How would you assess the success of the Local
Content Act in terms of bridging skills gap and empowering local players?
The Local Content Act is a combination of efforts, which originated from the private sector. The Federal Government keyed into it and got the Nigerian National Petroleum Corporation (NNPC) involved. So, between the private sector service companies such as ours and the NNPC, we were able to put together what we have today.
We thank the NNPC (representing the Federal Government) for moving when it was required. On the effect and importance of the Act in terms of local content capacity building, it will improve local content capacity. Capacity is not about rhetorics, it means more opportunities for Nigerians and trickling down of value. It amounts to more funding and will expose more Nigerians to the industry.
Exposing Nigerians and creating more opportunities within the Local Content Act, we synergise and have a system that will allow more players to come in. This means that at the end of the day, Nigerians will have better control over the exploration, production and other activities in the oil and gas industry. Beyond providing more jobs and boosting the economy, the Local Content Act provides better security as far as control of our energy resources is concerned. In many ways, the Local Content Act impact is positive.
The pioneer Executive Secretary of the Nigerian Content Development and Monitoring Board, Mr Ernest Nwapa, an engineer, is very experienced. I know there are lots of works to be done but I assure you that he is up to the task. The management of the board can make a lot of difference but if issues are not managed properly, it can backfire in many ways; but we don’t expect that.
Operators are contesting some provisions of the Act, which they say are grey areas that should be addressed, what is your view?
You can call them grey areas or potential pitfalls.
The way we do things sometimes is not very good. We have to ensure that the award of contracts to briefcase contractors who will inturn give the contracts to foreigners in the name of local content, is discouraged. This will not help us to build capacity. Secondly, politicians should ensure that nobody makes them use their influence where they don’t have to.
They should avoid negative influence by supporting companies and contractors not qualified in the sense that they are not prepared to develop capacity but to take up the contract, collect the money and disappear without doing the job.
This will create serious credibility problem and it will affect the Local Content Act and its practice. It is not just the politicians but anyone in position of authority should know that the Act is primarily for Nigeria and Nigerians. Our ability to use it positively will enhance the economy in many ways. Another issue is the local content fund being put together by virtue of the Act where one per cent of all contracts go into. This fund has to be deployed properly for capacity building. It has to be used in a way that builds up local content.
Stakeholders including PETAN chairman have identified funding and not skills gap as the major challenge to local capacity building. Do you agree?
I agree with them 100 per cent. Skills can be acquired. I can tell you that the skills in Nigeria are enormous, but there are still areas we are yet to build up skills. There are many ways to get the technology we need.
Some 20 years ago, it was a different ball game. We were not opportuned to have the technologies of today. That is history because some of us are handling projects worth more than $200 million at a time. So skill is not the issue. The issue is finance, as the chairman of PETAN said.
The finance regime in Nigeria is counter-productive. There is no way you can raise funds at 20-25 per cent interest per annum and make profit. There is no way you can build capacity with that kind of cost. There has to be a concerted effort to get finance cost lowered to build capacity. I know it cannot be done by fiat, the government cannot decree but it is important that it establishes some fund or even some security that will enable banks lend at a cheaper rate.
It is our duty as practitioners to give support so that risks borne by the banks are also reduced. It will encourage them to lend more. It is not a major issue but it is not an easy one to deal with. I believe that until we deal with cost of finance, our ability to grow will be limited.
Oilserve has subsidiaries that play in the exploration and production (E&P) segment of the industry, as well as in the power sector. How would you rate Nigerians’ participation in the E&P. Is it encouraging?
It is not encouraging but that doesn’t mean that it is bad.
There has been movement in the past 30 years. We have some Nigerian E&P companies today and we expect to have more. Certainly we have to work on it but what is important actually is the way the blocks are given. The government has to conscientiously put a process that is very transparent to encourage the real players to come into the industry. If you look at some of the players today, you will see a difference. Some years back many blocks were awarded, how many of them came to fruition? Only very few are being operated by Nigerians.
They are the few examples that I can give and both are managed by professionals. Although you cannot stop anybody from being an investor, you don’t have to be an expert in oil and gas to invest today but you can be an investor and you risk your money. But it is important that when that is done, there has to be a proper process in place to ensure that Nigerians get the best out of it.
How would that happen? It is by ensuring that these fields are run by Nigerians mostly? You can achieve this by putting up a proper process during bidding in such a way that there have to be criteria; with the criteria that encourage Nigerians to manage the blocks, that will make a lot of difference.
I believe that the future is still looking good, we have learnt from our mistakes and like I said earlier, we want to be higher than where we are today. Where we are today is a major move from where we were 20 years ago.
Can you talk on your marginal field?
We are only a participant in it. We are not the operating arm, at all. But I can tell you also that one of our sister companies, Frazimex won a block in Sierra Leone. It is a deepwater block offshore Sierra Leone.
Do you have any intention of playing in the E&P terrain in Nigeria?
Yes, it is a matter of having the right plan and system put in place. Our major purpose in Nigeria is entirely service delivery but we are ready to move into E&P because we can now synergise. We move into this field, we now have what it takes even to support most of the farm-ins. We are waiting for the next bid round to come up. We will also be involved in the next round of bidding for marginal fields.
The passage of the Petroleum Industry Bill (PIB) has been delayed for long. Do you believe the non-passage of the Bill has impacted the oil industry negatively?
You are conservative and modest. I can tell you categorically that non-passage of the PIB is a disaster to Nigeria oil and gas industry. It is a complete disservice to Nigerians. We have to make sure that we pass a PIB that reflects a situation where we get the best value for our resources while encouraging foreign participation as much as possible. It has to be a PIB that opens up the industry further to investments by Nigerians and non-Nigerians. It has to be a PIB that lays a ground work that will enable Nigeria as a country tap the most out of the resources they have.
We have experienced people in the National Assembly. In my opinion, the onus is on the executive arm to do the right thing for Nigerians. I’m urging everyone involved in the process to realise that it’s time to move. I know that they are patriotic but they also know the duty they owe Nigerians, and I’m sure they will be able to do that because the cry is getting louder by the day and I know they know what to do.
As an operator, can you list some challenges facing indigenous players?
There are challenges but funding is the major one. Availability of finance and cost is a major issue, if not more than 50 per cent of the challenges. The other is security. It has to be dealt with to reduce the cost of doing business. Also, we have to continue to build capacity in terms of skills. To move forward, we have to keep building capacity and skills. Even America as advanced as it is today continues to build capacity and skill. They train people, retrain them and give them the opportunity to keep growing and learn new things because technology evolves.
The technology we have today may be obsolete in a year or two, so we have to keep training and retraining. It is a fact that we have to make a conscious effort to work on because, without that, we cannot be in a position to tap the best out of our resources.
The oil industry says that Nigerian graduates are not employable. Don’t you think, it is a serious blow to the already extant gap we have in the industry as a country?
There is a major issue with the quality of our education.
To say the least, it is very poor and many things led to this. But again I’m one of those in life who don’t believe in just complaining about something but also in doing something about it. Until Nigeria does something about our education, the country will remain limited in her ability. And the issue that is even more disturbing is our ability to take the best advantage of what we have. If we don’t have people that can compete with the rest of the world, what it means is, we will end up holding the wrong end of the stick, end up always being on the losing side because education is key.
Without education, people, nations and systems will have a bleak future. The only way we have to improve is education. Take yourself as an example, if you didn’t have the opportunity to go to school in one form or the other, you wouldn’t be here today. You probably would be wasting or wasted somewhere and the same thing applies to me. The reason why we can sit down today and talk about competing with the rest of the world is because we were given the opportunity to go to school and we got quality education. So, education is the key and until the government gives the sector serious attention, we are not going anywhere.
Do you see a Nigerian company being competitive enough to rub shoulder with international oil companies in future?
I see that. It is possible, not only from standpoint of belief that anything is possible but looking at the factors that are involved, it is possible. It is just that it doesn’t just happen; you have to make it happen. You have to work for it, plan for it and it is not just by the efforts of the investors including Nigerians, it is also by concerted efforts of the government in setting up policies that will encourage that. It is a multitude of factors that will lead to that but it is very possible and that is what we want to do.
What is your assessment of the government’s amnesty pro-gramme?
In my view, it is a very good programme and to a large extent it has been executed very well. I give kudos to the Federal Government for thinking about that and taking the right decision but we have to go beyond that. What I mean by this, is that we have to find a way to empower Nigerians, particularly, those in the Niger Delta, so they will have work to do, think properly and not resort to carrying arms and that requires longer term plan and execution.
Your company has done a couple of projects in Nigeria. Which one excited you most?
It is a difficult question you asked because we have done a myriad of projects and each of them is peculiar. For example we did phases one, two and three of Greater Lagos pipeline project for Oando. That is peculiar because it was the first time pipeline is being laid in a very densely populated area, such as Lagos. People thought it would not be possible.
We started it in 2001 but by 2002, we finished the first phase, did the second phase and finished the third phase three years ago. It is a peculiar one; it is something we are proud of. It is even more peculiar because in a situation we have a local company like Oilserv executing a major EPC project for a local company like Oando. There is nothing more important and significant like that when you talk of local content. Another one is clear intervention we did for Shell. I remember when Nembe oil field was taken out because of sabotage of a pipeline.
Normally it was to take four weeks to solve the problem because getting into the swamp, detecting the leak, excavating, building a cofferdam, preparing, testing and reinstating, will take you a longer time but we went in there instead of doing it in two months or so, we delivered that in 14 days. It was a major activity and it was an activity that foreign multinational companies could not do, but Oilserv did that. We also built a 36-inch TNP manifold for Shell. That was a project that commenced in 1993 and was abandoned. In 2001, we moved in there and started it all afresh and delivered it in less than six months. These are key projects we’ve done that are very typical but beyond that, we have done many other projects such as building major export pipeline for Global Gas Refining, which is an indigenous company, from Cawthorne Channel to Bonny River six years ago. It is 26km in the swamp.
We built a power plant, which included 13km of pipeline from Ikeja to Akute to power the Lagos Water Corporation and Akute Power Plant. That was the first time an indigenous company took such an EPC job from beginning to end. There are quite a lot of others but we are glad to have done all these.
Why don’t Nigerian operators play in the deepwater terrain?
The major difference between offshore and operating on land, or in swamp is purely the issue of the cost of the project and the issue of logistics. The technology is there, we can lay pipelines in offshore the way we lay on land. All it requires is that we need to invest more, get a lay barge that will cost millions of dollars but make sure that you have the opportunities because you cannot get a lay barge and keep. It is infeasible. Basically, the major impediment in offshore projects that doesn’t allow Nigerians not to move into offshore is cost. We require deep pocket to do that because the technology and knowledge are there already.
An Oilserve subsidiary undertakes power projects, why shouldn’t Nigeria fix its power problems?
It is not a big problem. Every technical challenge has a solution. And trying to use the solution, you create opportunities. We don’t run away from problems, we deal with them. Nigeria’s power sector has suffered tremendous difficulties. It was neglected for many years and when decision was taken to act, the decisions were good but the processes were not well thought through and some errors were made at the very beginning.
I know now there is a lot of effort to solve the problem. I know the president is very committed but let us be clear about the issue. Improving capacity in power is not a one day affair, it takes time. It is a long process because here we are talking of generation, transmission and distribution.
You have to put all those things together in order to achieve result. If you generate a lot of capacity and you cannot transmit, there is no power still. If you generate and you can transmit but the distribution system doesn’t have the capacity to take the power and give to various end-users, you still have a problem. So, you have to integrate entirely and it is only when you do this integration that you can be in a position to solve the problem.
How would you describe the importance of Offshore Technology Conference (OTC) to the oil and gas industry?
OTC as an event is very important to the oil and gas industry in many ways. We have to accept certain facts. One is that OTC is the biggest oil and gas show in the world as far as it concerns a show that showcases technology, the activities and all the various opportunities in the oil and gas industry. So, participation in OTC is most important way of showcasing the oil and gas industry to the rest of the world.
The industry is quite active in Nigeria and we know that it is our duty to make sure the world knows what we are doing and put to the world all the opportunities that are available that can create synergy as far as production or exploration is concerned. It is also good for Nigerians to come here and see the technologies that are coming up that can be deployed in operations in Nigeria that can make our own work more efficient.
