NIGERIA – It has been almost three years since the Nigerian Oil and Gas Industry Content Development Act became operational.

Stakeholders in the industry gathered at a conference in late November 2012 to appraise the implementation of the law signed by Nigerian President Goodluck Jonathan in April 2010.

Diezani Alison-Madueke, Nigeria’s oil minister, told the stakeholders at the Practical Nigerian Content Conference in Yenogoa, Bayelsa state, that implementation of the act has attracted direct investments worth more than US $500 million in the manufacturing of equipment components for the oil and gas industry.

Part of the local content act mandates original equipment manufacturers (OEM) to partner with their representatives to set up facilities to manufacture or assemble equipment components in Nigeria. Alison-Madueke said the act would ensure that about 30 OEM would have set up fully within the next five years.

The conference presented success stories from industry stakeholders on the implementation of the local-content act, passed on knowledge participants need to comply with the provisions of the law, and listed the shortcomings.

Before the act was introduced, more than 90% of about $20 billion of oil and gas spending in Nigeria was domiciled abroad by the IOCs, leaving local companies and contractors with a small slice of the huge investments in the key industry. Also, Nigerians had few opportunities to acquire skills necessary to operate successfully in the industry; there was little technology transfer; and the oil and gas industry employed few Nigerians.

The Content Development Act sought to correct the low levels of indigenous participation especially in exploration and production. The law was designed to reduce capital flight and unemployment for Nigerians, while reducing the number of expatriate managers and improving technical capacity for Nigerians and growth of the Nigerian economy.

A radical step was taken at the conference to make the training of young Nigerian graduates compulsory so that the influx of expatriates into the oil industry won’t continue unabated.

The Petroleum Technology Association of Nigeria (PETAN) and the Nigerian Content Development and Monitoring Board (NCDMB), which implements the act, signed a memorandum of understanding (MOU) that will make creating employment for young and qualified graduates part of the conditions for winning oil and gas contracts.

The NCDMB-PETAN Capacity Building Internship Programme was formed. Under the MOU, according to the board, PETAN companies will make commitments in the form of plans to recruit qualified Nigerian graduates. The NCDMB will issue certificates to the service companies on receipt of the plans; and the commitments will count with other variables in the evaluation of bids by service companies for industry contracts.

Emeka Ene, chairman of PETAN said, “Developing human capacity in the oil and gas industry should be given priority if Nigeria is to achieve the objectives and benefits of the content law. Local content means the quantum of composite value added to or created in the Nigerian economy through a deliberate utilization of Nigerian human and material resources and services in the upstream and downstream sectors without compromising quality, health, safety, and environmental standards.”

Ernest Nwapa, executive secretary of the NCDMB, said implementation of the local content initiative has ensured the spending of about $4 billion in-country out of the annual $20 billion spending, stimulated over $2 billion investment in new and upgraded facilities, and created 30,000 direct and indirect jobs in 30 months of implementation.

A major achievement of the act since it was enacted is the work being done by Lagos Deep Offshore Logistics (LADOL), located in the Apapa port axis in Lagos. Its promoters said they have so far invested over $100 million in transforming the swampland of Apapa port axis into a world-class, one-stop base for deep offshore logistics.

LADOL said on its website that it has successfully completed the three largest rig maintenance and repair jobs in Nigeria: Noble Drilling’s Noble Percy Jones and Noble Lloyd Noble, and Transocean’s Baltic.

“The near-term economic benefits created more than 1,000 jobs and prevented the leakage of more than $60 million of foreign capital. LADOL has contributed to making Nigeria the West African hub for rig and vessel repair with more than $500,000 of new revenues and business,” the company explained.

Dr. Amy Jadesimi, LADOL managing director, said that repairing rigs in Nigeria has helped the country to benefit from technological transfer through training of manpower.

There also has been an increase in the involvement of Nigerian oil services firms in the construction of facilities in the oil and gas industry. Stress Corrosion Cracking (SCC) Ltd., a Nigerian-owned pipe mill in Abuja, received a multi-million dollar contract from Shell Petroleum Development Co. (SPDC) to supply pipes for SPDC’s major pipeline projects.

Shell companies sponsored the training and professional certification of several Nigerians, including 12 engineers in FEED and detailed engineering at the Shell FEED office in Port Harcourt. They will increase in-country capacity in this field, according to SPDC.

“SPDC has continued to demonstrate its support for Nigerian content development. This is an example that we wish to see replicated across the Nigerian oil and gas industry,” Nwapa said.

Challenges, however, remain in the efforts to boost the local content in Nigeria. The major ones include insufficient skilled labor to support the growth of the oil and gas industry; local businesses servicing the oil and gas industry lack solid capital base and have to source funds from commercial banks at high interest rates; and delays to contract awards or disappointment of local companies that fail to win contracts.

But overall the Nigerian oil and gas industry isn`t the same again in that local companies are participating more than ever before in the industry and the participation is bound to increase in the years ahead if the NCDMB does not relax its implementation efforts.