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Govt should make laws that would help local content policy work— ISAN president |
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12 Apr 2008: Ifeyinwa Obi
The performance of the local content of the federal government has been a subject of controversy. In this report, Saturday Vanguard takes a look at the issues involved, the arguments projected and the conclusions drawn from different contenders. Nigeria is the World’s 6th largest producer and exporter of crude oil in the World. She is ranked 7th in the world in gas reserve with proven reserve base of 160 trillion cubic feet. There is equally significant scope for additional reserve of gas even as government has a target of 40billion reserve of hydrocarbon in 2010.
At present, over $5.5 billion is annually budgeted in the industry even as USD 1.5 billion is spent annually in the shipping segment of the industry. Out of this huge sum of money, Nigerians unlike other OPEC countries have an inconsequential share of the Oil and Gas business of their country as local participation is very low.
Worried by this situation, the Federal Government in 2003 initiated the local content policy and consequently directed oil companies operating in the country to commence in-country fabrication of equipment as well as other major components used in the Oil and Gas exploration. Government reasoned that the implementation of the policy will serve as a means of dissuading capital flight.
Minister of State for Energy (Petroleum), Mr. Odein Ajumogobia at the recent launching of Hamilton Technologies facility in Onne, Rivers State; assured Nigerian entrepreneurs who are wishing to go into the sector that everything that needs to be done for proper empowerment of Nigerians to step into the demands of the local content expectations of the Federal Government, would be provided by his ministry.
He said the N15 billion appropriated for the sector by the Federal Government in the 2008 budget would be used to better the lots of the industry. His words: “N15 billion will be spent in 2008 on the Oil & Gas industry and with that, tht sector will come of age”.
The local content policy is aimed at involving indigenous professionals in engineering design, fabrication, construction, shipping and logistic components of the industry.
Elsewhere in Lagos, at a forum organized by Nigerian Chamber of Shipping, the Minister of State for Energy (Gas), Mr. Odusina Olatundc who sat in for Ajumogobia at the event, blamed Nigeria entrepreneurs for not taking full advantage of the local content policy and the Cabotage Act which according to him gave them unequal access to businesses in the oil & Gas sector.
He said the scarcity of cooking gas (and in fact exorbitant prices at which it is sold), is because the big vessels bringing in the products could not navigate into our ports and jetties because of the shallowness of Nigerian water channels and secondly, the inability of Nigerians to take advantage of the local content policy and the Cabotage Act and acquire smaller vessels for the bridging of the products.
But the Managing Director of Molap Shipping, Chief Issac Jolapoma who is also the National President of Indigenous ship owners Association of Nigeria (ISAN), was incidentally at the function. He disagreed with the Minister that Nigerian entrepreneurs are not rising up to the challenge, rather, it is the government that does not seem to be serious with the implementation of its policies.
He said: “These laws and policies are made to be enforced. If they are not enforced ,they become of no consequence .As 1 am talking now at the forum, I have about $20 million loan granted to me by Skye Bank and one other bank to buy ships but 1 cannot buy because there is no job for me to do with the ship.
“The oil companies do not give us contracts. Somebody has to compel them to start giving jobs to indigenous operators.
“The banks have woken up. We the indigenous operators are ever ready but the government has to enforce the policy, other wise it will not work”, he warned.
Mrs. Nkechi Obi, Managing Director of Techno Oil and Gas also confirmed that it has become easier to access bank loans to fund Oil and Gas projects. Her company recently got a $1O million loan from the South African Eximbank to build a liquefied petroleum Gas (LPG) tank farm at the Kirikiri area of Lagos.
Earlier in 2006, the United Bank for Africa (UBA) in collaboration with Global Markets and BGL Securities as the mandated lead arrangers and financial advisers to the NNPC, floated a $350million local content fund.
The initiative according to parties involved will provide pool of local funds for the execution of Oil & Gas projects in the country thereby gradually reducing the dependence on foreign financial institutions for such funds and also help to stem capital flight.
The NNPC had a target of achieving by the end of 2007 the proportion of local content in the financing and contracting of Oil and Gas related activities which will be increased to 45 percent and 75 percent later on by 2010.
Group Managing Director (GM) of NNPC Engineer Abubarkar Yar” Adua said recently in Lagos that the Corporation has in the past three years embarked on strategic programs to bring UK dream to reality.
Speaking at the Fourth Quarter Nigerian Content Consultative forum, he said. ‘There is no gainsaying that tremendious progress has been made in the last three years with respect to domiciliation of services. Several engineering companies both indigenous and international have sprung up to take advantage of the new opportunities emanating from compliance with the NNPC local content policy guidelines
.Today, about 50 percent of the available five million annual engineering man-hour are domiciled in-Country compared to about 250,00 man-hours in the past. The number and tonnage of fabrication in-Country has also increased steadily such that fewer items are destined for foreign yards. The Country also boasts of a Ship yard where aluminum vessels are fabricated, thanks to the new Cabotage Law”.
But what the NNPC boss described as a feat has been described as a plague which according to some operators who spoke to Saturday Vanguard Business on condition of anonymity was as bad as when the foreigners were doing the whole things abroad.
They argued that a situation where the oil companies give the contracts to their kit and kins abroad, who then simply brought in their equipments and the materials to Nigeria with their own workers to do the job for them cannot be said to the same thing with local participation by Nigeria professionals. They said Nigerians neither got the job nor have access to cheap funds to operate. The situation they said must be a variant of indigenous participation.
“But if what they want to achieve is Nigerian’s participation like it is elsewhere in the world, there must be appropriate legislations in place to compel the oil companies to give jobs to Nigerians and government as well must have the political will to enforce the law.”
To this end, Ajumogobia said he was pursuing the coming to fruition of the local content policy by also looking at the relevant laws that will back it up where all the drawbacks would be removed and weak provisions strengthened.
He also promised that the teething problems of financing which used to place them at disadvantage would be addressed while discrimination based on the fact that they are competing against foreign firms who have comparative head start on them will be a thing of the past.
Ajumogobia has started looking beyond the provision of services within the shores of the country but was projecting that if Nigerians develop the competences in their various fields, they would move to control the West Africa and the Oil and Gas of the African continent. |
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