The local content challenge!

The best intention does not prevent the worst outcome. Benjamin Netanyahu.

At the start of oil exploitation in Nigeria in the late fifties down to the late nineties, it was common to see foreigners dominating all aspects of skilled labour in the industry. It was an era when an “Oyinbo” man was paidup to ten times what his Nigerian counterpart was paid. A veteran in the industry who started his career with the Shell Petroleum Development Company and in his late sixties told DrillBytes, “When Shell came in to Nigeria, majority of Nigerians on its board prevailed on its management not to pay their Nigerian employees the commensurate of what they pay their counterparts overseas. Their reason was that no one will work in the civil service!”Even though this was not the original intention of the company, it was a welcome development that was quickly embraced.

It was therefore very attractive for the few Nigerians in the business at the time, to hire white men much more than Nigerians. It doesn’t matter whether they are disc jockeys, wrestlers or perhaps farmers. What mattered most was that they were white, and their skin color was a veritable automated teller machine! In that era, one man stood out because he refused to engage white men even when it was clearly a one way corporate suicide. That man was Engineer Moses Kragha and it is to his credit that several Nigerian professionals particularly in the business of contract geologists broke out very early in their careers. This column wishes to salute him and others like him, as they are the true progenitors of the local content policy.

The oil and gas industry is the most organized, result driven and profit focused sector of the Nigerian economy. Perhaps, because it records the largest concentration of foreigners, who drive the business with international best practices. May be ,because it contributes over 70% of Nigeria’s revenue. Perhaps, because the government of Nigeria is involved up to 60%, in the assets and liabilities of the sector, or for the combination of all the reasons mentioned. The industry has now been opened up to more Nigerian participants with more Nigerian professionals in tow by the local content act, which is being managed through the Nigerian Local Content Development Commission. A good policy, no doubt but no matter how good a policy is, there is always the flip side that can be open to manipulation and outright abuse.

The emerging scenario is that some companies servicing the industry through third party contracts are devising all sorts of strategies to keep themselves in business, some of which runs afoul of international best practices. Why for instance, will a company sign-up a contract to provide an explosion proof unit but supply a sub-standard one? If there is an emergency, those trapped in such a shack will have to develop ingenious ways to manage their escape. Why, for instance will a company sign-up to provide real-time data linking the upstream facilities to the operator’s base office only to end up transmitting such information in a lag-time mode? This, when it happens, usually affect decision making, efficiency and productivity of the operator which translates to additional overhead. Why, for instance, will drilling operations be suspended, to get the Directorate of Petroleum Resources’ permit to conduct a wire line operation that involves detonation of dynamites? This, when it happens, is unnecessary loss of revenue to both the operator and the government.

The standard practice, the world over, is to get all necessary documents ready before commencement of drilling. Why, for instance, will an operator drill an oil well, any well at all, without the professional expertise of mud loggers, who are responsible for interpreting drilling/geological data? This is tantamount to having a carpenter supervise a bricklayer and flies in the face of due diligence and international best practices. Why, for instance, will companies owned by foreigners engage their nationals as well planners, well engineers, geologists and client representatives when there is an overabundance of qualified Nigerians to do such chores? This is a direct assault on the local content act!

It is not all Nigerian companies servicing the oil and gas industry that are abusing this policy. Some are promoting it to international standards maybe because, their management grew through the ranks in multinational companies and decided to come together to run their company to industry standards. Even if they are few, they deserve a mention for running local businesses with international mindset. Such companies can and are competing favorably with multinational companies in the business of servicing Nigeria’s oil and gas industry. Companies like CISCON Nigeria limited, SOWSCO oil well services and some others in the Petroleum Technology association of Nigeria, PETAN. Another good example in the industry is SEPLAT Petroleum, Nigeria Limited for driving a local oil company to international standards. These companies and such others like them are indeed, the beacon of the local content act.

In the final analysis, quality oversight is needed by relevant agencies. We should not let it look like, by solving a problem, we succeeded only in creating a set of others. We can either bury our heads in the sand like the proverbial Ostrich, and pretend it doesn’t exist or face the problems squarely and turn it into more benefits for Nigeria and her people. This is the local content challenge!