Mr. Abdul Rasaq Isa, IPPG Chairman
The PNC has always provided a viable platform for demonstrating the successes recorded in deepening Nigerian Content and fostering industry-wide collaboration in delivering the key tenets of the Nigerian Oil and Gas Industry
Content Development Act (NOGICD Act).
I must therefore specially commend the Nigerian Content Development and Monitoring Board (NCDMB), under the able leadership of Engr. Simbi Wabote, for once again convening this event. This event will always be a special one for IPPG – as an association of twenty-nine indigenous Exploration and Production companies, there is a natural synergy between the NCDMB and IPPG. The emergence of IPPG and strong indigenous Exploration and Production companies is a testament to the successful local content policy.
From the theme of this year’s conference, it is clear that a lot is happening in our industry – “Deepening Nigerian Content Amidst Divestments, Domestication & Decarbonisation” – our industry is witnessing a transformational shift and thus continues to underscore the importance of repositioning our industry in the short to medium term. The ongoing global energy transition drive as well as the widespread reforms across the domestic landscape – notably the implementation of the Petroleum Industry Act, the ongoing divestment of onshore and shallow water assets by the IOCs and the Decade of Gas Initiative – means exciting times are on the horizon for the industry bringing with it immense opportunities for growth. As an industry we must remain focused on rapidly and efficiently exploiting our vast hydrocarbon assets for the socio-economic transformation of the nation.
It is therefore imperative for the industry to be efficient and look inwards in fully optimising these hydrocarbon assets for today and future generations. The faithful implementation of the NOGICD Act is capable of unlocking the nation’s economic potential and serving as an enabler for rapid industrialisation.
The acceleration of in-country capacity utilisation, reduction of capital flight and in-country retention of a significant portion of industry spend will no doubt continue to expand the participation of the indigenous companies across the industry value chain and create linkages to the wider economy.
NCDMB needs to be specially commended for their pragmatic implementation of the NOGIC Act and overall performance. At last year’s PNC and mid-way into the NCDMB 10-year Strategic Roadmap, the Executive Secretary noted the Board had achieved 54% Nigerian Content level. Following the Executive Secretary’s address, it is heartwarming to hear Nigerian content level has now grown to xx%. This is a remarkable feat and NCDMB remains on track to meet, or even exceed, the 70% Nigerian Content target as articulated in its 10- Year Strategic Roadmap by 2027.
Also at last year’s PNC, I spoke about the role NCDMB has played as a proactive business enabling regulator with collaboration on the phenomenally successful 5,000 barrels per day Waltersmith modular refinery in Ibigwe which commenced operations in November 2020. Today, as I projected last year, the refinery has delivered its first dividend payment to NCDMB, paid off a significant portion of its project financing and commenced an expansion phase designed to double refinery’s capacity to 10,000 barrels per day in the next eighteen months.
NCDMB’s commercial ventures partnership programme continues to stimulate investment and promote in-country capacity.
It is clear the Government’s effort in deepening local content in the Nigerian oil and gas industry is paying dividends and it is imperative that this effort is sustained with greater focus placed on bridging inherent capacity gaps; addressing infrastructural inadequacy and capital deficiency plaguing the industry at the moment in order to optimally derive the full benefits of the local content policy.
While we proudly recognize the major role that local content implementation has played in advancing our oil and gas sector, we must also be mindful of ensuring that our local content policies are constantly evaluated to ensure that they are continually fit-for-purpose and not counter-productive to our long-term industry growth and cost targets. Our industry continues to face growing pressures to remain profitable and cost-efficient as it faces competition from other investment destinations. To this extent, I would like to encourage the NCDMB to review certain aspects of our legislation that may potentially work against the competitiveness of Nigeria’s oil & gas sector in the global marketplace.
A case in point is the Human Capital Development training requirements wherein industry participants are required to set aside 3% of project cost (projects above $1million) to conduct local content training. While this is undoubtedly a laudable initiative, we must consider that it amounts to a multiplication of levies as industry participants are already equally required to contribute a separate 1% of total costs as NCD levy. This invariably leads to higher project costs especially as the training is not allowed to be provided directly to company staff and service providers. Due to this and other contractual or administrative reasons, the process of complying with local content requirements has, on many occasions, proven to significantly increase the overall cost of delivering projects in Nigeria. Again, this unintended outcome requires some detailed review in order to ensure that we are not losing new investments to emerging investment destinations in the process of driving our local content agenda.
Most critically, because of the strict local content requirements, we have gradually seen a reduction in the presence of leading international oil & gas service providers many of whom are leaving Nigeria in droves. Unfortunately, while we continue to prioritise local content development, we must recognize that these international players have a key role to play in ensuring technology transfer and knowledge sharing that our local players can benefit from. You will agree with me that our local players still lack the requisite skills to adequately support our deep offshore operations and other specialised operations. Therefore, our recommendation is that ways should be sought to modify local content requirements to ensure that the industry remains globally competitive and sustainable.
It is instructive to note that this edition of the PNC will be the last under the stewardship of the indefatigable and high-performing Executive Secretary, Engr. Simbi Wabote. Since his appointment in 2016, NCDMB has delivered unprecedented milestones and been a shining example, not just in our industry but the nation, on how a best-in-class government agency should operate. These strides have definitely laid a solid foundation for the growth and development Nigerian Content in the years to some. It is on that note and on behalf of IPPG, I would like to express our deepest gratitude to him for his continuous support and unwavering commitment to the survival and growth of our industry.
As a Group, we remain optimistic that the vigour with which the local content policy has been implemented, we are able to get it right for the long-term growth of our industry. IPPG hereby re-affirms its commitment to continue to partner with NCDMB, as it aims to strengthen in-country capacity and increase Nigerian Content for the benefit of the industry and the county.
This Opening Address was delivered by Chairman, IPPG – Mr. Abdulrazaq Isa
Comment here