Local content Development Act… one year after

Olusola Bello

The signing of the Local Content Development Act by President Goodluck Jonathan a year ago was a landmark event in the oil and gas industry. It was a forerunner to subsequent bold steps taken by his administration to integrate the nation's oil and gas industry with the local economy. By insisting on what oil companies must do in the country, we are also creating opportunities for training, knowledge- sharing and technology transfer; opportunities for investment in tab yards, facilities to support industry operations; opportunities for Nigerians to own equipment, marine vessels and rigs and other equipment used in the industry. These opportunities are key to rapid and sustainable growth of the nation's economy.
Operators in the industry say one year implementation efforts have not achieved much, though it has rekindled our fillip to create capacity in human, infrastructure, facilities and other areas required to execute increased activities in Nigeria thereby retaining higher value in the country from industry operations.
According to them, by the implementation, the country is bringing back the country's jobs which have been exported to foreign economies for a very long time at the expense of the national economic development.

With the return of peace to the once restive oil-bearing areas of the Niger Delta, there are even greater prospects now for the industry to better serve the economy and provide the sectoral linkages that drive productivity.
Analysts believe that the industry must work with government and community leaders to sustain the Amnesty programme and continuously address the negative impacts arising from oil production. This strategy is already ensuring access to the oil fields with consequential boost in oil production and opening up the industry for new projects and investments on which the aspirations on Nigerian Content could be further realised.
According to Diezani Alison-Madueke, minister of Petroleum Resources, one year is a relatively short time in the oil and gas industry, but the establishment of the Nigerian Content Development and Monitoring Board (NCDMB) by the Act with clearly defined functions and powers has certainly introduced new dynamics in the implementation of Nigerian Content in the Industry.
"Already, there is measurable and continuous growth in quantum of work being placed in Nigerian yards, contracts awarded to Nigerian companies, increasing awareness by Nigerians and indoctrination on mindset change in the short time of implementing the Act provisions by the Nigerian Content Development & Monitoring Board (NCDMB).

To be sure, there have also been challenges in implementation emanating mainly from capability limitations.
"The progress we make and the benefits to industry will ultimately depend on how well we tackle the challenges which are bound to arise from time to time in the course of doing our business under this new framework. The fact that the Board is carrying the major stakeholders along in most of its activities is a positive testimony to the spirit of collaboration and partnership that President Jonathan's administration is known for."
There was an initial apprehension as regards the Act, but there seems to be  better understanding of the issues  involved by other stakeholders and because of this, they would have worked assiduously to build capacity in critical areas identified by several studies to ensure that the requirements of the Act do not impede the operation of the industry.
The minister, however, clarified that the Nigerian Content Act is not designed to nationalise foreign assets or to indigenise the industry. Rather, by domiciling services and building local capacity, there will be certainty of supply for industry projects and support for life cycle operations.
"Government has taken a firm stand on this strategy, mindful of the fact that the initial cost increase associated with Nigerian Content will result in savings in the medium term when the key inputs are available in Nigeria," the minister said.

She further stated that "we cannot pretend that these aspirations will be realised simply by the enactment of an Act, rather, the route to success on Nigerian Content lies in evolving a practical implementation framework that balances the interest of investors in the sector with our national interests."
To this end, she pledged in her capacity as chairman of the Governing Council of the Board that the implementation would be fair and firm, structured and result-oriented.
"For the avoidance of doubt, I will restate the targets I set for the Board to pursue with the collaboration of key industry stakeholders, especially the major operators," she said.
According to the minister, such targets include:   (1). Retention of $10 billion out of $20 billion average annual Industry expenditure.
(2). Creation of over 30,000 direct employment and training opportunities.
(3). Establishment of three to four new pipe mills to service industry demands.
(4).Development of one or two dockyards and utilisation of existing shipyards.
(5). Indigenes to own 240 out of 400 marine vessels supporting industry.
Alison-Madueke noted that the "result of all this is that the initial apprehension in the wake of the Act is yielding to better understanding and we must work assiduously to build capacity in critical areas."

JONATHAN’S GAS REVOLUTION: A BREATH OF FRESH AIR?

JONATHAN’S GAS REVOLUTION: A BREATH OF FRESH AIR

Margaret Nongo - Okojokwu

In a bid to  commemorate the government’s efforts to ensure gas to power and bring about the rebirth of the industrialization agenda in the country, President Goodluck Jonathan on Thursday March 24^th, unveiled an ambitious $10 billion plan to harness the country's vast gas reserves and develop a petrochemical and fertiliser industry, barely weeks before elections. It is the President’s hope that this "gas revolution" will indirectly create up to 500,000 jobs, many of them in agriculture, and help improve power supply to homes and manufacturers in Nigeria, also known as Africa's most populous nation and second biggest economy. President Jonathan said that the launch of the Gas Revolution: Rebirth of Industrialization agenda was bound to deliver the country from hopelessness and truly reposition it to become the industrial giant of the continent; noting that over the next few years, full implementation of the entire gas master-plan agenda would result in about $25 billion worth of investments in gas processing, transmission and downstream utilization projects. In his words: "The investments agreed today will result in foreign direct investment of about $10 billion over the next three years, the economic impact of this agenda will be endless in terms of employment and wealth creation," President Jonathan who told industry executives, government officials and diplomats at the launch of the plan recently in Abuja, also said that as a nation, we are continually striving to realize the fullness of our potential. In his words, “very few nations can boast of the resources we have, both natural and human. Our proven gas reserves base of 187 trillion cubic feet and a further undiscovered potential of 600 trillion cubic feet, leave us with no excuse for the relatively high rate of unemployment and under-industrialization. Today we take a small but important step in a conscious effort to reverse that trend. Today marks the beginning of what I believe will be an amazing journey of transformation of our own destiny and the restoration of Nigeria into the League of Nations which has leveraged their strength in the abundance of natural gas, to transform the lives of present and future generations of Nigeria”. The President was also confident that the revolution holds the key to position the country into a regional gas hub in the nearest future, saying “By 2014, we would have positioned Nigeria firmly as the undisputed regional hub for gas based industries such as fertilizer, petrochemicals and methanol. We would by then, be producing enough fertilizer to create a self sufficient country and a net exporter of fertilizer and food to the world. We would be the leading regional centre for petrochemical production and manufacture of petrochemical related products both for local and export use.” He emphasized.

While commemorating the President’s point, the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, who also spoke at the event, noted that the gas revolution will create the under tone for even widespread of wealth in the country. In her words: “Based on the various steps that were taken last year to reposition the commercial framework for gas in the domestic market, I am confident that we now have in place, a more sustainable framework to assure gas availability to Power. The impact is becoming evident as we see a great improvement in gas supply performance relative to last years. Our power agenda will create the undertone for even more widespread wealth.” The Minister noted.

According to her, “the boost in LPG production from the proposed land-based Central Processing Facilities, CPF, to be located in Obiafu, Rivers State and Warri, Delta State, will result in widespread availability of LPG and significant reduction in LPG price. She said: “We believe that this will displace as much as 60 per cent of the eight million liters of kerosene consumed daily for household use.  The replacement of firewood by the much cleaner LPG will reduce deforestation and desertification. Natural gas will replace fuel oil as fuel for industrial boilers. Above all, this agenda sets the tone for the final stop of gas flaring in Nigeria as the markets created provide a sink for all currently flared gas,” she added.

According to the Minister, Italian oil and gas firm Agip and local energy firm Oando will build a central gas processing plant under the plans, while U.S. energy firm Chevron will supply the gas. “We've agreed to begin with 175 million (cubic feet) of gas per day. We will deliver the gas once the pipelines and infrastructures are in place," said Andrew Fawthrop, Chevron's managing director in Nigeria. Also, India's Nagarjuna Fertilisers said it had committed to building two fertiliser plants, an investment of around $2.5 billion, while Saudi Arabian firm Natpet, a subsidiary of petrochemicals firm Alujain, said it would invest $3.5 billion in a petrochemicals plant. Two other companies, Oando Nigeria Plc and Agip Petroleum were awarded contracts for the development of the anchor Central Processing Facility, CPF, to be located in Obiafu, Rivers State and Warri, Delta State. Other gas-based industries expected are a world scale petrochemical plant, five fertiliser blending plants, a methanol plant and an LNG distribution plant.

Fostering the search for oil in Chad Basin

On the other hand, the launch of this policy on gas for the country, will also for the first time see more exploration activities in the North where the search is ongoing for the huge deposit of gas locked up in the bowels of the region. According to the Petroleum minister, President Jonathan in 2010 launched an aggressive focus on drilling gas in Chad Basin, Gongola/Yola Basin, Benue trough and Anambra Basin. Though this was meant to shore up the country’s gas reserves, Nigerian OrientNews gathered that the project was also meant to demonstrate that the president is prepared to grow the North industrially; just as a top management staff in the ministry pointed out that a key significance of the revolution that would be launched is the commitment to exploiting gas in the Northern region.

Some experts in the oil and gas sector are of opinion that there is a huge variance in the make-up and synclines of the Chad Basin and the Niger Delta region, and that any move to rummage around for oil in the area, should be critically scrutinised and certified as being necessary.

This is against the backdrop of insinuations that the search may be to satisfy the urge of some people at the expense of the nation, or to create cost centres that are absolutely unnecessary.

On account of the North not yet spotted as an ‘oil domain’, some experts have maintained that the Chad Basin is only five kilometres, compared to the Niger Delta, which has a 12-kilometre basin, maintaining that the deeper the basin, the more the likelihood that it will contain oil reserve and natural gas.

The syncline of the Chad Basin, according to them, is high, while that of the Niger Delta is low, maintaining that the features show that the geology of the Niger Delta is different from the North and so, the difference in the geological age and activities of the two basins.

But the Federal Government, in spite of the odds against the exercise, noted that it was absolutely determined to make more commitment, both financial and manpower resources, to the exploration activities in the location, a stand that some said could not be far from political motivation.

However, Skeptics while questioning the timing of the revolutionary launch, made it known that turning agreements in paper into reality would be the key to making the announcement more than a campaign pledge. "The asset is there, the reserves of gas exist, it is whether there is a mechanism to transform that into something you can monetize," said Antony Goldman, an independent consultant and expert on the West African energy industry. Until now there have been quite a few false dawns."

Meanwhile, this move by the federal government has proven to the world that something good and profitable can actually come out of Nigeria, after all. It shows in the way foreign investors are trooping into the country to invest in the sector. Only recently Royal Dutch Shell awarded Saipem, an American Oil and gas company, a $101 million contract to build a gas pipeline system in Nigeria, which it hopes will reduce flaring and boost domestic supply to Africa's most populous nation. The Nigerian arm of Italian oil services firm Saipem, whose parent company is ENI, signed the deal to build 42 kilometres (26 miles) of pipeline to take gas currently being flared in the vast wetlands of the Niger Delta to a new processing plant. This can be seen as part of the implication of the recently launched gas revolution by Mr. President.

 However, while this move is seen as a breath of fresh air and a ground breaking achievement for the present administration, especially as it concerns the oil and gas sector, it is expedient to note that all hands must be on deck to ensure the full implementation of this gas revolution, although it has been launched, yet it goes beyond the launching, after all we have seen huge projects like this one kick off and then die untimely deaths on the way. So then the Petroleum Ministry and all stake holders must ensure that this project see the light of the day, throwing aside every personal gains and prejudices. Lets hurry while it is still day time, It’s time to make Nigeria work again.