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Indigenous firms get N5.6bn oil contracts

By on June 30, 2014

Nigerian companies were awarded contracts worth N5.63 ($34.1m) in the oil and gas sector in the first quarter this year, representing 90.7 per cent of the $37.65m contracts (N6.2bn) that should have gone to indigenous firms in line with the Nigerian Content policy.

A document obtained from the Ministry of Petroleum Resources on Friday, which showed these details, indicated that the Nigerian Content Development and Monitoring Board evaluated the contracts.

It also indicated that a total of 44 certificates of authorisation were issued on Nigerian content plans submitted by operators.

The document revealed that 21 commercial reports were issued for various tenders.

“Out of $37,651,277 worth of contracts evaluated during the period under review, Nigerian content commitments were $34,161,247, representing 90.7 per cent compliance,” it stated.

For the whole of 2013, Nigerian companies implemented contracts worth over N1.054tn ($6.45bn) in the oil and gas sector.

The amount is about 63.37 per cent of the total value of contracts awarded in the sector for the period, which was put at N1.579tn ($10.185bn).

It said, for the 2013 period, “Compliance monitoring activities covered projects valued at $10,185,559,111.59. The Nigerian content spend was $6,454,244,096.48, giving Nigerian content compliance level of 63.37 per cent.”

In the 12-month period, 158 commercial reports and 27 Nigerian Content Compliance Certificates were issued for concluded tenders, the document stated.

It also showed that 327 certificates of authorisation were issued on approved Nigerian content plans submitted by the operators.

The biggest International Oil Company in Nigeria, Shell, in its briefing notes released this month, had said 91 per cent of its contracts were awarded to Nigerian companies in 2013.

According to the company, 95 per cent of Shell Petroleum Development Company of Nigeria Limited and Shell Nigeria Exploration and Production Company as of the period were Nigerians.

The Country Chair, Shell Nigeria, Mr. Mutiu Sunmonu, said local content was not a discretionary field of activity, as legislation set rules and regulations governing the use of contractors and set targets for the amount of Nigerian-created content that must be achieved in various categories.

He said, “These targets can prove challenging in a technical industry in which skills and capacity usually take time to mature. Shell’s commitment to local content is not hinged on legislation alone but it is first and foremost a business strategy. We believe that we best serve our customers and maximise our competitiveness when we help to develop local capacity. We strive to harmonise this with our need for competition, quality and delivery.”

He said the ownership of key assets such as rigs, helicopters and marine vessels was a focus for many of its local content initiatives, as Shell had provided technical and financial support to companies across a range of sectors including transportation, shipping and the manufacture of pipes, drilling fluids and production chemicals.

According to the Shell Nigeria boss, lack of access to capital has continued to hinder many Nigerian companies from being able to compete and execute contracts effectively.

He said, “In order to support local contractors, the SPDC launched a fund with three Nigerian banks in 2011 to provide small Niger Delta-based contractors with access to loans needed to finance the supply of goods and services.

“The ‘Kobo fund’ proved so successful that the SPDC launched a second, larger fund with five Nigerian financial institutions in 2012 to support a wider range of contractors working for the SPDC. SNEPCo followed with the launch of its own fund for contractors in 2013.”

The Executive Secretary, Nigerian Content Development and Monitoring Board, Mr. Ernest Nwapa, recently said developing local content would ensure that Nigerians benefited from the multi-billion dollar investments expected to flow into the country after the passage of the Petroleum Industry Bill.

Failure to sufficiently domicile the services and manufacturing ends of the oil and gas industry operations, he warned, would mean that investments would flow into the country but take flight in the form of overseas procurement of equipment used for the operations and remuneration of expatriate personnel working on the projects.

As such, the NCDMB boss said concerted efforts must be made to develop Nigerian content in the post-PIB oil industry for the benefit of the local economy and Nigerians in general.

 

 

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