Category Archives: Oil and Gas

10 years of the Local Content Act: An operator’s appraisal – Ken Etete

The Nigerian Local Content bill received presidential assent on April 2, 2010.

The Act was to provide a framework that would guide indigenous content and participation in the Nigerian oil and gas industry. The law also provided for the establishment of the Nigerian Content Monitoring Board (NCMB), charged with the responsibility of managing the coordination, monitoring and implementation of the new Local Content law.

The Act states without equivocation that “(1) Nigerian independent operators shall be given first consideration in the award of oil blocks, oil field licenses, oil lifting licenses and in all projects for which contract is to be awarded in the Nigerian oil and gas industry subject to the fulfilment of such conditions as may be specified by the Minister. (2) There shall be exclusive consideration to Nigerian indigenous service companies which demonstrate ownership of equipment, Nigerian personnel and capacity to execute such work to bid on land and swamp operating areas of the Nigerian oil and gas industry for contracts and services contained in the Schedule to this Act.”

10 years after the enactment of the Act, it seems fitting to appraise the Act and its enforcement from the perspective of an operator.
To fully understand what the Local Content Act means to a Nigerian entrepreneur working in the oil and gas ecosystem, we must retrace our steps to decades before the bill became law in 2010.

Our historical excursion will take us back to 1990 to a medical doctor called Professor Jubril Aminu, whose foresight and deliberate policy directions presaged in many ways what would become the Local Content Act 2010.

How did this happen? In November, 1990, Professor Aminu awarded oil blocks to 11 Nigerian entrepreneurs on a discretionary basis. He was convinced that Nigerians had worked long enough with the IOCs and gained enough requisite experience to run their own affairs.

That discretionary bid round gave rise to Queens Petroleum (OPL 135); Cavendish Petroleum (OPL 453); Consolidated Oil (Conoil) (OPL 113); Express Oil and Gas (OPL 74); Summit Oil International (OPLs 205 & 206); International Petrol Energy Co (OPLs 229 & 202); Paclantic Oil Co. (OPL 204); Inko Petroleum (Oriental Energy) (OPL 224);Ultramar Energy (OPL 227); Solgas (Nig) Ltd (OPL 226) and Atlas Petroleum (OPL 75). Chief Lulu Briggs was subsequently awarded an oil license bringing the number to 12.

That bid round signaled the beginning of serious indigenous participation in the oil and gas industry because before then the only indigenous player was Dr. Itsueli’s Dubri Oil which had come into being when Dr. Itsueli as Managing Director of Phillips Oil bought over a small field that was producing about 1,000 bopd at that time. Phillips felt the field was not worth their while from a commercial standpoint, so they decided to sell it. Dr. Itsueli formed a company, left Phillips and bought the Giligili fields. That was how Dubri came on stream in 1987, 4 years before Professor Aminu’s indigenization exercise.

The success of that exercise as seen today, most notably in Conoil, led to another exercise in 1999 under the Obasanjo regime when marginal fields were awarded to Nigerian entrepreneurs.

With Nigerians showing enterprise and capacity to run oil and gas companies, it was only a matter of time before a deliberate policy that would provide a framework for oil servicing companies would be made; thus privileging indigenous oil servicing companies and giving them a part of the lucrative pie hitherto enjoyed by the big international companies like Schlumberger, Haliburton and Baker Hughes.

Once the Coastal and Inland Shipping (Cabotage) Act, 2003 was signed into law, it was only a matter of time before the Local Content Act would come into effect and the rest is now history.

But it was not so simple. A policy of indigenous participation was only one half of the equation. Nigerian oil servicing companies needed to step up to the plate and prove they had the capacity to play in the big league and it was a case of preparation meeting opportunity for those already in the fray. The oil servicing business demanded expertise and experience as well as financial capacity and political will to make it happen.

The political will was provided by the establishment of the (NCMB), which was charged with the responsibility of managing the coordination, monitoring and implementation of the new Local Content law.

Century Group, where I administer and execute strategy has been in operation since 2002, were thus in prime position to demonstrate capacity to play in the new dispensation. 10 years down the line, Century Energy Services Limited, a member of the Century Group and others like Tecon Oil Services, Delta Marine Oil Services Ltd, Damagix Nigeria Limited, Ciscon Services, Chrome Oil, Denca Services, AOS Orwell, Petrok Oil and Gas, Tricon, Maerlin Ltd, etc., has demonstrated that Nigerian companies can provide bespoke and world class oil servicing support to the industry.

A recent news report with the caption – “Nigeria saves $2bn on LNG Train 7 through Local Content development” and quoting Mr. Simbi Wabote, Executive Secretary, (NCDMB) was the trigger for this rumination. The piece noted that Nigeria has saved “$2 billion on Engineering Procurement and Construction (EPC) contract for Nigeria LNG Train 7 Project” through implementation of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act.

This is great news for an industry that is creating job opportunities, fostering economic prosperity and halting capital flight as well as ample demonstration of the Nigerian spirit of enterprise.

The value creation and exchange that companies like Century Group, PFL Engineering, First Marine, IGPES Gas & Power have been able to contribute using local resources is phenomenal. The capacity, experience and aggregate assets that are now owned by indigenous companies proves how far the local content policy has come.

Ken Etete, Group CEO of Century Energy writes from Lagos.

Nigeria: Days of Crude Oil Are Numbered – Govt

STRONG indications emerged Monday that hardship looms in Nigeria following the nation’s over-reliance on oil as the Federal Government has raised the alarm that the days of crude oil are numbered.

According to the Federal Government, it has become imperative for Nigerians to start making effective utilization of its oil wealth when it matters most before the commodity becomes worthless.

Speaking Monday in Abuja at an interactive meeting with the leadership of the National Assembly, Minister of State for Petroleum, Timipre Sylva cautioned that based on a forecast in the global oil industry, oil will in the next 20 years become less relevant in the global energy mix as the world looks beyond oil and seeks alternative sources.

The meeting, which was presided over by the President of the Senate, Senator Ahmad Lawan, with the Speaker, House of Representatives, Femi Gbajabiamila and other leaders of the National Assembly in attendance is aimed at discussing the details of a draft copy of the Petroleum Industry Bill(PIB).

Sylva who pleaded that Nigeria should make use of the best of the remaining days of the relevance of petroleum in the global market, however, sought the cooperation of the National Assembly for speedy passage of the Petroleum Industry Bill ( PIB) forwarded to both the Senate and the House of Representatives.

The Minister who spoke on the intendment of the bill said that having wasted 20 years in putting in place required laws for the regulation of the oil industry, the country needs to quickly pass the PIB to make the best of investments from the sector before 2040, already forecasted for 50 per cent loss of relevance of crude oil in the global market.

The Minister said: “It is quite unfortunate that since the year 2000 when attempts were made to come up with a draft copy of PIB, to 2007, 2009 and 2012 when draft bills were submitted to different sessions of the National Assembly by the executive arm of government without passage, up till 2018 when the legislators came up with one; that we are yet to put on the ground required laws for effective regulation of the oil industry.

“Twenty years have been wasted in putting the laws in place for a sector that has 20 more years of full relevance going by forecasts already made.

“Forecasts in oil industry circles indicate that oil will play less and less role in the global economy.

“Specifically, by the year 2040 which is 20 years away, the relevance of oil in the global economy will reduce by 50 per cent”

According to Sylva, the PIB as drafted and passed to both Chambers of the National Assembly, if expeditiously considered and passed, will serve as the foundation of investments, adding that one of the central aims of the bill, is to make Nigeria an attractive investment destination.

He warned saying, “The days of oil are numbered; deposits of coal did not run out before the world moved away from it. Today the world is talking about alternative energy and we should also move we should take advantage of making hay while the sun shines.”

Earlier in his opening remarks, the President of the Senate, Ahmad Lawan, said that though the PIB seemed to be jinxed since 2007 and 2019, the fresh effort will surely see the light of the day, adding that it is difficult to put a time frame on when the jinx would be broken through the passage of the bill because details of its contents must be understood and thoroughness applied in its consideration.

Lawan who disclosed that President Muhammadu Buhari’s communication will be read today said that the Ministry must be around to educate the National Assembly on the content of the Bill, adding, “the essence of this meeting between the leadership of the National Assembly and officials of the Ministry of Petroleum and NNPC is to discuss the essence and focus of the Petroleum Industry Bill that has been sent to the National Assembly about two weeks ago.

“We announce that the Bill is now in the National Assembly even though it is not before the National Assembly. By tomorrow when the letter of transmission is read on the floor of the Senate and House of Representatives, we will know what it is the Bill.

“The essence of this meeting is for us to understand what is in the Bill. That is the essence and purpose of the meeting.

This is just for us to interact with you on the content of the Bill so that we have some first-hand information, understanding, and idea of what is in there and of course from there the interaction will continue maybe at another level with our committees for the processing of the Bill by the National Assembly leading to its eventual passage by the grace of God.

“The PIB is said to be jinxed. Actually for a long time, roughly from 2007 to 2019, it was either the Bill was sponsored by the executive and not passed by the legislature as was the case in 2007 and 2011 in the 6th and 7th Assembly.

“In the 8th Assembly, the legislature sponsored the Bill by breaking it into three Bills which were passed but there was no assent.

Now the Bill is an executive Bill sent to the National Assembly. The two chambers promised even during our campaigns that we want to break that jinx.

We want to see an oil industry in Nigeria that is properly regulated and that does not only sustains the investments we have but attract even more investments. We want to see an oil industry that is very competitive and oil resources that are beneficial to Nigerians.”

Speaking in the same vein, the Speaker of the House of Representatives, Hon Femi Gbajabiamila, said that though the bill will be considered and passed speedily, thoroughness will not be sacrificed.

Gbajabiamila said, “Oil represents the livewire of our Nigeria’s economy, making the PIB the most important piece of legislation that will come out of the 9th National Assembly in months or years to come.

“We will pass the bill speedily, but not sacrifice thoroughness at the altar of speed. We have assembled a crack team of legislators who are versed in the workings of the industry.”

Vanguard

6 top oil servicing companies in Nigeria. Number 4 will shock you!

Ten years ago, on the 2nd of April 2010, the Nigerian Local Content bill received presidential assent and thus became a law to provide for a framework that would guide indigenous content and participation in the Nigerian oil and gas industry.

The law also provided for the establishment of the Nigerian Content Monitoring Board (NCMB), charged with the responsibility of managing the coordination, monitoring and implementation of the new local content law.

The law also provided for the establishment of the Nigerian Content Monitoring Board (NCMB), charged with the responsibility of managing the coordination, monitoring and implementation of the new local content law.

Why did Nigeria need a local content law? The quick answer is that the Nigerian oil and gas industry had matured with a thriving marginal field regime run by Nigerians and it was time for the service industry to open up to Nigerians as a means of further increasing indigenous participation in the sector by prescribing a minimum threshold for the use of local services and materials while promoting technology and skill transfer to Nigerians in the industry.

To put this in context, before the coming of the local content act, the oil services industry was almost the exclusive preserve of the top 3 – Schlumberger, Haliburton and Baker Hughes with a handful of Nigerian companies providing ancillary support services.

The act however states that “(1) Nigerian independent operators shall be given first consideration in the award of oil blocks, oil field licences, oil lifting licences and in all projects for which contract is to be awarded in the Nigerian oil and gas industry subject to the fulfilment of such conditions as may be specified by the Minister.

(2) There shall be exclusive consideration to Nigerian indigenous service companies which demonstrate ownership of equipment, Nigerian personnel and capacity to execute such work to bid on land and swamp operating areas of the Nigerian oil and gas industry for contracts and services contained in the Schedule to this Act.

Ten years after the signing into law of the act, a consideration of the oil services industry will indicate the emergence of thriving, technologically savvy and financially stable Nigerian companies treading where only foreign companies dared to tread many years before.

These companies have become veritable local content champions and this piece focuses on the Top 6 in no particular order.

AOS Orwell:
The company has over 30 years’ experience in oil well construction, Process Automation, instrumentation & control; OCTG, Conductor Casing & Machine Shop Services in Nigeria. Formed in 2011 as a result of a merger between Africa Oilfield Services (AOS) and Orwell International Limited, the company has grown her capacity and is now offering numerous products and services. The company is able to deliver based on its unfettered access to the world’s best technology through long-standing relationships with world class OEM’s such as Emerson, Tercel, EATON, 3P, and others, as well as robust local content expertise gained through its investment in Nigeria.

Tecon Oil Services:
A wholly indigenous company, Tecon was originally set up in the Isle of Man as a company controlled by an American Investor group through Alliance Oil of Houston, Texas. Tecon became a 100% Nigerian Company through acquisition in 1991, whilst still retaining its Isle of Man identity. Tecon is a leader in the business of Oilfield Equipment Rentals and Provision of such specialized services as Oil Well Fishing, Casing and Tubing Running, Oil Well Snubbing/Hydraulic Work-over Services, Machine shop/Tool fabrication and Redressing e.t.c.

Ciscon:
Established in 1986, Ciscon now operates from offices in Port Harcourt, Warri, Lagos and Houston. The company provides geological, engineering, training and consulting services in addition to its core oilfield service lines. Ciscon’s Quality Management System conforms to ISO 9001:2008, ISO TS 29001, API Spec Ql having been duly certified by the American Petroleum Institute (API).

Century Energy Services Limited (CESL) is Nigeria’s leading oil and gas service company and has operated in Nigeria and the West African sub-region, since 2002. CESL, a member of the Century Group is one of the largest providers of O&M services, executed in conjunction with partners in the Gulf of Guinea. CESL provides training and manpower services as well as community liaison and logistics support for FPSO operations and other IOCs operating in the Niger Delta.

A true Local Content Champion, Century Energy Services Limited is the only indigenous company in Nigeria that wholly owns two (2) FPSOs. CESL is expanding its operations beyond the West African Coast while carving a niche in the global market. The company offers a range of services to the oil and gas industry in Nigeria including: Operation and Maintenance (O&M) of offshore production and storage facilities including EPS, FPSO MOPU, FSO and Drilling Rigs/Jack up; Operation / Maintenance of Flow Stations; Drilling / Drilling Support Services; Field Development Solutions; Engineering, Procurement, Construction and Installation (EPCI) of Oil and gas facilities; Mooring and Installation; Chartering and Management of Offshore Support Vessels, Anchor Handling, Tug Supply Vessels, Platform Supply Vessels, Utility Vessels, Accommodation Barges, Fast Support Intervention Vessels, Crew boats, Procurement and Materials Supply services, Offshore and Onshore Logistics Support Services, Training and Manpower Development, Community Affairs, Bunkering Services and Tank Farm Operations.

Hydroserve:
This indigenous oil services company began operations in the year 2000 in the oil rich Niger Delta area of Nigeria. The company was founded as a result of market demand for a nimble and innovative service provider capable of quality and superior service delivery to the oil and gas industry.

Hydroserve has morphed from an indigenous company in Nigeria into an international company with subsidiaries in the West African region. Committed to the highest standards of safety, efficiency, ethics, and social responsibility, Hydroserve has demonstrated itself as a serious organization through its investment in personnel, equipment, facilities, as well as appropriate business operating systems, processes and procedures.

Petrok Oil And Gas Services Limited:
A project support company registered in 2012, Petrok Oil and Gas Services Limited focuses on reducing clients’ risks by providing Manpower Supply and Development, Equipment/Material Supply Services, Marine Vessel Supply and Offshore Operations, Heavy Duty Equipment Supply & Maintenance and Technical Consultancy Services. Petrok Oil and Gas Service Limited provides services to clients in the Oil & Gas industry, Energy, Engineering and others. Petrok Oil And Gas Services Limited focuses on ensuring that clients get value for their money by leveraging on their comparative advantage which enables them save money and time by outsourcing needs to a highly efficient and skilled team.

How NNPC Staff Sold 48 Million Barrels Of Stolen Crude Oil, Issued Death Threats To Whistleblower

Facts have emerged on how some Nigerian Government officials and senior Nigerian National Petroleum Corporations staff connived to sell 48 million barrels of Bonny Light crude oil stolen from the country during the first year of President Muhammadu Buhari’s first term in office in 2015.

The stolen crude was moved to China where it was stored in various ports and terminals including Sinochem tanks in Zhoushan bonded area and Vishal star tanks.

Potential buyers were from that point contacted for the stolen product by the Nigerian Government officials including a company that eventually blew the whistle on the monumental fraud.

Realising that the crude was stolen, SAMANO SA DE CV brought to the Nigerian Government’s attention the criminal activity involving the NNPC, according to documents seen by SaharaReporters.

Group Managing Director of the NNPC, Mr Mele Kyari, late Chief of Staff to President Buhari, Abba Kyari, and Mr Umar Mohammed were all promptly notified of the stolen crude in order to take appropriate action.

However, a letter written by the whistleblower to the President was prevented from getting to him by Mohammed.

In October 2015, the stolen crude was moved from China without the knowledge of President Buhari and sold illegally by some government and NNPC officials with the proceeds not remitted to the government’s coffers.

When the whistleblower pushed for its agreed five per cent cut of the sale of the crude for exposing the theft, its officials were harassed and issued death threats.

Several efforts for compensation by the whistleblower continues to be frustrated by government officials, who were part of the illegal deal and economic sabotage.

The whistleblower in a letter by its lawyer, Gboyega Oyewole of Lord and Temple, a United Kingdom-based law firm, dated July 23, 2020 to the NNPC GMD has demanded for the company’s compensation for helping to expose the criminal activity.

The whistleblower policy, an anti-corruption programme launched in 2016 by the Nigerian Government, encourages individuals to report cases of financial mismanagement or stolen funds in return for a share of the recovered item if the information provided turns out to be credible.

The letter reads, “Our client was approached by a group in the Peoples’ Republic of Chinas with the intent to sell 48 million barrels of Bonny Light Crude Oil believed to have been stolen from the Federal Republic of Nigeria and stored in various ports and terminals in China.

“It was revealed to our client that the Nigerian National Petroleum Corporations authorised certain companies to sell the stolen product.

“It was agreed that an investigation into the stolen products should be made to ascertain the veracity of the information and gather more facts as to the fraudulent activities. It was also agreed that if the information is found credible, the perpetrators of the offensive will be apprehended and that compensation due to our client for the information so brought forward will be awarded.

“In October 2015, our client got wind of the fact that the stolen products were being moved from their location in China by the Nigerian Government in calculated steps to recover the said products. Our client then caused a letter to be written to Mr Mele Kyari, through Mr. Marco Ramirez, offering to legally purchase the said products from the Nigerian Government if available for sale.

“Our client through its representative subsequently wrote to Mr Umar Mohammed clarifying its intention to the criminal activity in respect to the stolen products and not to make illegal purchases of the same.

“To date, our client has unfortunately not received any form of compensation for the information provided to the Nigerian Government in respect of the stolen products and or response to its offer to legally purchase the same when recovered.

“The upright act of reporting the criminal activity to appropriate quarters was not protected by the expected confidential nature of the policy, thereby exposing officials of our client to serious consequences including threat to life.”

The whistleblower’s lawyer further revealed that Minister of Niger Delta Affairs, Godswill Akpabio, and former Director-General of the Department of State Services, Lawal Daura, were contacted to help get its compensation but nothing tangible surfaced.

The company has now threatened to take legal action against the NNPC if after 14 days from the date of the receipt of the letter the demand was not met.

Sahara Reporters