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Nigeria targets 70% retention of $20.4bn spent on oil, gas projects

By Kingsley Jeremiah, Abuja
01 December 2021   |   3:04 am
With the Federal Government able to retain about $8 billion of the $20.4 billion spent on some projects by oil firms between 2016 and 2021 through local content development

Shell, Eni, ExxonMobil, Chevron may take FIDs on $100b projects
• Stakeholders seek leeway, an extension of local content to manufacturing, construction, others
• Bayelsa Govt decries degradation, treatment by FG, oil companies

With the Federal Government able to retain about $8 billion of the $20.4 billion spent on some projects by oil firms between 2016 and 2021 through local content development, it has outlined plans to increase the value that can be retained through the in-country capacity to 70 per cent.

Indeed, N19.5 trillion is spent on importing raw materials for the manufacturing sector as foreign companies dominate railway and other construction projects as well as the power sector, raising agitations in the National Assembly to expand extant local content law in the oil and gas industry to every sector of the Nigerian economy.

This is coming as energy experts yesterday, at the 10th Practical Nigerian Content Forum in Yenagoa, Bayelsa State, raised concerns about the possible implications of Covid-19 and net-zero in the sector, which was projected by African Energy Chamber to leave a cascading $150 billion loss in the continent’s oil sector before 2025.

The Nigerian National Petroleum Corporation Limited at the forum also revealed that there were possibilities that the country would sign Final Investment Decisions on key upstream projects already in the pipeline by Shell, Eni, ExxonMobil, Chevron and others.

Besides the need to enable the country to control its resources and play active roles in the backdrop of improved capacity, stakeholders are also asking that the concerns of oil-producing communities, especially in the areas of fair business practices and environmental degradation are addressed.

Speaking at the event hosted by the Nigerian Content Development and Monitoring Board (NCDMB), Governor of Bayelsa State, Douye Diri, Minister of State for Petroleum Resources, Timipre Sylva, Group Managing Direct of Nigerian National Petroleum Corporation Limited, Mele Kyari, Executive Secretary of NCDMB, Simbi Wabote and other industry player canvassed drastic growth of local content across sectors of the economy to address over-dependence on import and build in-country capacity amidst existing lessons of the Covid-19 pandemic.

Minister of Petroleum Resources, Timipre Sylva, represented by the Director of Human Resources, Dr Famous Eseduwo Seyeregha insisted that growing local content in the oil and gas sector to 70 per cent by 2027 remained sacrosanct.

With the passage of the Petroleum Industry Act, as well as over $42billion worth of investment agreement signed by various Nigerian entities at the just concluded Intra African Trade Fair (IATF) in South African, Sylva said there are strong indications that so many new projects would soon commence in the Nigerian Oil and Gas Industry.

“We need new projects in the industry to increase our production, grow national revenues, engage the local supply chain, create more employment for Nigerians and promote national security,” he said.

While Kyari, who joined the event virtually, had noted the level of challenges that energy transition might pose for the industry, especially in terms of investment and energy crisis, his colleague, who was at the panel session of the forum, Group General Manager, National Petroleum Investment Management Services (NAPIMS), Bala Wunti, hinted that key oil and gas projects were set for sanctioning in 2022.

Some of the likely projects include Shell’s Bonga South-West and Aparo, which is expected to add about 225,000 barrels per day (bpd); Bonga North (100,000bpd); Eni’s Zabazaba-Etan (120,000bpd); Chevron’s Nsiko (100,000bpd); ExxonMobil’s Bosi (140,000bpd); Satellite Field Development Phase Two (80,000bpd) and Ude (110,000bpd).

These projects are estimated to cost around $100 billion, boosting the nation’s production by as high as 875,000 bpd and revenue by about $1.5 billion.

Wabote noted that monitored level of Nigerian Content in five categories showed that oil companies spent about $20.4 billion in the categories in the past five years from 2016 to 2020, adding Nigeria retained $4.2billion out of $4.7billion representing 89 per cent of the spending on engineering services while in project management, about $427million out of $746million representing 57 per cent was retained.

In services, $441million out of $1.12billion representing 37 per cent was retained by local companies, while $1.5billion out of $5.7billion representing 27 was retained in the procurement of materials. In fabrication services, $1.98billion out of $8.07billion representing 25 per cent was retained.

Noting that aggregated level of Nigerian Content across the five categories amounted to 42 per cent, Wabote admitted that although performance in Engineering was above the 70 per cent target, there was a need to focus on the other two areas fabrication and procurement of materials if the country would achieve the 70 per cent target by 2027.

“That is why we are keen to ensure that the established in-country fabrication yards are utilised for sanctioned projects such as NLNG Train- seven as well as drive local manufacturing of goods such as chemicals, hardware, spares, accessories, and other consumables via our commercial venture partnerships and our oil and gas industrial parks.

“Overall, we believe we are on track towards the 70 per cent Nigerian Content target but we will need the support of all industry stakeholders to make it happen,” Wabote said.

In the year, he said the board would commission and commence operations at Nigerian Oil and Gas Park Scheme (NOGaPS) sites in Emeyal, Bayelsa and Odukpani, Cross Rivers State and complete the engineering design of Brass Island Shipyard while embarking on roadshows to secure investment partners.

Wabote also said the content board would commission the 2,000 bpd Atlantic Modular Refinery in Brass, the 400,000/year Rungas LPG composite cylinder manufacturing plant in Polaku, Bayelsa State, the 48,000 litres/day Base Oil production plant located in Omagwa Rivers State, the 30MMscf Nedo gas processing plant and the 300MMscfd gas hub tied to the OB-3 pipeline in Kwale, Delta State.

Wabote, who had been at the forefront of advocacy towards the expansion of the local content law said the National Assembly is being engaged in the review of the Nigerian Oil and Gas Industry Content Development Act.

Diri, who noted that the state is not being considered in most of the Federal Government projects stated that adding value to oil communities remained sacrosanct.

He said areas, where most oil companies have operated for years, have no access roads, adding that there was a need for the oil companies to build their offices in the state where they operate.

Diri noted that while the state would continue to push for local content development and protect the interests of NCDMB, which he described as the only presence of the Federal Government in the state, fair operations that would avert environmental degradation, especially oil spills were necessary.

Also speaking at the event, Country chair of Shell Companies in Nigeria, Osagie Okunbor noted that some achievement has been made in local content in the country.

Calling for a collaborative approach, he noted that there was a need to urgently address challenges in the sector given the impacts of local content in the industry.

Chairman of the Nigerian Upstream Regulatory Commission, Gbenga Komolafe said sustainable development of the nation’s huge hydrocarbon resources, in the overriding interest of the country and that of stakeholders, by enabling upstream businesses and creating additional revenue streams for government and the investors must be a priority.

According to him, it was critical for the global oil and gas industry to remain efficient and innovative in responding to the emergence of renewables, to sustain the relevance of hydrocarbon resources in the global energy mix.