government firmly intends to dispose of the refineries but may choose a more opportune time to make the announcement after an appropriate period of consultation with the unions and other stakeholders.

DOWNSTREAM NEWS

OANDO TO EXTEND GAS DISTRIBUTION NETWORK Indigenous energy group, Oando Plc, announced that it is to extend the natural gas distribution network of its Greater Lagos Area franchise from Ijora to the Marina Central Business District. The project, which will be executed by one of its subsidiaries, Gaslink Nigeria Limited, in conjunction with Oilserv Limited, will increase Oandoâ&#x20AC;&#x2122;s current gas distribution capacity of 85mmscf/d, of which 55mmscf/d is currently utilized.

8km The length of the extension project.

12 inches The diameter of pipe line.

18 months Expected time taken to complete the extension.

DOWNSTREAM NEWS

NLNG DELIVERS 3,000TH CARGO Nigeria LNG Limited (NLNG) celebrated the export of its 3000th cargo of Liquefied Natural Gas (LNG) from its Bonny Island Terminal in Rivers State in style. The milestone was achieved on the 7th of January as the cargo bound for Marmara LNG Terminal in Turkey set sail on board LNG Lokoja, one of NLNG’s vessels. The cargo is for Botas Petroleum Pipeline Corporation.

Six-train NLNG currently processes for export and domestic use more than four trillion cubic feet of associated gas, which was previously flared. The company has set aside supplies of about 250,000 tonnes of liquefied petroleum gas (LPG) popularly known as cooking gas for the Nigerian domestic market.

The first export of LNG cargo from NLNG was on October 9, 1999. Since then, NLNG has grown to become Africa’s largest single private sector industrial investment, supplying about 7 per cent of total world LNG demand.

Currently, NLNG has 24 LNG carriers, which together constitute by far the largest shipping fleet in the country. In addition the company has 6 vessels under construction in South Korea, due for delivery in 2015 and 2016.

NLNG’s plans to expand to a seventh train has stalled over the years. The company expects that when Train 7 is finally constructed, it will up the company’s total production capacity to 30 million tonnes per annum (MTPA) of LNG and potentially increase Nigeria’s supply of world LNG demand to 10%. NLNG is owned by four shareholders, namely, the Federal Government of Nigeria, represented by the Nigerian National Petroleum Corporation, NNPC (49%), Shell Gas BV, SGBV, (25.6%), Total LNG Nigeria Limited (15%), and Eni International (N.A,) N. V. S. a. r. l (10.4%).

DOWNSTREAM NEWS

THE NEW OPEC REFERENCE BASKET (ORB)

OPEC BASKET PRICE

Introduced on 16 June 2005, is currently made up of the following 12 crude grades: Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela).

The OPEC basket price opened the year in the middle of a steep drop, which began in December after reaching $109.35 on the 27th of December last year. From then on prices have been dropping relentlessly except for a blip in January when it managed to climb back up to $106.11 on the 23rd. It finally bottomed out at $102.55 on the 4th of February before beginning to rise again, reaching $107.15 on the 19th of February.

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NIGERIAN CONTENT DEVELOPMENT PERCEPTION INDEX 2014 In commemoration of the fourth anniversary of the Nigerian Content law, Nigerian content advocacy group, Borderless, has released the result of its Nigerian Content Development Perception Index (NCPDI). In the survey, indigenous companies were asked to score International Oil Companies (IOCs) in ascending order of perceived commitment to Nigerian Content. The Result of the 2014 NCPDI is as follows:

OTHER FINDINGS: Most indigenous companies reported that they were significantly positively impacted by the Nigerian Content law, enjoying greater growth business, capacity development and access to finance, even though the cost of funds (interest rate) from the banks remains a challenge. They are aware that funding is available through the Nigerian Content  Fund, but want a clearer and less cumbersome process of accessing it.

International oil companies are perceived as more committed to Nigerian Content  development, but a lot more ground remains yet to be covered.

Most indigenous companies would like to see the domestication of International  Standards, with international transferable qualifications from Nigeria, rather than  having to seek certification for goods and services in Nigeria, from other jurisdictions.

Most Indigenous companies reported that as developmental partners the Nigerian  Content Development and Monitoring Board (NCDMB) has done very well in assisting  indigenous companies.

The NCDMB, Organised Civil Society and National Assembly need to be more  proactive in monitoring the activities of IOC’s; the NCDMB is seen as too much of a sympathetic friend to IOC’s. It needs to focus more attention on its role as a policeman (enforcement).

Most companies view the NASS (National Assembly’s) non-passage of the P.I.B as a major threat to Nigerian Content development; this is due to uncertain investment climate, slowing growth.

REGULATORY NEWS NNPC EXPLAINS “MISSING” $10.8 BILLION OIL REVENUE The Nigerian National Petroleum Corporation (NNPC) began the year struggling to explain why $10.8 billion in oil revenue had not been remitted to the Federation Account. The then Governor of the Central Bank of Nigeria, Sanusi Lamido Sanusi, had, in a letter to the President, which was leaked to the press, accused NNPC of failing to remit $49.8 billion in oil revenue to the Federation Account. After some hurried reconciliations Sanusi retracted the accusation but insisted that $12 billion remained unreconciled (although the Minister of Finance maintained it was $10.8 billion). He said reconciliation meetings were continuing. According to NNPC, the outstanding amount of $10.8 billion is in fact not missing. The Group Executive Director, Finance and Accounts Directorate of NNPC, Bernard Otti explained that the sum alleged to be missing was expenditure incurred on behalf of the Federal Government in kerosene subsidy. The House of Representative is currently investigating the subsidy claims. Sanusi has since levelled fresh accusations against NNPC claiming that $20 billion has not been remitted by NNPC to the revenue account. There are now growing calls for a full audit of the accounts of NNPC. The Minister of Finance and Coordinating Minister for the Economy Dr. Ngozi Okonjo-Iweala has also called for urgent action with regard to an independent forensic audit of NNPC over the conflicting claims of unaccounted funds made by Sanusi. Group Managing Director of the Corporation, Engr. Andrew Yakubu, said he was happy for an audit to take place. He said: “We have no problem with auditing, but let the professionals, the certified bodies and agencies that are charged with this responsibility of auditing, to do their work.’’ Yakubu remains adamant that the issues will be eventually reconciled. Meanwhile, Sanusi has been suspended from his job as CBN Governor amid claims against him of impropriety over some CBN transactions.

FG TO COMMENCE METERING POLICY ON 1ST FEBRUARY The Department of Weights and Measures of the Ministry of Trade and Investments confirmed that the Federal Government’s new metering policy in the oil and gas industry would kick off on the 1st of February. The Director, Weights and Measures, Mr. Oluyinka Sikuade, said this during a technical meeting between officials of the ministry and the consultants handling the project. He said the full implementation of legal

meterology services in the oil and gas sector would enable stakeholders to conform with the weights and measure regulation. He said, “We are going to look at the metering system of the operators for accuracy, equity, fairness and conformity. We will take into consideration internationally acceptable error margins for us to have fairness and justice in trading devices used by the operators.”

FG LIFTS BAN ON BUNKERING IN TERRITORIAL WATERS Some thirty years after bunkering in Nigerian territorial waters was banned, it has once again been legalised. The government announced that it would begin to licence bunkering again. Director, Department of Petroleum Resources (DPR), George Osahon, made the disclosure through a press statement saying: “President Goodluck Jonathan has approved the issuance of licenses to bunkers as part of his economic agenda”. “This will help create employment activities for Nigerians as well as act as a stimulus for growth in other sectors of the economy, including inland ports and waterways,” he explained. The DPR intends to publish guidelines in line with the Petroleum Act 1969 for

licensing bunkering operations, which it hopes will net the government around N250million annually. Bunkering is the process of supplying a ship with fuel, which the ship takes into its bunkers. In the 1980s, the process was being abused as vessels were taking subsidised fuel on board and selling them abroad for huge profits. The government banned bunkering in territorial waters as a result, at one time even imposing the death penalty for illegal bunkering. The DPR has advised intending operators to visit the DPR website, http://dprnigeria.org.ng/license-permit/ bunkering-guidelines/ for the new guidelines on bunkering and application forms for DPR licence.

REGULATORY NEWS RIVERS AND BAYELSA STATES SOKU OIL WELLS DISPUTE CONTINUES

JTF DEPLOYS SWAMP BUGGIES FOR ILLEGAL OIL REFINERIES The Joint Task Force (JTF) operating in the Niger Delta says it will now use a new method for the destruction of illegal oil refineries. The Commanding Officer of 29 Battalion of the 2 Brigade of the Nigerian Army, Port Harcourt, Lt.-Col. Olusegun Oladuntoye, said that they were deploying “swamp buggies” which will be able to crush metal tanks used in the illegal refining process. The tactic of completely destroying the tanks will make it impossible for the oil thieves to recommence their illegal activities with the same equipment. “Based on intelligence reports we have discovered that the war against illegal oil bunkering cannot be completed without thorough destruction of illegal refineries,” he said.

The dispute between Rivers State and Bayelsa State over the Soku oil wells, which are located on the boundary of both states, continues in spite of the matter having been ruled on by the Supreme Court. Amaechi issued a statement through his Chief Press Secretary, Mr. David Iyofor, in which he insisted that Bayelsa State’s claim to the wells were based on the 11th edition of the Administrative Map of Nigeria. He said the 2000 map had erroneously shifted the boundary between Rivers and Bayelsa States from the initial boundary between Kalabari and Nembe, west of the Santa

Barbara River, to San Bartholomew River. The shifting of the boundary put the Soku wells within Bayelsa State. According to Amaechi, in 2002, following the publication of the 11th edition of the map, the Rivers State Government, under Dr. Peter Odili, petitioned the chairman of the National Boundary Commission (NBC), Vice-President Atiku Abubakar. He said that in a letter dated July 3, 2002, the Director General, NBC acknowledged the error and apologised, saying that the corrections would be reflected in the 12th edition.

AGWAI IS NEW CHAIRMAN OF SURE-P The Federal Government has appointed Martin Agwai, as the new Chairman of SURE-P following the resignation last year of Dr Christopher Kolade, the former chairman. Tanwa Olusi was appointed as Deputy Chairman. The Subsidy Reinvestment and Empowerment Programme (Sure-P) was hastily constituted following the partial removal of fuel subsidies in 2012. The government said the programme would take the money saved as a result of the partial removal of subsidies and reinvest it into infrastructure, health and educational projects. Dr Kolade resigned last year after the programme came under scrutiny for appearing to be funding projects that the Federal Government was already funding. He insisted that his resignation was unconnected with the allegations. The programme has already received $2.5 billion for projects and a further payment of $1.6 billion is due to it this year.

HOUSE OF REPS INVESTIGATES NON-PAYMENT OF BONGA OIL SPILL COMPENSATION The House of Representatives has decided to get involved in the long running Bonga oil spill compensation matter. The Environmental Committee of the House has summoned the Minister of Environment and the National Oil Spill Detection and Response Agency (NOSDRA). Also to appear before the House Committee are the Department of Petroleum Resources (DPR), the Nigerian Maritime Administration and Safety Agency (NIMASA) and Shell Petroleum

Development Company (SPDC. The House Committee is concerned about the effects of the dispersant that was used by Shell to disperse the oil spill. The communities affected by the spill, from the Warri North, Warri South West and Burutu Local Government Councils areas of Delta State as well as Ekeremor, Southern Ijaw and Brass Local Government Councils of Bayelsa State, say the dispersant that was used caused the water to become polluted. This, they say, has led to loss of

livelihood for coastal communities that rely on fishing and other water-borne activities. The House is asking the agencies involved and Shell to explain why compensation has still not been paid to the communities affected by the December 2011 oil spill at the Bonga oil field. The communities had planned to picket oil companies in the area but shelved the plans following the intervention of the House Committee.

REGULATORY NEWS

NEITI BEGINS 2012 OIL AND GAS INDUSTRY AUDIT

HOUSE OF REPS INVESTIGATES NNPC - SWISS CRUDE TRADERS DEALS The House of Representatives has launched its investigation into dealings between the beleaguered Nigerian National Petroleum Corporation (NNPC) and Swiss Traders. The lawmakers are probing the crude oil deals between NNPC and its crude oil trading partners, particularly Vitol and Trafigura. The investigation comes after Swiss non governmental organization (NGO), Berne Declaration, accused Swiss traders of colluding with NNPC to defraud

the nation of $6.8 billion in oil swap deals, an accusation denied by all the parties fingered by the report. Giving evidence at the hearing, the Executive Secretary of the Nigeria Extractive Industries Transparency Initiative (NEITI), Hajiya Zainab Shamsuna Ahmed, demanded full and transparent disclosure of all alternative funding arrangements in the audited financial statements (AFS) of NNPC.

The Nigerian Extractive Industries Transparency Initiative (NEITI) has commenced its independent audit of the oil and gas industry to cover the period 2012. The objective of the audit is, among other things, to establish what companies paid to the Federal Government and what the Federal Government received into the Federation Account. The audit is also to find out if companies paid what they ought to pay to the Federal Government and if the Federal Government received what is due to the Federation Account especially in taxes, royalties, signature bonuses, levies, rents, concessions etc.

JTF DENIES ISSUING ADVERTISEMENT FOR SALE OF PETROLEUM PRODUCTS The Joint Task Force (JTF) in the Niger Delta has denounced a newspaper advertorial, which said that the JTF was offering petroleum products for sale at the JTF headquarters in Yenagoa. The spokesperson for the JTF, Col. Onyema Nwachukwu issued a statement saying that the advertisement in two national newspapers earlier this year was a hoax. He said: â&#x20AC;&#x153;Joint Task Force Operation Pulo Shield wishes to categorically inform the public that the Task Force is not connected to such advertorial.â&#x20AC;?

REGULATORY NEWS

PTDF AWARDS 60 SCHOLARSHIPS FOR STUDY IN NORWAY The Petroleum Technology Development Fund (PTDF) has awarded 60 scholarships for study in Norway. The scholars, 48 men and 12 women, will study Bachelor of Science programmes in oil related fields at Otsfold University College, Fredrikstad in Norway. The educational programme is part of the agencyâ&#x20AC;&#x2122;s capacity development mandate for the oil and gas industry and youth development. The programme is part-funded by the United Nations Institute for Training and Research (UNITAR).

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FINANCIAL NEWS FHN 26 SECURES $150 MILLION LOAN FROM ACCESS BANK First Hydrocarbon Nigeria (FHN) 26’s plans for oil mining lease (OML) 26, which it won in a Shell divestment, received a boost after the exploration and production company concluded terms for a $150 million Senior Secured Term Loan from Access Bank. Ahonsi Unuigbe, Executive Director and Chief Financial Officer of FHN 26 commended the Bank for the speed and flexibility with which the transaction was arranged. Executive Director and Chief Operating Officer of FHN 26, Femi Bajomo, said the finance would enable it to fund capital expenditure. They are planning to drill new wells with the intention of ramping up production capacity within 18 months.

FORMER CBN GOVERNOR DRAWS ATTENTION TO DEPLETED EXCESS CRUDE ACCOUNT Former Central Bank of Nigeria (CBN) Governor, Sanusi Lamido Sanusi voiced his concern over the depleted Excess Crude Account (ECA). Speaking at the end of a two-day meeting of the Monetary Policy Committee of the CBN Sanusi said that the ECA had fallen from $11.5 billion in December 2012 to less than $2.5 billion on January 17, 2014, a decline of $9 billion in the ECA, in only one year.

The former CBN Governor said he had concerns about the depletion of fiscal buffers following the continued decline in oil revenue and the depletion of the ECA. Declining oil revenue could not be explained wholly by output loss from theft and vandalism he said. “This is giving us cause for concern and also to the Finance minister, and I suppose ongoing discussions will begin to reveal some of the reasons for

that dramatic decline,” he noted. He urged fiscal authorities should find ways to block what he called “revenue leakage.” He also expressed grave concern over the country’s declining external reserves, saying that the gross external reserves as of December 31, 2013 stood at $42.85 billion, representing a decrease of $980 million or 2.23% compared with $43.83 billion at the end of December 2012.

AFC TO UNDERWRITE $65 MILLION LOAN FACILITY TO DEPTHWIZE The Africa Finance Corporation is to underwrite a $65 million loan facility for indigenous drilling contracting company, Depthwize Nigeria Limited. The amount is part of a $100m senior secured term loan facility, which the company said in a statement that it will use for the acquisition and upgrade of swamp rigs. JP Morgan is the co-mandated lead arranger on the transaction. Depthwize is a contractor for shallow water and swamp barge drilling rigs and is planning to acquire more rigs with the capacity to drill beyond 30,000 feet depth. Their technical partner is American company, Megadrill Services Limited, which builds swamp rigs. According to the statement, Depthwize operates the assets of Megadrill in Nigeria with two high temperature and high-pressure swamp rigs currently under its purview. The loan facility will be used to finance capital expenditure related to the acquisition of new HTHP swamp rigs and upgrading of the existing ones. The Managing Director, Depthwize, Mr. Uche Dimiri, said the new rigs would enhance the company’s access to new swamp drilling opportunities in the Niger Delta.

FINANCIAL NEWS FORTE OIL POSTS N6.52 BILLION PROFIT FOR 2013

The company’s revenue in the period was N128 billion, a growth of 41 per cent, while profit before taxes grew 467 per cent to N5 billion and earnings per share rose 365 per cent to N4.32. The company says its growth was a by-product of a wellexecuted business transformation strategy in the last 24 months covering corporate governance, risk management and controls, business revitalization, development and expansion. Group Chief Financial Officer, Mr. Julius Omodayo-Owotuga said the company’s revenue growth was due to the significant increase recorded in the sales of its fuel products segment, Premium Motor Spirit (PMS), Automotive Gas Oil (AGO), Aviation Turbine Kerosene (ATK) as well as its production chemicals, lubricants and greases. Its newly acquired power plant also contributed significantly to the revenue stream. Omodayo-Owotuga said: “Our 2013 PBT of NGN6.52bn is a clear demonstration that Forte Oil Plc is on a clear path to dominate our primary market; the downstream petroleum marketing sector.” The company intends to make a dividend payment of N4.31 billion at N4 per share.

6 5 billion

Forte Oil Plc continues its winning streak after announcing a 467 per cent increase in its full year profit before tax. The downstream indigenous giant posted N6.524 billion for the period ending 31 December 2013. Profits after tax rose 397 per cent to N5 billion.

4 3 2 1 0

1.15bn 2012 Proﬁt (before tax)

6.52bn 2013 Proﬁt (before tax)

FORTE OIL PLC IS ON A CLEAR PATH TO DOMINATE OUR PRIMARY MARKET; THE DOWNSTREAM PETROLEUM MARKETING SECTOR.

OANDO TO DOUBLE PRE-TAX PROFIT TO N100 BILLION Oando has revealed that its pre-tax profit is set to double to over N100 billion due to increased production it expects as a result of the ConocoPhillips acquisition. Speaking during a recent visit to the Nigerian Stock Exchange (NSE), Oando PLC Group Chief Executive, Mr. Wale Tinubu, said post-acquisition, Oando’s Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) will rise from the current annual average of N45 billion to N100 billion. Shareholders are on course to benefit significantly as the increase in earnings will lead to an improvement in dividend payout to shareholders in the near term said Tinubu. He said that the acquisition will significantly enhance the company’s growth initiatives.

Shares of the company surged 10 per cent after the company announced that it had secured the funds to complete the acquisition. The shares rose N18.6 to N21.11, outperforming the broader index, which was up 0.27 per cent. The company’s shares had taken a 30 per cent hit as the longstop date of 31st January for closure of the acquisition approached. They were able to get further extensions to complete the financial close and await Ministerial Consent for the transfer. Oando has experienced exponential growth in its asset base since 2003, going from N36billion to N515billion in 2013 due to the diversification efforts from its maiden downstream business that was acquired in the early 2000s to the fully integrated platform with major assets in the midstream and upstream.

INDUSTRY MOVES

OGUNBIYI STEPS DOWN FROM FHN, AFREN Constantine ‘Labi Ogunbiyi, founding chief executive officer (CEO) of independent indigenous upstream player, First Hydrocarbon Nigeria (FHN), has stepped down from his role as CEO. He has been CEO of the company since its inception in 2011. He also steps down from the board of Afren Plc from where he was instrumental in setting up FHN and leading the fund raising effort for the acquisition of oil mining leases (OMLs) 26 and 113 by FHN.

Chief Executive Officer of Afren Plc, Osman Shahenshah, said in the statement: “We would like to thank ‘Labi for the instrumental role he has played in the evolution of both Afren and FHN into leading players in the Nigerian and African oil and gas industry.”

Ogunbiyi rose through the ranks of Afren to eventually become general counsel, then associate director and finally, executive director in charge of business development. From there he went on to become the founding CEO of FHN.

Speaking about giving up his roles in Afren and FHN, Ogunbiyi said: “I am extremely proud to have been a part of the establishment and evolution of Afren and FHN and to have been a part of their incredible success. From small and humble roots to becoming the leading Nigerian and independent E&P players in Africa with a world-class management team, I am safe in the knowledge that they could not be better positioned for further growth. I will remain a passionate advocate, interested and ready

Afren said in a statement that: “Mr Ogunbiyi has been a core member of the executive management team since Afren’s inception and assisted in establishing Afren’s business from the early days of Afren’s existence.”

to support however I can. I would like to thank the board and my colleagues for their support and assistance over the years.” Ogunbiyi has not confirmed what his future plans are although industry watchers are predicting that he is planning to set up his own exploration and production business to replicate the Afren story himself. The various international oil company (IOC) divestments going on at the moment could present the perfect opportunity for the personable former CEO from an oil family to finally strike out on his own or partner with other like minded individuals. NOGintelligence wishes Ogunbiyi great success as he embarks on his next venture.

KAMGAING LEAVES BNP PARIBAS TO HEAD ECOBANK INVESTMENT BANKING GROUP Moyo Kamgaing has joined Ecobank as Group Head, Investment Banking (IB), reporting to the Deputy Group CEO, Corporate and Investment Banking. He will be based in Accra, Ghana.

He was a sale mandate for the exit by Conoco from Nigeria and related financing for the buyer Oando. One of his major achievements was arranging Ghana’s first sovereign syndication in 1995, with an oil facility via Citibank.

With over 25 years of experience, Moyo is joining Ecobank from BNP Paribas where he spent 3 years as Head of Coverage, CIB – West Africa, London & Bahrain. His primary role was to design and implement strategy across Corporate Finance, Debt Capital Markets, Project Finance and Commodities Derivatives.

Prior to joining BNP Paribas, he set up and successfully managed Sydmor, an Advisory firm based in London during 15 years.

Kamgaing has been involved in a number of major oil and gas transactions. He performed Project Finance advisory for BTG, the Nigerian LNG transport company.

Kamgaing started his career with Bankers Trust (BT) for 9 years as Vice-President, CIB West Africa, Paris & London with several achievements as the negotiation

and closure of BT’s first post-apartheid deal in South Africa, a goal swap line for Reserve Bank, as well as the arrangement of a syndication for Ghana Cocoa board in 1994, in a deal that won the Euromoney award. Kamgaing holds an MSc. in Finance and International Business from Massachussets Institute of Technology (MIT) and an MSc. in Management from HEC Paris. NOGintelligence wishes Kamgaing every success in his new role and career with Ecobank.

BRIEFING

STRUCTURE OF THE NIGERIAN CONTENT DEVELOPMENT MANAGEMENT BOARD” GOVERNING COUNCIL

EXECUTIVE SECRETARY

DIRECTORATE OF FINANCE & PERSONNEL MGT

DIRECTORATE OF PLANNING RESEARCH & STATISTICS

NCDMB GOVERNING COUNCIL The Act establishes the Governing Council to conduct and oversee the Affairs of the Board. The Governing Council is made up of: (a) The Chairman who is the Honourable Minister of Petroleum Resources. (b) Representatives of (i) Nigerian National Petroleum Corporation (NNPC) (ii) Department of Petroleum Resources (DPR) (iii) Ministry of Petroleum Resources (MPR) (iv) Petroleum Technology Association of Nigeria (PETAN) (v) Nigeria Content Consultative Forum (NCCF) (vi) Council of Registered Engineers of Nigerian (COREN) (vii) National Insurance Commision (NAICOM); and (c) The Executive Secretary who is the Secretary of the Council and the CEO of the Board.

DIRECTORATE OF MONITORING EVALUATION

DIRECTORATE OF LEGAL SERVICES

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COVER STORY

ERNEST NWAPA: “WHAT I WOULD LIKE TO ACHIEVE THIS YEAR” THE EXECUTIVE SECRETARY SPEAKS EXCLUSIVELY TO NOGINTELLIGENCE Ernest Nwapa is a man on a mission. He is driven by his mission to deliver local content participation to Nigerians in all aspects of the Nigerian oil and gas industry. He knows he has his work cut out for him. So, when NOGintelligence asked for an interview at the end of last year, Mr Nwapa said: “Let’s do it after the holidays, when I am back with fresh ideas.” Mr Nwapa is a man of his word and in between his hectic schedule he found time to talk exclusively to NOGintelligence about what he would like to achieve this year.

1. NIGERIAN OIL AND GAS INDUSTRIAL PARKS PROJECT Nwapa: There are three main areas I want to look at this year, the first being the parks project, what we call the Nigerian Oil and Gas Industrial Parks Scheme (NOGIPS). It is such a big part of our vision to get the impact felt not only in the country but also closer to the oil fields in a meaningful, sustainable and really impactful way.

The NOGIPS is modeled after the desire to get manufacturing entities to come into the country and what has happened over the years since we started doing this agenda is that Original Equipment Manufacturers (OEMs) that are already established here, have been improving their capacity and doing more and more in the country. But full-blown manufacturing is still something they are really not doing. Part of the problem is the infrastructure

and also being sure whether the goods manufactured will have off-take in the industry. So we have tried to use another approach to attract newer OEMs, by creating centres close to the oil fields. What we are trying to achieve is to mobilize local SMEs and entrepreneurs in the community who are already doing things in the nature of manufacturing or who have enterprises to

COVER STORY

gear them up in such a way that they are able to link up with OEMs that are currently supplying the industry. Many of these OEMs have had relationships with locals for years, but these locals just handle their goods importation, supplying them as vendors to the oil and gas industry. We believe that there are so many components of these goods that can be manufactured or assembled in Nigeria. Now, are the big foreign companies willing to start buying land and developing houses and workshops? I think many of them will prefer to have a place that is already built and then they just pay rent and move in. We believe that if we go ahead and develop some property and put some road infrastructure and power and then all the necessary utilities into that enclave, that we are able to attract quickly all the OEMs who have already keyed into the message in Nigeria. The Local Content message in Nigeria is no longer new. The problem has always been how do we keep up to these challenges in a country where to get a plot of land to set up a workshop, you get into all sorts of community issues and government approvals. That pushes back the interest and appetite to really build some of these things here. We believe that if we take that away, we would have solved a major problem for interested OEMs who are willing to invest. So that is one of the major things we want to do. We have identified locations and we have also identified the structures that we want to use and we have actually started preparing the workforce to move in that direction so that we are not just regulating what the oil companies are doing and

â&#x20AC;&#x153;We are not just regulating what the oil companies are doing and passing down rules. We are stimulating actual growth in this whole sector.â&#x20AC;? passing down rules. We are stimulating actual growth in this whole sector.

2. UTILISATION OF THE NIGERIAN CONTENT DEVELOPMENT FUND Nwapa: We believe that the Fund should be mobilized towards capacity building, to assist Nigerian companies with upgrading their yards and upgrading their capacity in terms of human resources. To that end we have discussed with all the banks to support the local people. Our fund is not that big yet (about $300 million currently) but we see that the Fund can grow to a billion dollars by 2016/2017 and if the projects come as we expect them to come, people will be running after that fund, both the banks and the service companies that need that fund. The Fund is a stakeholdersâ&#x20AC;&#x2122; contribution, in which private service companies who have been given a contract, have brought out 1% by requirement of the Act and put it together in a fund that is called Nigeria Content Development Fund (NCDF). That fund is supposed to be used by the same people to build their capacities.

We want the NCDF to focus on strategic long-term issues, like how do we structure the funding for the acquisition of assets like marine vessels and rigs? We want to leverage the Fund to make these things happen. That is the major move for this year and we have started on a good note. Two banks are actually jostling for support to get a Pipe Mill. The structure they are trying to use will involve taking a guarantee from the Nigerian Content Fund and then taking the full loan either directly or in partnership with some export-import banks. We did the pilot phase for the utilisation of the Fund with the Petroleum Technology Association of Nigerian (PETAN). We just wanted to fine-tune a lot of things, the documentation, the requirements, the ease of approving the Fund, and there are modifications we are making on the numbers around the guarantees and the flexibility of the guarantees to make sure they are appropriate for the type of funding we are giving. The Fund is now open and we are going to do a road show to properly get Nigerian investors and services providers to n Continues on page 28

COVER STORY

n Continues from page 27 understand what they need to do to access the Fund.

3. EMPLOYMENT STATISTICS The third area is to begin to collate the employment statistics. We have run programs that have been very successful and many Nigerian youths have been trained and re-trained to participate in engineering, geology, scaffolding, welding and other kinds of vocational skills. So it’s about time now that we begin to harness these resources and make sure that we can pinpoint them. The Joint Qualification System (JQS) already has a collection system but unfortunately it relies on a feedback mechanism to be put in place. The feedback process is not utilized by the young lads, because once they get what they want i.e. employment, they don’t even go back to the JQS. The JQS in set up in such a way that as you get your training, as you get employed and as you have any thing new added to your CV, you go back to the JQS and update your CV. We also built in a structure in the JQS that if you don’t update your profile within

three months we drop you off. We believe that we can publicize this and hope that it will help people come back in and update their status so we can analyze the data.

OTHER PROGRAMMES Nwapa: These are the three major things that we see, but then there are other programs and we are working with other transformational sectors. People are doing things of a transformational nature that can help boost the work we are doing. For instance all the capacity that has been built in the oil and gas industry in the past 5 years cannot be deployed in the oil and gas industry because there is more of that than the oil and gas industry requires. In other words, we don’t have the critical mass in the oil and gas industry. So we need to mobilize the power sector, telecoms, agriculture, transportation and the like. We need to mobilize these sectors to begin to work with the oil and gas sector capacity. That way people who are investing in pipe mills in the country for the oil and gas industry will be able to manufacture pipelines for people building water pipe lines. We want to mobilize people who are building machine parts for the oil and gas industry to building machine parts for

locomotives. We need to get people in the marine sector to see beyond the oil and gas industry and look at the general marine environment, the same for telecoms, and for power. With power, as you know a lot of the expansion to power is based on gas to power and some of the issues with gas is the pipelines to deliver the gas to the power plants. That is something that we will continue to do for the next 20 years, so the power sector needs to come in and look at the investment we are making and tie into it. They are already collaborating but they need to drop down in the value chain so that they can also influence the speed and specifics of our program. How do we begin to drive local content in everything we are doing without necessarily waiting for the law that is supposed to unify local content across the country? That is one of the things we want to start discussing and we have set up meetings to put that in motion and we have designed a framework for that collaboration. Nwapa concludes by paying tribute to the President for his local content vision and the Honorable Minister for her unwavering support for the work of the NCDMB.

INTERVIEW

PROGRESS OF LOCAL CONTENT Financial Services The Nigerian Oil and Gas Industry Content Development Act (NOGIC) 2010 provides that financial institutions should be retained by operators, contractors and other entities engaged in Nigerian oil and gas operations, except to the extent the Board is satisfied this is impractical. It is imperative that the proceeds of oil and gas produced in Nigeria passes through Nigerian financial institutions. For instance, most OPEC countries insist on the proceeds of production on their soil passing through their financial institutions so that their economies reap the knock-on benefits brought about by the additional liquidity provided by revenues from extractive industries. The system in Nigeria prior to NOGIC was an anomaly that had to be corrected; as such, local financial institutions are very pleased that this is finally being addressed through NOGIC. In the past, International Oil Companies (IOCs) would hire offshore investment banks to finance transactions with financing raised off-shore, complete with offshore proceeds accounts and offshore design engineers and subcontractors! By so doing most of the benefits of oil and gas production escaped the country in terms of human capacity development and flows through the private sector which is the real engine of growth and development. Fair enough, tax revenues accrued to government but we all know that government has been very inefficient and unbalanced in channeling the benefits of oil proceeds into the wider economy. Thankfully the old days are fast disappearing. Nigerian banks are now taking their rightful place in funding large ticket transactions in the oil and gas sector and retaining the benefits of such participation by getting the opportunity to manage the proceeds of revenues flowing through these accounts. These flows are in turn channeled into productive ventures that benefit the Nigerian Economy thus boosting the profitability of these financial institutions and creating employment.

Wale Shonibare Managing Director, Investment Banking UBA Capital Plc

Legal Services The clear intention of the Nigerian Oil and Gas Industry Content Development Act 2010 (the Act) is to reserve the provision of legal services in the oil and gas sector in Nigeria for Nigerian legal practitioners. This intention is borne out by the clear unequivocal provisions of Section 51 of the Act which mandates all operators, contractors and other entities engaged in the sector to retain only Nigerian legal practitioners located in Nigeria for the provision of all legal services requirements. While the Schedule to the Act reserves only 50% of legal consultancy contracts to Nigerians, it should be noted that the Schedule does not apply to Section 51 and in the event of a conflict the provisions of Section 51 will prevail. Notwithstanding these provisions the reality in the industry as the Act marks its fourth anniversary is that not even the level prescribed in the Schedule is being complied with. A number of devices have been evolved to externalise legal work that could have been given to Nigerian lawyers thereby

circumventing the provisions of the Act. An analysis of the fee income that is attributable to Nigerian legal firms from oil and gas legal work has not seen much increase since the promulgation of the law. While there may appear to have been more instructions given, the more complex, higher fee earning work is still largely given to foreign firms, with Nigerian lawyers continuing to play second fiddle to foreign counsel and ascribed with roles limited only to regulatory interface and other non tasking roles.

Tominiyi Owolabi Partner, Olaniwun Ajayi LP

Maritime Perspective The Maritime and Shipping Sector has been proactive in driving the local content initiative for enhanced benefits and businesses for Nigerian operators. The Act stipulates that the Minister shall make regulations setting out targets to ensure the growth of indigenous companies engaged in other facilities as well as provision of other support services for the Nigerian oil and gas industry. Primarily, the interrelationship between maritime/ shipping and oil and gas is the support service of providing the vehicles (vessels) to move cargoes from one location to another. It is actually when wet cargoes and services are moved from areas of production to areas of consumption. Shipping plays this important support role and is so accommodated in the Act. The indigenous shipping operators can be more confident in going into new acquisitions as the law ensures that they will get available contracts. As a result of this, a lot of repositioning is taking place presently in the maritime and shipping sector that will transform the economy by direct cumulative impact. Various shipping-based support services that will receive boost includes services by barges, tug boats accommodation platforms, floating storage, security patrol vessels and waste and disposal vessels among others. The Lagos Deep Offshore Logistics Base (LADOL) is an example of emerging Nigerian companies positioning to take advantage of the Nigerian Content. LADOL is a one-stop-shop-hub for oil and gas logistics, maintenance, mega fabrication, FPSO integration and engineering. It provides integrated chain drilling and production solutions, supply base drilling and production solutions, supply base services, project management,

country.

personnel, vessel charter services, equipment supply, procurement, catering, crew change services, hotel accommodation (within the base), fully furnished and services offices etc. LADOL is one of the largest 100% private Nigeria-funded oil and gas infrastructure development projects in the

Nigerian content is defined as the valued added or created in the Nigerian economy through the utilization of Nigerian human and material resources for the provision of goods and services to the petroleum industry within acceptable quality, health, safety and environmental standards aimed at stimulating the development of indigenous capabilities. To add effective value, we must have healthy funding, quality participation, efficient collaboration, and transparent regulation, availability of energy, capacity building, safety and security. The call now is for indigenous companies to wake up to the challenges and imperatives of the local content law and endeavor to meet the expectations of government within a short time frame. Funding is very crucial, necessary and must be provided through available channels. For instance, the commercial banks have the Cabotage Vessel Finance Funds (CVFF). I also believe that the time is ripe to have a maritime bank that will attend to maritime requests based on the peculiar nature of the industry. It is our desire that more of you endeavor to set up such businesses in the sector. You can be sure of the support of the Chamber of Shipping.

Ify P. Anazonwu-Akerele Director General, Nigerian Chamber of Shipping

BRIEFING

A GUIDE INDUSTRY CONTENT In 2010 the President of the Federal Republic of Nigeria signed the Nigerian Oil and Gas Industry Content Development Bill into law. The Nigerian Oil and Gas Industry Content Development Act (“the Act”) was designed to enhance the level of participation of Nigerians and Nigerian companies in the country’s oil and gas industry. With the promulgation of the Act, the Government clearly established its intention to increase indigenous participation in the industry in terms of human, material and economic resources. The implementation of the Act was expected to significantly change the business and operating structure in the Nigerian oil and gas industry, particularly for the international oil service companies. This Briefing Note highlights some of the major provisions of the Act. n Definition of “Nigerian Content”: The quantum of composite value added to or created in the Nigerian economy by

a systematic development of capacity and capabilities through deliberate utilisation of Nigerian human, material resources and services in the Nigerian oil and gas industry” n A “Nigerian Company” is defined as: “a company formed and registered in Nigeria in accordance with the provisions of Companies and Allied Matters Act with not less than 51% equity shares by Nigerians”. n Establishment of the Nigerian Content Development and Monitoring Board (the Board) to monitor, coordinate and implement the provisions of the Act; and the Nigerian Content Consultative Forum to provide the platform for information sharing. Submission of Nigerian Content Plan (“the Plan”) to form an essential component of bidding for any license, permit or interest in the oil and gas industry. It shall contain provisions to ensure that ‘first consideration’ is given to Nigerian independent operators, goods and services and also to Nigerians in employment and training.

n The award of contracts shall not be based solely on the principle of lowest bidder (provided that the Nigerian company’s bid does not exceed the lowest bid price by 10% percent). Where bids are within 1 % of each other at the commercial stage, the bid containing the highest level of Nigerian content shall be selected, provided the Nigerian content in the selected bid is at least 5% higher than its closest competitor. n Where there is inadequate Nigerian capacity, the Minister may authorize the continued importation of the relevant items up to 3 years from the commencement of the Act. n Requirement to pay 1% of total contract sum awarded in the upstream sector into the Nigerian Content Development Fund (NCDF) - deductible at source. n All fabrication and welding activities must be performed in-country. n Grant of tax incentives by the Minister to companies which establish

BRIEFING

TO THE DEVELOPMENT ACT facilities, factories, production units or other operations within Nigeria for the purposes of manufacturing goods or providing services which were previously imported. n Subsidiaries of multinational companies to own at least 50% of the equipment used for execution of work in the country. n All operators, contractors and subcontractors shall maintain bank account(s) in Nigeria in which it shall retain a minimum of 10 percent of its total revenue accruing from its Nigerian operations. n Only Nigerians shall be employed in the junior and intermediate cadres or corresponding grades by operators and companies in the industry. n Only a maximum of 5% of management positions may be retained by operators or project promoters for expatriates (as may be approved by the Board). Operators shall submit a succession plan to the Board for positions not held by

Nigerians. Nigerians shall understudy the expatriates for a maximum of 4 years, after which the position shall become â&#x20AC;&#x153;Nigerianisedâ&#x20AC;?.

n Establishment of a Joint Qualification System (JQS) as an industry databank of available capabilities in the oil and gas industry.

n Submission of, and receipt of approval from, the Board prior to making application for expatriate quota to the Ministry of Interior, going forward.

n Companies operating in the oil and gas industry are required to submit the following returns and plans to the Board on a periodic basis:

n Submission of a programme of planned initiatives aimed at promoting the effective transfer of technologies from the operator and alliance partners to Nigerian individuals and companies.

n Nigerian Content Performance Report to be submitted within 60 days of the commencement of each year.

n Operators, contractors and subcontractors requiring financial and legal services shall retain the services of only Nigerian financial institutions (where practicable) and Nigerian legal practitioners whose offices are located in Nigeria. n Only insurance brokers registered in Nigeria are permitted, while no insurance risks can be placed with foreign insurance companies without the written Approval of the National Insurance Commission.

n The following reports, every 6 months: n Research and Development Plan n Legal Services Plan n Financial Services Plan n Insurance Report n Any operator or company that fails to comply with the provisions of the Act commits an offence and is liable upon conviction to a fine of 5% of the project sum, or cancellation of project. This Briefing Note was prepared by KPMG.

Building capacities in Nigeria to support increased investment in the oil and gas industry The Nigerian Oil and Gas Industry Content Development (NOGICD) Act 2010 was signed into law by His Excellency President Goodluck Ebele Jonathan on 22 April 2010. This piece of legislation established the Nigerian Content Development and Monitoring Board to superintend over the implementation of the provisions of the NOGICD Act. Over the past three years and half of its establishment, the Board has achieved several feats under the leadership of the Chairman of the Governing Council, Her Excellency Diezani Alison-Madueke, Honourable Minister of Petroleum Resources. One notable achievement is the establishment of the Nigeria Oil and .HZ PUK\Z[Y` 1VPU[ 8\HSPĂ&#x201E;JH[PVU :`Z[LT 56.0* 18: HU LSLJ[YVUPJ WSH[MVYT [OH[!

Q Currently captures more than 16,000 entries of individuals and professionals and their skills and competencies; Q Has more than 5,000 service company portal accounts with details of their capacities; Q Offers oil and gas assets categorisation modules; Q Uses Expatriate Quota Management modules. The Board has also commenced the development of Oil and Gas Industrial Parks to promote manufacturing and JYLH[L QVIZ ZOVW Ă&#x2026;VVYZ HUK Z[PT\SH[L the development of linkage sectors. This is being implemented under the Nigerian Oil and Gas Industrial Parks :JOLTL 56.07: HUK ^PSS PU]VS]L the establishment of the physical infrastructure and create an

enabling environment for low-cost manufacturing, domiciliation of capacity, technology acquisition, training, employment opportunities and structured community participation. :V MHY [^V ZP[LZ VM HIV\[ hectares each have been secured in Bayelsa and Cross River, and development commences in the second quarter of 2014. The Nigerian Content Development Fund has also grown to more than $300 million and is now being accessed by Nigerian service companies. The fund structure earmarks 70 per cent to guarantee loans from Nigerian Banks to service providers to build capacity. The 30 per cent balance is currently being used to fund direct intervention WYVQLJ[Z Z\JO HZ [OL 56.07: WYVNYHTTL

pilot pipe mill initiative, training and employment initiatives in geosciences, environmental remediation, construction skills and so on. Below are highlights of some of the achievements.

New and upgraded facilities

Q More than $5 billion worth of investments have been made in the development of new fabrication yards and upgrade of existing yards and facilities; Q Government efforts at maximising in-country fabrication have stimulated the establishment of these facilities to achieve in-country fabrication capacity of about 120,000 tons per annum, and has created jobs for around 10,000 Nigerians.

Human capital development

Q More than 5,000 employment and On the Job Training (OJT) slots have been created for Nigerian engineers and technicians on ongoing oil and gas projects; Q The Board is training about 1,000 geoscientists, environmental scientists and vocational/construction professionals who will be attached to companies and projects to gain expertise.

The Board has commenced the development of Oil and Gas Industrial Parks to promote manufacturing Oil and gas equipment

Construction work has commenced for two steel pipe mills in Bayelsa and Edo states. These mills will produce about 400,000MT per annum of steel pipes for the oil and gas industry by 2016 and create more than 10,000 direct and indirect jobs during the construction and operating phases of the mills. The Equipment Component Manufacturing Initiative (ECMI), which began in 2011 to develop local capacity for manufacturing of equipment packages and components, has birthed investment commitments of almost $2 billion by Original Equipment Manufacturers and their local reps.

Nigerian-owned and operated marine assets

Today, more than 55 per cent of the offshore support marine vessels used in the oil and gas industry are owned and operated by Nigerians. This has resulted in the retention of about $2.5 billion in Nigeria, out of about $5 billion expended by the industry on marine vessels.

Nigerian companies have mastered land and swamp activities and are now owning and operating jack-up rigs and venturing into deep-water development.

Nigerian Content Development and Monitoring Board Revenue House, Lambert Eradiri Road Onopa Yenagoa, Bayelsa State 560001, Nigeria Email: info@ncdmb.gov.ng www.ncdmb.gov.ng

FEATURE

4 YEARS OF NIGERIAN CONTENT DEVELOPMENT:

Achievements

Challenges “I can boldly say that we have met these objectives and we have gotten into gear to drive the aspect of implementation to the next level.” 34

Recently the Nigerian Association of Energy Correspondents recently, the Executive Secretary of the Nigerian Content Development and Management Board, Ernest Nwapa, set out some of the NCDMB’s achievements and challenges in 4 years of Nigerian content development. The Executive Secretary explained that when the NCDMB was set up, the Minister of Petroleum Resources gave them a loaded agenda, which included employment, ownership of vessels, domiciling of ports in the country. The NCDMB was carrying the aspirations of the country and the industry, foremost of which was to link the oil and gas industry to the other sectors of the economy and to domicile the activities and get most of the input from Nigeria. After 4 years, the Executive Secretary says: “I can boldly say that on those scores we have met these objectives and we

have gotten into gear to drive the aspect of implementation to the next level.”

Mr Nwapa points out that as a result of the local content drive, there has been a major change in the mind set of operators, service providers and even vendors and suppliers operating from outside the country. Everybody in the industry now understands that to do any work in this industry you have to have a Nigerian Content bent. He says that anybody who is designing any project has Nigerian content as a major consideration and he believes that we have to continue pushing this message and demonstrating the benefit of this message so that it will get into our culture, not only the oil and gas industry but also in other sectors of the economy. So what has been achieved in 4 years of Nigerian content development?

FEATURE

LEGACY PROJECTS

DOCKYARDS

NCDMB is working on many models. When they have a major project – some of these projects range from $5 billion to $20 billion – they insist now that there must be legacies out of these projects. The Egina is one such project. Out of Egina, the operators TUPNI is committed to topside integration in Nigeria, which means that you have to prepare a yard and bring it up to that level. This topside integration project is at a cost of $150 – 200 million and it will generate 30,000 jobs and a lot of training opportunities.

In the case of dockyards, quite a lot of activity is going on there, with more than 2 billion dollars investment going on in different fabrication yards. Everybody is racing to be able to do more in Nigeria, both international companies and local indigenous companies. An LNG carrier size dockyard being built will be complete by 2015 at a cost of $250 million. It will generate 55,000 jobs with 20,000 training slots as a result.

Other legacy projects include Bonga SW, Erha, OPL 245, Brass LNG, OKLNG, NLNG Shipping.

The deepwater projects are contributing significantly to local capacity. Companies like Cameron and FMC are annually increasing their capacity off the back of projects that are being awarded in the industry, most especially with subsea equipment. For example, the umbilical facility and tree assembly for Erha North and Egina will be produced at a cost of $250 million, generating 5,000 jobs and 2,000 training slots.

EXPATRIATE QUOTA NCDMB now has a database that allows it to track expatriates. Three months before the two years are up for any expatriate, the system will flag it up and any renewal will be tracked. The model will help NCDMB with tracking the succession plans of the organisation to ensure that when an expatriate has trained an understudy, the transition is seamless and practical.

HIGH TECH EQUIPMENT

PIPE MILLS There are three new pipe mills planned and the construction of one in progress with production scheduled to begin in 2015. These pipe mills will be built at a cost of $150 million each and will generate 15,000 new jobs with some 3,000 training slots as a result.

“Everybody in the industry now understands that to do any work in this industry you have to have a Nigerian Content bent.” 35

FEATURE DIRECT TRAINING INTERVENTIONS Another major intervention by NCDMB is training. They are deepening their training intervention. About 4 years ago, they started requiring that IOCs, for any project they are doing, must make a provision of 10 per cent of either dollar or naira for training Nigerians on the job. The issue is about creating the slots for attaching Nigerians. This has been very effective as a pipeline for employment. You find that when you attach people to these companies for about 1 year, over 60 per cent of them continue their employment and those of them that come out after a project is finished have less difficulty in finding employment in the industry. This on-the-job-training scheme has worked very well, to the extent that now, what

NCDMB has started doing is that when they canâ&#x20AC;&#x2122;t find an attachment slot, they create a prototype construction project. They started it with the training of artisans to build a headquarters building where they are engaging all the artisans that they can to create a dummy project for them to demonstrate their skills before they move on to construction sites, which will be opening up in about 7 months time. NCDMB has an MOU with PETAN so that every PETAN member creates a certain number of slots, depending on the size of the company, although it is voluntary at this point. They will be expected to create a 2-year attachment programme but NCDMB will pay the stipends through the Nigerian Content Development Fund. NCDMB believes that this will generate a skill development initiative that will be

possible to replicate in other areas of the economy. NCDMB has engaged global expert in technology, Petrofac to work with the Oil and Gas Trainers Association of Nigeria (OGTAN). OGTAN brings all trainers in the oil and gas industry together and standardises the training curriculum, the training model and the training environment. When NCDMB is satisfied that the requisite standard has been obtained they will start to collaborate with the operators and work out a good proportion of training that must be done in Nigeria. They do not intend to ban foreignbased training but feel that there is a need to strike the balance and bring facilitators and experts to come and use facilities in Nigeria and bring knowledge centres to the country.

THE NIGERIAN CONTENT DEVELOPMENT FUND One per cent of every contract awarded in the upstream sector goes into the Fund. NCDMB started the fund with zero. Today there is around $300 million in the Fund, and it is designed not to be depleted. The fund is split into two parts. 30 per cent of it is used for direct interventions and 70 per cent is to guarantee loans. Contractors have found it difficult to borrow with interest rates too high and tenures too short. The Fund provides a guarantee to participating banks to take 50 per cent of the interest rate for qualifying contractors. The guarantee by the Fund will also enable contractors to get loans with longer tenures where the cash flow demands justify it. Only a few transactions have been done so far as NCDMB tests the waters. They are now expanding the size of the loan packages and preparing for a road show to make the fund more widely available.

MANUFACTURING There is an initiative to promote local content manufacturing. It is now a serious requirement that every company should have a plan of action for getting some of the components of the equipment they need manufactured in Nigeria. NCDMB says this is working well and that they have managed to get commitments and are monitoring the representations. Companies will only get certificates to import those components renewed if they are able to show the progress they have made. The kinds of equipment they are targeting are macro components such as line pipes, umbilicals and pumps, etc., while micro components include flanges, chemicals, PPEs, bolts and nuts.

THE NIGERIA OIL AND GAS INDUSTRIAL PARK SCHEME (NOGIPS) This is an essential part of the drive for more manufacturing. To that end, NCDMB will be acquiring land, most of them donated by State governments, where they will build basic facilities that provide infrastructure so that people who are really interested in manufacturing will not have to worry about land or power. It makes it easy for manufacturers to get in and just get going. NCDMB has decided to drive the quest for local manufacturing directly by investing in a pipe mill. It has acquired 10 hectares of land and is about the

start early civil works. Shell is going to put the jetty in for the facility as part of their CSR. This land will hold a pipe mill that will do 250,000 metric tonnes a year. Nigeria has come a long way and whenever the Executive Secretary, Ernest Nwapa, sees a gap between what there is and what could be he sees it not as a challenge, but as an opportunity. He would like investors to invest to fill these gaps and gave the assurance that Nigeria is committed to ensuring that the Nigerian content legislation transforms the countryâ&#x20AC;&#x2122;s economy.

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INTERVIEW

DR OLUWOLE OLULEYE SPEAKS TO NOGINTELLIGENCE Dr Oluwole, the 6th Executive Secretary of the Petroleum Technology Development Fund (PTDF) was appointed to that role in May 2013. He is the Chief Executive of the Fund. He was the first Executive Secretary of the Petroleum Products Pricing Regulatory Agency (PPPRA), serving there between 2003 and 2009. During his time at the PPRA, he was credited with the development of a transparent petroleum pricing mechanism and the initiation of the deregulation policy on the supply of products. Dr Oluleye spoke exclusively to NOGintelligence about the task at hand and the areas that he wants to improve.

interview

Q. When you assumed office what were

the things you felt needed to be done differently?

A. A lot of things needed to be done

differently i.e. (I) Processing of OSS entitlements-school fees, students allowances etc (II) Multiplicity of projects without completion. (III) Staff morale (IV) More emphasis on local content.

Q. What areas of the work of the PTDF do

you feel still needs to be improved?

A. Most aspects of our interventions

require various levels of improvement. Some may be minor while others may require complete overhaul. (a) On the Overseas scholarship Scheme (OSS) we need to renew the course content of the masters and Ph.D scholarship awards to reflect the gradual shift from hydrocarbon based energy to renewable. The same applies with our sponsored research program such that the outcomes will have immediate impact on the industry, we are also now emphasizing on entrepreneurship training programmes. (b) I have realized that there are too many projects and programmes going on at the same time. The effect has been that some of our projects like the institutional development interventions, the equipping of ICT centers are not completed and left hanging. (c) We need to cultivate the buy-in of the beneficiaries of our intervention projects for

maintenance and sustainability.

If you had to pick 3 things that you want the PTDF to achieve this year, what would they be?

A. If I am to pick 3 things to be achieved

in 2014, I will pick the following: (a) Completion of Head office building. (b) Completion of the Federal Polytechnic of Oil and Gas, Ekowe, Bayelsa, Federal Polytechnic Bonny, Skills acquisition Centers in Port Harcourt and the National Institute for Petroleum Policy and Strategic Studies, Roll out of several tertiary institutional upgrades. (c) Payment of Overseas students school fees and entitlement as at when due (This has already been achieved).

What are the biggest challenges the PTDF is facing at the moment?

A. Funding; A corollary of this is that most

of our projects and programmes have been stalled. It is only now, with the intervention of the Hon. Minister, that attempts are being made to complete those that have attained 80-95% completion level. Another consequence is that it created delayed remittance of our scholars’ tuitions and allowances. We could also not process the scholarship awards for 2013/2014 and have had to combine it with the 2014/2015 awards hoping that Funds will be available.

What in your view is the greatest achievement of the PTDF?

A. We have succeeded in developing

sufficient human capacity to man all the segments of the Oil and Gas industry from the upstream to midstream and

downstream. We have trained chemical Engineers, Petroleum Engineers, Geologists, Petroleum Economists, as well as enhanced the skills and competencies of Drilling Engineers, Underwater Welders and others. PTDF is indeed an example of the success story of Government’s local content policy with regard to human capacity development.

How does the PTDF fit in with the local content initiatives from the NCDMB?

A. How does the PTDF fits in with the local content initiatives from the Nigerian Content Development Monitoring Board (NCDMB)? First, I will like to say that the local content initiative is part of the transformation agenda of Mr. President. It is the initiative that led to the creation of NCDMB. The PTDF has a whole department called ‘’Nigerian Content” which was established to complement the local content initiative of the Federal Government. Since establishment the Department has carried out the Skill Gap Audit in the Oil and Gas industry. Based on the result of the audit, Need based programmes like the Welders Training and Certification Programme Under Water Welding training program, University Lecturers Skills Enhancement Training Programmes etc were initiated. In addition to the training programmes the Fund is involved with University upgrade projects in higher institutions with Oil and Gas related faculties. We have also instituted a number of Oil and Gas and alternative energy researches. n Continues on page 40

interview

“PTDF IS INDEED AN EXAMPLE OF THE SUCCESS STORY OF GOVERNMENT’S LOCAL CONTENT POLICY.” n Continues from page 39

to modern technology and best practices which they will bring back to impact on the system.

All these are geared towards ensuring the achievement of local content initiative.

In relation to the NCDMB, the two agencies have initiated action towards having a collaborative agreement that will ensure complementarity in the programmes of the two institutions. For example, if we train, NCDMB will make sure the trainees are employed by the industry.

What is your view of the progress of transfer of technology to Nigerians in the oil industry?

A. The progress of transfer of technology in the Oil industry may appear to be slow but we are making appreciable progress.

This informs our commitment to build world class institutions like the PTI, Effurun, Polytechnic of Oil and Gas, Ekowe/Bonny, Center for Skills Development and Training, Port Harcourt; and the University upgrade projects which I earlier mentioned. Our OSS is also targeted at scholars being exposed

Are you happy with the performance of the Petroleum Training Institute (PTI) in Warri and the Kaduna National College of Petroleum?

A. I can only speak of the likely impact

of PTDF intervention in PTI and Kaduna College on the performance of the institutions. We were asked to install the most sophisticated and up to date training facilities in PTI and these you may not find in similar institutions in Africa and the Middle East. Some of these are a full oilrig, simulators, welding equipment and other workshop and laboratory equipment. The Kaduna College is still undergoing construction so the impact cannot be felt yet.

Are you getting enough support from the industry for industrial attachments and hands-on experience?

Yes, we get support from the industry for trainee attachment and hand-on experience, but it is not yet enough. Our

approach now is to work in accordance with industry requirements.

What kind of monitoring is taking place to be able to keep track of the transfer of technology to Nigerians and any gaps in training?

The PTDF now has a monitoring and Evaluation Unit that is directly under my supervision. We are iniating software that will enable us track the performance of our trainees and evaluate the gaps for necessary solutions. Already a schedule of Monitoring and Evaluation activities that will cover all PTDF programmes has been put in place for 2014.

What would you like to be your legacy at the PTDF?

A. I would like to leave behind an

institution that emphasizes the tenets of good governance by the Upgrade of several faculties of oil and gas in our tertiary institutions to world-class standards whereby Nigeria will be a destination for training in oil and gas. Also, to leave a legacy of starting fewer projects that will be completed and have an impact on the society.

Developing Regional Know-How The petroleum technology development fund (PTDF) is Nigeria’s agency for developing and enhancing the skills, capacities, competencies and capabilities of Nigerians to operate and manage the various segments of the oil and gas industry. PTDF offers local and overseas scholarships to deserving Nigerian students for undergraduates and graduate studies in specialized oil and gas related courses in PTDF upgraded Nigerian Universities and top ranked universities abroad. PTDF trains and enhances the skills of Nigerian welders including under water welders for international certification to practice and carryout complex fabrication and welding requirements of the oil and gas industry. PTDF upgrades oil and gas related departments with world class teaching and research facilities in universities across the country. PTDF is also enhancing the teaching, learning and research skills of University lecturers including trainings in Engineering Design Software Interpretation. PTDF sponsors research activities in critical areas of the oil and gas industry through its Endowment and Research Grant Competition and provides the platform for sharing research outcomes with the industry through the Technology Knowledge Sharing Programme.

PTDF is building relevant institutions for in-country development of the human capital requirements of the oil and gas industry. These include the Federal Polytechnic of oil and gas, Ekuwe, Bayelsa state. The Federal Polytechnic Bonny, Rivers state, specializing in Environmental Management and Gas Technology. The comprehensive infrastructural and faculty upgrade of the Petroleum Training Institute, Effurun, Warri, and Delta State. The National Skills Training and Development Centre, Port Harcourt, Rivers state. International Oil and Gas Research Centre and Museum, Oloibiri, Bayelsa State. The National Institute for Petroleum Policy and Strategy, Kaduna and the development of information communication technology (ICT) centers in secondary and tertiary institutions across Nigeria. Through its sponsorship of the annual “Catch Them Young” competition in Petroleum Technology, PTDF creates awareness and sustains interest among secondary school students in core science subjects necessary for the study of oil and gas courses and future career in the petroleum industry. PTDF conducts and regularly updates skills gap surveys and audit of the oil and gas industry to determine the skills requirements of the industry that Nigerians lacked and with a view to providing specialized training to fill the gaps. ALL THESE AND MANY MORE PROGRAMMES MAKE PTDF THE LEAD AGENCY FOR HUMAN CAPACITY DEVELOPMENT IN THE OIL AND GAS INDUSTRY

Plot 672 Port Harcourt Crescent, Off Gimbiya Street, Area 11, Garki Abuja. www.ptdf.gov.ng Enquiry: ptdfupdate@ptdf.gov.ng, twitter: @ptdf_nigeria, facebook: www.facebook.com/ptdf, Website: www.ptdf.gov.ng

COMMENT

Nigerian Content Compliance by International Oil Companies Whilst investors are entitled to their profits their hosts are equally entitled to the value of those investments – development. The concept of Nigerian content is about ensuring that Nigerians reap maximum value from investments - the deliberate use and development of Nigerian goods and services; a paradigm shift from the era of profiteering and underdevelopment. Its ingredients are indigenous capacity development, domestication of international standards and promoting investments. Essentially, this means that jobs are to be domiciled in Nigeria, rather than abroad, and that any capacity gap is to be bridged through a cross-border transfer of skills, expertise and technology. It was this concept that was codified as the Nigerian Oil and Gas Industry Content Development Act (NOGICD)- 2010, to shift the paradigm and grow the local supply chain. Accordingly, the Act sets a series of targets for Nigerian participation in the oil and gas sector, and charged the Nigerian Content Development and Monitoring Board (NCDMB) to police it. But how well are these targets being met, within the letters and spirit of the law? The President, to his own admission, in his national interview of 29th September 2013,

said the perception of corruption within his administration is very high. Well, this is also true of oil and gas industry in relation to Nigerian content compliance, and its enforcement. There exists the perception that International Oil Companies are ‘cooking the books’, and seeking unnecessary waivers (moreover as they are seeking an extension of the waiver window), and that when the regulatory body-NCDMB comes visiting they leave with Dollars, Pounds and Yen. Of course this need not necessarily be true, the NCDMB might actually mean business and International Oil Companies might very well be committed to hitting Nigerian content targets within the letters and spirit of the law. But perception, they say, is reality, and this is certainly true in the minds of those that hold them, and that is why a greater amount of transparency can throw light in this direction - as the scriptures say, ‘you shall know the truth, and the truth shall set you free’; in this instance, the publication of data on compliance, waiver and grounds thereof. The President on his part has demonstrated goodwill, having signed the enabling Nigerian Content legislation - NOGICD (2010), and then the Freedom of information Act (2011), which permits public access to information ;and having gone further with a directive to all Ministries, Departments , and Agencies (MDA’s) to comply.

COMMENT

“There exists a perception that international oil companies are cooking the books and seeking extensive waivers.”

The buck rests with the organized civil society, to take the bull by the horn, in accessing the requisite information available to empower the public in making informed decisions. That is why Borderless (not for profit ltd/gte) – the Nigerian Content NGO, has requested for information from the NCDMB on Nigerian Content compliance by International Oil companies. And that is why it is currently before a third presiding Judge (the second having been sacked by the National Judicial council), at the Federal High Court, Yenagoa, seeking judicial review of the NCDMB’s decision not to make this very important information available to the public. Though disappointing, but given our culture of impunity, it comes as no surprise, that a fight is needed to access information, for public awareness in respect of Nigerian content compliance. However, it need not necessarily be corruption, it could be red tape, or officials simply doing a job, or insufficient resources needed to collate process and analyse information available, with a regulatory body that’s but 3 years old. But, as it was said of Russia by Winston Churchill in 1939, so it can be said of

International Oil Companies in relation to Nigerian content compliance: “I can’t forecast for you the actions of Russia. It’s is a riddle, wrapped in a mystery, inside an enigma; but perhaps there is a key. That key is Russian national interest.” The key to Nigerian content compliance by international Oil Companies lies in their commercial interest. That is why it was gratifying when in a recent web chat with Borderless, Mr Mutiu Sunmonu, the Country chair of Shell Companies in Nigeria said: “… We believe having more players especially in the technical services side of the business will introduce more competition, improve capacity and promote cost efficiency of the EP operations in the country”. More important still, to the administration, is the key to reducing its perception of corruption. It is in greater transparency, and in respect to Nigerian Content, by the regulators regularly making public information on compliance by International Oil Companies. With weak institutions and giant corporations - powerful multinational commercial interests, this David has met its Goliath!

‘Tunde Kusamotu, Esq Founder of Borderless (not for profit ltd/gte) Nigerian Content Advocacy NGO, Also, Principal of Kusamotu Associates, a Cross -Border law firm.

BRIEFING

NCDMB: CLARIFICATION OF 50% OWNERSHIP BY NIGERIAN SUBSIDIARY NCDMB has developed a model and approved a precedence for 50 % equipment ownership by a Nigerian Subsidiary based on the following minimum criteria: i. There must exist a Nigerian subsidiary which shall also meet the definition of a Nigerian Company under the NCDMB Act. That is to say, at least 51% of the shares of the Nigerian subsidiary must be owned by Nigerians. ii. The Nigerian subsidiary must own at least 50% of the equipment, or a satisfactory plan for it to own 50 % of the equipment. iii. Ownership or plan to transfer ownership must be in writing, legally binding, credible, and verifiable by NCDMB. iv. Ownership or agreement to transfer ownership shall not be predicated on impossible or dodgy conditionalities. All

conditionalities or encumbrances based on 3rd party interest such as banks or financiers shall be submitted to NCDMB for verification. v. A plan to transfer ownership shall take

The Nigeria Natural Resource Charter (NNRC) is part of a global initiative which aims to support governments and societies of resource-rich countries to harness the economic opportunities of extractive resources. For the effective management of natural resources the Charter has developed a set of 12 Precepts, encompassing the entire chain of decisions faced by governments in relation to resource extraction.

place during the life cycle of the contract for which the equipment is being imported. vi. Where NCDMB is giving approval based on a plan to transfer ownership, the approval will be provisional, normally for a period of one year, renewable upon satisfactory compliance with the terms of the Agreement for the Transfer of ownership. vii. NCDMB will not allow round tripping of ownership whereby agreement is entered with the foreign vendor or parent company to transfer ownership of asset/ equipment after the life cycle of a contract. Except where the Nigerian shareholders (who shall have the first right of refusal to purchase the equipment) have declined interest in taking up the foreign equity interest, foreign shareholder(s) shall not be allowed to have the first option of buying back the equipment after the contract.

Precept 1: Maximizing benefits for all citizens Precept 2: Promoting transparency and accountability Precept 3: Better fiscal regimes and contracting Precept 4: Better sector governance Precept 5: Environment, society and local benefits

The Charter could eventually be the basis for a more formal agreement among governments and, possibly, companies. Such an agreement would represent a new kind of international compact â&#x20AC;&#x201C; one that is not dictated from above, but is instead built upon a critical mass of informed opinion from citizens and civil society groups in resource-rich countries which have demonstrated success by adopting the Charterâ&#x20AC;&#x2122;s principles. Programme Manager: Ademola Oshodi Website: http://nigerianrc.org/ Twitter: @NigerianNRC Facebook: Nigerian Natural Resource Charter

Precept 6: The role of national resource companies Precept 7: Investing the revenues Precept 8: Smoothing revenue volatility Precept 9: Better public spending Precept 10: Encouraging private investment Precept 11: The role of international governments Precept 12: The role of international companies

FEATURE

A MODEL NDEP Plc is one of the leading indigenous exploration and production companies in Nigeria. They are marginal field pioneers and operators of Ogbele marginal field, which has produced over 8 million barrels. NDEP has had extraordinarily successful relations with its host communities and the forward thinking company credits their unique Community Development Trust model for this. The Trust was the first of its kind and was established in 1997. The NDPR Trust has become the cornerstone of the companyâ&#x20AC;&#x2122;s community relations liaison. Its success is the reason for its wide adoption by various other entities operating within the Niger Delta region.

sphere of operations of NDPR Ltd, the fully owned subsidiary of NDEP Plc. The Company funds the Trust by voluntarily donating 5% of its profits, which are then administered separately for community development related projects. The Trust is administered by a Board of Trustees, under the Chairmanship of Professor Sylvanus, J. S. Cookey (OFR), who works closely with an appointed Advisory Committee (from each community), that recommend projects based on Community need. In addition to nominating community projects, community contractors are also nominated for each project, thus boosting local content and capacity.

The NDPR Trust: How it Operates Through the Trust, community specific nominated projects are undertaken for the benefit of each community in the

The unique nature of the Trust aligns the interests of the community with the interests of NDEP Plc, as the more production, oil and gas infrastructure are

APPROACH TO COMMUNITY RELATIONS

located within a community, the more each community will benefit. This ensures that host community residents are genuine partners in their own development and that of NDPR Ltd. Since 2007, The Trust has successfully completed many projects and initiatives, which have significantly improved the quality of life for local residents. Bursary awards to all students of tertiary education institutions have been approved and disbursed yearly in all host communities. Gender based training has been given, youth skills acquisition training have been provided as well as key improvements made to existing community infrastructure and security. Below are some highlights of Community based projects funded and supported in from 2013-14:

OTARI COMMUNITY l A new community Ultra Modern Town Hall has been built and is now being furnished. This has replaced the old town hall, which had become run down and neglected. The new Ultra Modern Town hall was completed and commissioned by the Trust.

OGBELE COMMUNITY l In Ogbele Community, an ongoing electrification project has been underway, which has been completed to 70per cent. l A Health Centre for the Ogbele community has been rehabilitated l Ogbele Road has also been rehabilitated l A skills acquisition grant has been given to 91 people, a bursary to 145 students, while medical aid has been paid to 191 Elders.

OSHIUGBOKOR COMMUNITY l A bursary payment to 85 students was paid, with an additional supplementary bursary going to 6 students l The process of electrification has commenced within the community and is nearing completion.

OBUMEZE COMMUNITY l The UPE primary school, which has been constructed and completed by the Trust, is now at the finishing stage l The electrification project is at 70per cent completion l The grading of the main access road has also been completed.

RUMUEKPE COMMUNITY l The construction of 2 blocks of Secondary School is currently ongoing l A bursary payment has been given to 400 students l A Skills Acquisition grant has been paid to 406 beneficiaries

COMMENT

DEVELOPING A STRATEGY FOR LOCAL CONTENT IMPLEMENTATION AND COMPLIANCE INTRODUCTION As the Nigerian oil and gas sector is rapidly developing and maturing a wave of fundamental change has arrived. The Federal Government through the Nigerian Oil and Gas Industry Content Development Act 2010 want greater participation of its citizens in its economy, to stimulate industrial development by providing jobs and essentially to keep its wealth within the country. In Nigeria, international oil companies (IOCs) on their part must move beyond being philanthropists, giving jobs to communities and the odd contracts here or there. The world over, IOCs are challenged by the local content requirements and most especially in Nigeria but anyway one assesses the issue of local content, it is a positive development.

DEVELOPING A STRATEGY Local content is here to stay and though posing both challenges and opportunities. The major IOCs have swung into action by setting up Local Content departments or units but there are still some small oil exploration companies who act as technical partners to indigenous companies who are oblivious of local content and carry on business unperturbed. For IOCs and the Nigerian Content Development and Monitoring Board (NCDMB) to succeed a strategic approach

must be developed in compliance with the Nigerian Oil & Gas industry Content Development Act. To achieve an effective local content strategy planning, resources, realistic targets and total commitment is required by both the IOCs and the NCDMB and most especially in the understanding of each otherâ&#x20AC;&#x2122;s needs and priorities. In Angola IOCâ&#x20AC;&#x2122;s must have an Angolanization Plan ie Angolanize their workforce, industry succession and career development plan. An

approach that will be most accepted and with determination can work here in Nigeria. To develop a successful strategy the needs of the oil companies must be clearly defined. What therefore can be realistically sourced locally i.e. supply capabilities and what is beyond the capacity of local industry. The NCDMB on their part in setting out targets must be realistic. Certain products and services can be exclusively reserved for Nigerian companies with majority Nigerian ownership, these may not require high amount of capital or technical knowhow. However other products or services may be open to international companies in collaboration with Nigerian companies and these must be in very specific instances only.

COMMENT

NCDMB will most certainly need the support and collaboration of other arms of government namely: Ministry of Finance for tax incentives, Petroleum Technology Development Fund (PTDF) for training, Ministry of Trade and Investment to attract investors who may want to partner with local suppliers, Ministry of Education in collaboration with Universities, the Petroleum Institute and other Institutions of higher learning in the establishment of specific courses targeted at the oil and gas industry. Funding can be sought to aid the universities or institutions in setting up departments offering courses in the development of petroleum management and with strategic planning set up a welding procedure qualification institute, a facility most required in this country. And of course collaboration with NAPIMS to ensure longer term contracts are awarded to indigenous suppliers. And NIMASA and Nigerian Shippers Council for qualification of Nigerian registered vessels. These stakeholders will play a vital role in the implementation of local content .Some companies no doubt will find a way around by circumventing the Local Content Act. There must be a transparent policy on local

employment, workforce training and skills development. Therefore NCDMB must have a focus just like in other countries practicing local content. In Norway, local content development was driven by a national focus on research and development and the transfer of technology. In Indonesia, local content has been focused largely on the involvement and development of manpower rather than technology. In Angola, their focus has been on developing Angola into a manufacturing and fabrication base for after sales service and support for oil operations. The strategy to recruit, train and retain is vital in enhancing local content. In the area of human capacity development, IOCs have made significant headway. This has been achieved under the Nigerian Human Capacity development Initiative NHCDI. Nigerians are trained in various skills on all major capital projects. Training, mentoring and on the job experience, has been achieved due to curricula developed by successful suppliers based on the scope of work. The aim logically is to develop Nigerian capacity to international standards. Another significant achievement by the IOCs is the scope reservation, whereby the scope of work is broken down to smaller work to ensure Nigerian participation in major capital projects.

May Mbu Poor infrastructure and funding are a major challenge for Nigerian companies and this cannot be over emphasised. For local content to reach its full potential, procurement strategy must be institutionalised, partnerships or joint ventures with international companies must be encouraged as it will go a long way to increase opportunities for knowledge and technology transfer to Nigerians, this is an area smaller IOCs seldom have the capacity or desire to get engaged in. All said and done, there are areas of significant importance which NCDMB would have to consider in their strategic priorities to enhance the inclusion of Nigerians in the high stake products and services in the oil industry which require high amount of capital. This has been an area of great concern in the implementation of the Cabotage Act. Collaboration with NAPIMS to ensure longer term contracts awarded to indigenous suppliers e.g. marine vessel suppliers. Nigerians can have a higher chance of getting finance with long term contracts. NAPIMS can in turn reduce the contracting cycle time too.

COMPLIANCE Compliance and enforcement can be extremely challenging.

ultimate and must be carried out systematically and constantly.

IOCs generally are strong on collating data. They must go further to set up a dedicated local content compliance officer or manager; to audit, track and monitor its company compliance to local content requirements and to partner with internal and external stakeholders to ensure the oil companies are fully compliant and have met their target.

Verification should be done speedily especially in the following instances where the operator must submit Nigerian content performance report which would be have to be assessed and verified by the Board. Board approval is required before application for expatriate quota is made.

The NCDMB and the IOCâ&#x20AC;&#x2122;s must work closely together to achieve success and therefore transparency, information sharing and data collection are the

A substantial amount of human capital will be required by NCDMB to effectively monitor and evaluate compliance by IOCâ&#x20AC;&#x2122;s in the area of collecting of data. This process requires time and resources. NCDMB must have a formula and metric

for local content targets and reporting. The NCDMB would require professional services by consultants who will engage in the collation of data on its behalf from the IOC, and therefore electronically transmitted to the NCDMB data base from which it can be uploaded and updated periodically. This allows for on the spot checks. Local content should be given its due regard and seen as a major leap in the economic growth of our country. May Mbu Principal Partnrs Norfolk Partners

report

The NNRC observed that the Local Content Vehicle program, was chaotic as winners of bidding rounds for oil blocks were directed to partner with local companies in “forced marriages” giving rise to situations where unqualified companies were issued contracts or oil blocks merely because they were indigenously owned. Their recommendations are: n Rather than have separate parastatals qualifying and categorizing vendors in the Nigerian Oil and Gas industry, such as the NNPC- NAPIMS-NIPEX JQS (Joint Qualification System) and the NCDMB NOGIC JQS it would be more purposeful to harmonize and merge their different activities in a manner that promotes a holistic development of vendors. This can be achieved through the enhancement of the vendor management module of the Achilles software to meet with the functions NOGICD JQS seeks to provide. This enhancement, coupled with a thorough prequalification exercise will help to develop local content in Nigeria. As the NJQS is supported by law, NIPEX needs to harmonise its processes with the NCDMB solution to ensure that companies are well categorised, contracting cycle period reduced and vendors developed more effectively. n Enact the PIB in a manner that does not conflict with the provisions of the NOGICD Act whilst ensuring that it creates opportunities,

penalize

FUNDING GROWTH e-procurement meritocratic

collaboration OIL AND GAS NCDMB

promotes the development of both community and human resource at the grass root level, guarantees safety and security and in the delivery of petroleum related activities. n Promotion of e-procurement and e-sourcing in a manner that minimizes delays, eliminates bribery and corruption whilst ensuring that credible players are encouraged to compete in a meritocratic system which in turn reduces the procurement cycle from 5 years. n Introduce recognition and rewards for stakeholders in a manner that harnesses the ownership, management and organizational structure of indigenously owned companies, deploy technical service contracts and memorandums of agreements and re-inject profit for business growth and sustainability. n Penalize errant companies who take advantages of loopholes in the NOGICD Act. n Provision of world-class infrastructure and uninterrupted power supply is necessary for Nigeria to develop local content. Multiple taxation and irregular management of government processes at ports that handle equipment, materials and human movements must be addressed. n Growing a manufacturing and industrial base linked to the agro and allied industries would ensure that optimum capacity, capability and competency in-country exists to support true development. Creation of jobs and wealth for Nigerians by Nigerians would address the terrible state of insecurity and corruption that exists currently. n Promoting Research and Development among stakeholders and closing the R & D

HOLISTIC DEVELOPMENT

PRIVATISED

RECOGNITION

PROCUREMENT

The NNRC also query the effect of awarding major capital projects as Engineering, Procurement and Construction (EPC) contracts whereby contracts are awarded to Korean majors (HHI, Samsung and Daewoo) and say that these contract awards are yet to be thoroughly evaluated as a Nigerian Content growth or killer vehicle. They say there is no clear indication that this has reduced capital flight and has increased money retained in the country.

R&D

The NNRC observed that Nigerian content targets set in 2006 (45%) and 2010 (70%) were not achieved. They are also sceptical of “success stories being celebrated and touted in the press as having translated into an increase in the number of contracts and employment opportunities which are given to Nigerians.”

LOCAL

NIGERIA PARTNERSHIP

The NNRC conducted a review of the implementation of the Nigerian Oil and Gas Industry Content Development Act, 2010.

INFRASTRUCTURE

THE NIGERIAN NATURAL RESOURCE CHARTER (NNRC) BENCHMARKING EXERCISE

gaps between the industry and academia. Provisions should be made for all relevant stakeholders in the petroleum industry to partner with Higher learning Institutions and work with academia to improve R & D in Nigeria n NCDMB in collaboration with IOC’s should strive to encourage genuine partnerships between local companies and foreign companies for the effective implementation of technology transfer and knowledge acquisition. n Encourage collaborative efforts and partnerships amongst local players to ensure maximum utilization of Indigenous capacity, establishments of robust business models and formidable consortiums that can compete both nationally and internationally. n Run meritocratic Bid Rounds that are depoliticized, maximizes value for Nigeria and promotes indigenous ownership with the right business models that would attract funding, capacity, capability and competence development in the medium to long-term. It is through these LCV’s that we can promote the domiciliation of investment and recreate a higher level of patriotism. n Domiciliation of Project Development, Project Management and Procurement teams is critical to implementing local content. n The partnership of NCDMB, SMEDAN and SMEEIS to promote better local service amongst local service providers will go a long way towards developing new vendors, rapid industrialization, sustainable economic development, poverty alleviation and employment generation.

OIL & GAS CIRCUIT

EROMOSELE BOWS OUT Celebrant, Victor Eromosele addressing well-wishers at his Career Bow Out (CBO) GetTogether marking nearly 34 years of service to the industry. Eromosele is the longest-serving Chief Financial Officer (CFO) of Nigeria LNG Limited, Africaâ&#x20AC;&#x2122;s leading LNG exporter. He was seconded from the Nigerian National Petroleum Corporation in February 2007, after a two-year stint as General Manager Finance of NNPC-NAPIMS.

From l to r: Patrick Olinna, GM Commercial, Nigeria LNG Ltd, Emmanuel Iwejere, Past ICAN President, Celebrant, Victor Eromosele, Alfred Okoigun, MD/CEO, Arco Petrochemical Eng. Ltd

OIL & GAS CIRCUIT PETAN

PETAN PETROLEUM TECHNOLOGY ASSOCIATION OF NIGERIA

WWW.PETAN.ORG

2013 Nigeria Oil Industry Achievement Awards Dinner Photos

PETAN Chairman Mr. Emeka Ene making his welcome remarks

Engr. Tunde Delana, Director Monitoring, NCDMB, representing the ES, NCDMB

Mr. Stephen Aribeana, MD Ariboil and Mr. Ranti Omole, MD Radial Circle

Mr. Charles Ngoka, Deputy MD Total and Mr. Cletus Onyekwere, MD WEAFRI

Engr Phil Chukwu Former GED (E&P), NNPC, receiving the Professional Achievements Award from Mr. Pedro Egbe MD Weltek and former Chairman of PETAN

Mr. Nnaji Igwe of Nestoil receiving the Capacity Development Award from Mr. Chris Onyekwere, PETAN Financial Secretary and ED Weafri

PETAN Vice Chairman, Mr. Bank Anthony Okoroafor presenting the Aret Adams Award to the Chairman of SEPLAT Dr. ABC Orjiako and the MD Mr. Austin Avuru

Mr. Ehianeta Ebhohimhen representing the MD of Diamond Bank receiving the Financial Institution Award from Mr. Dapo Oshinusi, Secretary of PETAN

Engr. Emeka Okwuosa Receiving the CSR Award from Mrs. Iyabo Obasa the Permanent Secretary, Ministry of Energy and Natural Resources, Lagos State representing the Lagos State Governor

Mr. Bernard Bos, GM Commercial Shell Nigeria and Gabon receiving the Local Content Operator Award from the PETAN Chairman, Mr. Emeka Ene

Engr. Delana, representative of ES NCDMB Congratulating recipients of Leadership Achievements award

Mr. Bernard Bos, General Manager Commercial, Shell Nigeria & Gabon, Mr. Segun Adebayo, Head NCD, SPDC, Mr. Guy Janssens, Finance Manager Shell Nigeria and Gabon, Mr. Simbi Wabote Manager, Local Content

Mr. Luke Anele, GM Materials, NAPIMS representing the GMD, NNPC

Mr. Sam Adegboyega MD SOWSCO, Mr. Cletus Onyekwere, MD WEAFRI, Engr Phil Chukwu former GED E&P, NNPC

Mr. Emmanuel Onyekwena, MD Tolmann, Mr. Simbi Wabote, GM Local Content Shell International Group, and Mr. Bank Anthony Okoroafor MD CB Geophysical