Content board pushes opportunities in oil, gas sector to $20m – Wabote

Engr. Simbi Wabote is the Executive Secretary, Nigeria Content Development Management Board (NCDMB). In this interview, he highlights some of the successes recorded in the Nigerian Oil and Gas Opportunity Fair (NOGF) and efforts the board is making to ensure that more indigenous service companies have access to the $20 million Nigeria oil and gas fund.

How do you measure success of the transformation opportunities in the Nigerian Oil and Gas Opportunity Fair (NOGF)?

This is a good question because stakeholders will want parameters with which to measure the success of any event and in keeping with our strategy, every year, we try to highlight the promises that we made the previous year and how well we have been able to achieve those promises and then lay out our strategies for the next year. This gives the opportunity for stakeholders to measure our performance.

So when you talk about the value and the opportunities that we showcased two years ago, I can give you some figures. Today, as you are aware, SPDC and its joint venture partners had signed a Final Investment Decision (FID) agreement for 300-million cubic feet of gas per day, the Assa North Gas Development Project. The project is one of those opportunities we highlighted in our previous fora. It has a value of almost $2 billion and we also highlighted the TOTAL project two years ago which is also about $2 billion. We also highlighted the ExxonMobil project two years ago and also told you that within the next couple of weeks, they will also take FID on a major project that is also worth about $1 billion as the case maybe.

We also highlighted the potential in SNEPCO’s  $3.9 billion South West  Aparo oil field project. I am happy to tell you that tenders have been issued and you are looking at an opportunity of almost $10 million that is coming into the country.

Also, there’s the NAOC’s project for which they have taken FID and it is ongoing and we are looking at about $1.5 million. I don’t want to talk about the round field opportunities that will bring between $100 million and a billion dollar, which are also ongoing.

Within the past two years, I can confidently say that we have pushed the opportunities in the nation’s oil and gas sector up to about $20 million and in the next two years, we are looking forward to another $25 million in the oil and gas sector going by the opportunities we have identified which we also want to share.

So far, there have been substantial progress and things are looking up especially with the resolution of some of the cash-call challenges that joint venture operators faced in the past, which stagnated projects and investments in the oil and gas sector. Since that has been resolved, a lot of opportunities are springing up in all the joint venture operations that we have.

SPDC has also commissioned a significant project which was about $200 million, that is also adding value to the oil and gas industry. We also know that TOTAL is looking at Ikike Field development  project for Final Investment Decision within the next couple of months. That in itself is significant.

Two years ago we also shared 27 opportunities by NLNG. As I speak, we are optimistic that all things being equal, before the end of the year, the FID on the 27 projects which is about $5 billion will be taken. So things are looking up; investments are coming, they are not drying up and I believe that this will only improve.

On the issue of Project 100, the project beneficiaries will have active participation at the long run because it is giving them an opportunity to participate in the future of the oil and gas sector.

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What are some of the challenges militating against your activities in the sector?

Indeed, there have been some drawbacks in investment but I think by and large, the present administration has been able to create an enabling environment where things are done smoothly and businesses are done quite differently with the way decisions are taken and, particularly, in the oil and gas sector. So, if there is anything, we want to give credit to the current administration that has provided the enabling environment.

A lot of work has been done, with the ease of doing business initiative and some of the measures by the customs in clearing of goods, immigration management of the ports. So, things are looking up and a lot of work has been done in that regard. We are surmounting those challenges; there are lots of things that you can’t do overnight but I think that with tenacity and continuous focus without being distracted, we will overcome most of the challenges in a very short time.

What is the level of penetration by local companies in the sector?

I can tell you that almost 80 per cent of the contracts that are awarded in Nigeria’s oil and gas sector today are to local contractors. That gives you a significant level of penetration because no international company without local participation is allowed to take up contracts in the sector. Of course, you can differentiate between opportunities and penetration but the actual local content in those opportunities pertaining to production, we are not there yet.

In what way is NCDMB helping local players to collaborate?

If you go through some of the objectives of Project 100, it is actually geared towards achieving collaboration across the oil and gas industry, some of it is also looking at how the local players can merge themselves to pursue bigger opportunities because we are seeing a lot of fragmentations. They all want to go for the big bags but they don’t have the capacity. But we believe that if they are able to come together they will be able to chase those opportunities with their strength. It is one of those measures we are putting in place to get them together.

Also, we are working with PETAN which is also an amalgamation of indigenous oil and gas service providers, to see how to bring them together to use their strength to pursue opportunities as opposed to doing it individually because if we don’t collaborate, we will still not be able to take on the big prize. So it is one of the objectives to ensure collaboration. This collaboration is not just within the service providers, we are also working to collaborate with other sectors, government institutions in other to get their support to ease the activities of most of the service providers. For instance, we have a very firm collaborative agreement with NIMASA, we have collaboration with customs, immigration, as well as  Oil and Gas Trade Zone authorities, with NNPC, NAPIMS and DPR, such that all the challenges that the service providers are facing are jointly addressed and tackled.

So, the collaboration goes beyond the service providers but links to other sectors of the economy.

What about community engagement?

This has always been one of the topics of discussion, as to how we integrate the oil and gas communities into the business. I think about five months ago, we signed what we call the community content policy, in which  for any project opportunity that is happening in any community, there are aspects that are earmarked for the community contractors, such as opportunity for employment for community people as spelt out clearly in the Nigerian Content Plan which is very important. What is not within our scope as NCDMB is to discuss how much people are paid. That is not part of our mandate. It is left to the Ministry of Labour as well as the concessionaires, as well as the joint venture partners, because we don’t play in that field. But providing the opportunity for employment is part of our mandate and we are driving that effectively through the community content policy in other that it integrates the community.

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The other thing is funding. We have also established the Community Contractor Funding which is an avenue to help them access single digit interest loan for funding of opportunities that they get. The interest is just about 5 per cent for five years payment period to assist them. So, there are deliberate policies and actions to address the community challenges and also integrate them into the oil and gas sector.

How do you maximize investment with the PIB hanging in the National Assembly?

I think that is an important question that everybody will be interested in but I am aware that the Petroleum Industry Bill (PIB) has been hanging for God knows how long and despite that we have taken major FIDs. I think PIB was in the works when TOTAL took $16 billion FID on Egina; they have gone through it and that project has been completed. I have mentioned other projects that they have taken FIDs on. There are other legislative processes that are actively working but that does not mean business will not continue because of PIB.

We are carrying out most of our investments but I agree with you that perhaps if that has been resolved we should have more and greater investments or perhaps no investments at all because it depends on what the conditions are. But that is not acting as a deterrent any way. I can assure you that activities will continue in the oil and gas industry despite the delay in passage of the bill.

How about the $200m oil and gas sector fund. How many industry players have drawn from it?

Today, we have almost 100 applicants for the fund but we have succeeded in only disbursing to three beneficiaries. Most of the applications are still hanging. I think the reason for that is that during the downturn in the oil and gas sector,  when oil price came down to $27 per barrel, a lot of companies had accessed facilities from a number of commercial banks and a lot of the applicants that I see are highly leveraged. Some of them cannot meet some of the conditions that are put forward by the Bank of Industry (BoI). And I am sure you know that there are a lot of bad loans, particularly as it relates to the oil and gas sector. So, the BoI adhered to the strict requirements of ensuring that no loan they give out fails and because of that, most of the would-be applicants have not been able to fulfill the requirements to benefit from it.

Having said that, the board is actively reviewing the process as to see what can be done to change that narrative and I am sure that in the next couple of weeks, you will be hearing from us the new strategy that will be put in place in order to address that law as regards to being able to access the fund.

I think it is also very important for people to realise that it is not free money because if you access it, others that are waiting on the queue will also benefit. So you must have the capacity to pay back for others to benefit. So, we are managing it in that context and in a couple of weeks, we will be addressing the press on the strategies.

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 There are reports that oil companies are not complying with the Nigerian Oil and Gas Industry Content (NOGIC) Act. How true is that?

I can categorically tell you that in terms of compliance, the IOCs are the most compliant to the NOGIC Act to a large extent compared to the indigenous players. If there are people who flout the act, they are the indigenous players who have benefited from the Act itself when you put the measure of compliance between International Oil Companies and indigenous operators. I see the clear tendency by indigenous operators to want to circumvent the provisions of the Act which, to me, is an irony, to be honest.

People who benefited from the process are now the ones who are working actively to see how they can circumvent the Act. So, in terms of compliance, if you compare the IOCs with the NOCs and the indigenous players, the IOCs are on top of compliance because their corporate governance structure is strict. They also go through international scrutiny so they try as much as possible to comply and our strategy has always been a pragmatic approach to the implementation of the Act.

We don’t read the act like a Bible by stating the dos and the don’ts, we have to compare between existing capacities and capabilities; when do we build them up, are they available now to address the particular challenge in the industry, are we going to build them in the couple of year, time? Don’t forget that oil and gas is the mainstay of our economy and if we don’t manage them properly, we will short down businesses as well as shut down our future as a country. So we use the pragmatic approach in terms of implementing the Act itself.

We have made tremendous progress compared to other sectors, be it construction, IT. Today, every other sector is wanting to model its local content implementation to the oil and gas sector which we are also actively supporting them to do.

 Will the NCDMB accommodate those that are highly leveraged in the $200m oil and gas fund?

As I said earlier, the board is looking at it seriously to see how it can help because the Nigerian Content Development Funds are funds set aside by the service providers themselves, the contractors, so the responsibility is on us to look for a way to use it to support them. It is not a government grant or government fund, it is set aside by them. Technology is changing, the way we do business too is changing, people are changing, so we must continuously improve to find the ultimate solution at some point. So we are reviewing it, the review is not intended to give bad loans that cannot be paid back but the review is intended to see what other strategy we can adopt to support the local contractors when it comes to fund.

So we are working on it and when it is ready we will make it known to the press and also other stakeholders on what new strategy is in place. This year we want to revitalise that process and make it more efficient and active because the success of that fund is very much hinged on the success of NCDMB itself.