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Petroleum group urges NCDMB to review 3% project cost

The Nigerian Content Development Monitoring Board (NCDMB) has been urged to review certain aspects of legislation that may potentially work against the competitiveness of Nigeria’s oil and gas sector in the global marketplace.

This includes the Human Capital Development training requirements wherein industry participants are required to set aside three per cent of project cost (projects above $1million) to conduct local content training.

The Chairman, Independent Petroleum Producers Group (IPPG), Abdulrazaq Isa who made this call at the ongoing 12th Practical Nigerian Content Forum with the theme: Deepening Nigerian Content amidst Divestments, Domestication and Decarbonisation, in Bayelsa State, who commended the initiative said it amounts to a multiplication of levies as industry participants are already equally required to contribute a separate one per cent of total costs as Nigerian Content Development (NCD) Levy.

This, he said invariably leads to higher project costs especially as the training is not allowed to be provided directly to company staff and service providers.

According to him, due to this and other contractual or administrative reasons, the process of complying with local content requirements has, on many occasions, proven to significantly increase the overall cost of delivering projects in Nigeria.

Again, this unintended outcome requires some detailed review in order to ensure that we are not losing new investments to emerging investment destinations in the process of driving our local content agenda.

"Most critically, because of the strict local content requirements, we have gradually seen a reduction in the presence of leading international oil and gas service providers, many of whom are leaving Nigeria in droves.

“Unfortunately, while we continue to prioritise local content development, we must recognize that these international players have a key role to play in ensuring technology transfer and knowledge sharing that our local players can benefit from" he said.

While he said government’s effort in deepening local content in the oil and gas industry is paying dividends, the chairman noted it is imperative that the effort is sustained with greater focus placed on bridging inherent capacity gaps; addressing infrastructural inadequacy and capital inadequacy plaguing the industry at the moment in order to optimally derive the full benefits of the local content policy.

It must also be mindful of ensuring that the local content policies are constantly evaluated to ensure that they are continually fit for purpose and not counterproductive to long term industry growth and cost targets, Isa stated, adding that the industry continues to face growing pressures to remain profitable and cost-efficient as it faces competition from other investment destinations.

Isa said local players still lack the requisite skills to adequately support the deep offshore operations and other specialised operations.

He acknowledged that Practical Nigerian Content (PNC) has provided a viable platform for demonstrating the successes recorded in deepening Nigerian Content and fostering industry-wide collaboration in delivering the key tenets of the Nigerian Oil and Gas Industry Content Development Act (NOGICD Act).

While commending the NCDMB under the able leadership of Engr. Simbi Wabote, he said the forum will always be a special one for IPPG as an association of 29 indigenous exploration and production companies.

He also commended the NCDMB for remaining on track to meet, or even exceed, the 70 per cent Nigerian Content target as articulated in its 10-Year Strategic Road map by 2027.

According to him, the emergence of IPPG and strong indigenous exploration and production companies is a testament to the successful local content policy.

“"It's clear that our industry is witnessing a transformational shift and thus continues to underscore the importance of repositioning our industry in the short to medium term; the ongoing global energy transition drive as well as the widespread reforms across the domestic landscape notably the implementation of the Petroleum Industry Act, the ongoing divestment of onshore and shallow water assets by the IOCs and the Decade of Gas Initiative-means exciting times are on the horizon for the industry bringing with it immense opportunities for growth.

"As an industry we must remain focused on rapidly and efficiently exploiting our vast hydrocarbon assets for the socioeconomic transformation of the nation. It is therefore imperative for the industry to be efficient and look inwards in fully optimising these hydrocarbon assets for today and future generations," he said.