The Nigerian Oil and Gas Industry Content Development Act (“Local Content Act”) signed into law by President Goodluck Jonathan was the outcome of several years of agitation by the citizenry and indigenous stakeholders in the hydrocarbon industry to ensure that the sector is both valuable and beneficial to the Nigerian nation and Nigerians.
Nigeria is not an exception in this regard. Governments the world over encourage foreign firms on the development of indigenous firms through patronage as a deliberate strategy for national growth and development. For over five decades since oil activities started in Nigeria, little attention was paid to the empowerment of the indigenous sector by the multinationals. Rather than empower indigenous firms and build human capacity, sister foreign companies were merely invited to undertake sundry services in the sector, which was attributed at the time to lack of technical know-how, facility, requisite training and funds.
Hence, before the Act was signed into law, in a presentation delivered at the Nigerian Content Summit on Oil and Gas/Exhibition in December 2007, the Nigerian Content Implementation Division of Nigerian National Petroleum Corporation (NNPC) estimated that over 80% of work value in the hydrocarbon sector is executed outside the shores of Nigeria. To date if there is any improvement such is insignificantly minimal and inconsequential compared to the footprints of the industry in the Niger Delta: the most juicy and mind bugling dollars’ worth contracts in the oil and gas sector are still the preserve of foreign firms in Nigeria.
There was palpable relieve on indigenous oil and gas stakeholders when the Local Content Act was signed into law with Nigerian content defined as the quantum of composite value added to or created in the Nigerian economy by a systematic development of capacity and capabilities through the deliberate utilization of Nigerian human, material resources and services in the Nigerian oil and gas industry. Similarly, section 3(2) of the “Local Content Act” stipulates that: Exclusive consideration to Nigerian indigenous service companies which demonstrate ownership of equipment, Nigerian personnel and capacity to execute work on land and swamp operating areas.
This section of the Local Content Act speaks directly to the ongoing brouhaha over the refusal by Shell Petroleum Development Company (SPDC), Nigeria, to award the Trans Niger Pipeline Looplines Project to an indigenous company as recommended by NAPIMS. FENOG is an indigenous oil and gas firm that has over the years invested more than one billion dollars into the petroleum sector: the company has invested in some of the most recent technological facilities required in the oil and gas sector, which most foreign firms in the region are yet to acquire. The company (FENOG) was recommended based on its human and infrastructural capacity and capabilities, and previous job certifications in the oil and gas sector in Nigeria. FENOG has satisfied all requirements except ‘colour of the skin’ to enable it undertake the project to completion.
SPDC, in defiance to the Local Content Act and as recommended by appropriate authorities of the NNPC, has declined award of the Trans Niger Pipeline Loopline Project to FENOG. Even though there is an indigenous company (FENOG) with the infrastructural competence and technical knowledge, foreign firms are preferred by Shell, Nigeria, hence, the delay.
There are conscious efforts by Shell to undermine this project expected to give a lifeline to the people of the Niger Delta and other Nigerians. The company’s Managing Director, Mr. Mutiu Sunmonu has consistently attributed his preference for foreign firms rather than capable local firms to dictates and arm-twisting from the ShellInternational Headquarters in The Hague. Mutiu Sunmonu is very well aware of the negative consequence to the country and the injury to indigenous firms, the award of contracts that could have been handled by local firms to foreign corporations.
The headquarters of multinational oil and gas companies operating in Nigeria need to be reminded that Nigeria is a sovereign state whose laws and regulations must be obeyed and respected. Such action by any multinational corporation in Nigeria should be regarded as corporate racism. Attempts therefore, by multinational oil corporations (as gang-up or otherwise) to frustrate the Local Content Act must not only be frowned at, but also resisted determinedly. This would require sustained efforts to preserve and protect the growth of indigenous oil and gas companies from the Minister of Petroleum, Group Managing Director of NNPC, Executive Secretary of Nigerian Content Development and Monitoring Board (NCDMB), and Group General Manager of National Petroleum Investment Management Services (NAPIMS).
There is urgent need to discourage an ongoing trend where contracts in the oil and gas sector are mostly first awarded to foreign firms who in turn award same to competent indigenous companies at very ridiculous and embarrassing rates. This practice in the oil industry has made the indigenous companies not only second class partners, but exploited underdogs. Would Shell in The Hague, on contract awards, give preference to a Nigerian company (or any other country) over a competent indigenous firm in the Netherlands? NO. My sincere appeal therefore, as a stakeholder in the industry, is that these unwholesome practices must be stopped forthwith to enable the indigenous firms make adequate and the desired progress that would lead to national growth and development.
If Nigeria must grow, indigenous oil and gas companies such as FENOG must be encouraged and protected by government regulatory agencies in the oil and gas sector against discriminatory practices as currently exhibited by Shell. The marginalization of indigenous oil and gas companies contributes in no small measure to the teeming army of unemployed youths and the prevalence of social vices in our nation.
Enough certainly is enough.
Member, Niger Delta Oil & Gas Stakeholders Network, Port Harcourt. Email him at firstname.lastname@example.org.