Home Interview Local content panacea to economic growth – Wabote

Local content panacea to economic growth – Wabote

by Business News Report

At the Just Concluded 9th Practical Nigerian Content Forum held in Yenagoa in Bayelsa State, the Executive Secretary, Nigeria Content Development and Monitoring Board (NCDMB) Engr. Simbi Wabote  spoke on  ways to grow the nation’s economy, revenue  through implementation of Local content in other sectors of the economy.

You are clamouring for an extension local content policy in other sectors of the economy? I will like you to explain, how you intend to manage this as a Board, if by chance you get a legislation to do that? Do you have a capacity to do that; looking at the huge nature of the oil and gas sector and then other sectors. How would you harmonise the legislation?

What the legislators are thinking is not to allow for proliferation of regulatory agencies within all sectors. You would not want to hear that there is a local content board for construction; there is a local content board for Information and Communication Technology (ICT). It becomes spaghetti and makes nonsense of the entire vision of wanting to localise things in the country. I  think what the legislators are thinking is under one umbrella, you can bring local content, where you now have divisions. That is to say under one umbrella of local content, you now have a division of local content in charge of construction;  a division in charge of ICT; a division in charge of oil and gas. That way, you have one body responsible for regulation, but each of those divisions have their peculiarities. In amending the Nigerian Oil and Gas Industry Content Development Act, you take those peculiarities into consideration in order to implement, with a view not to create an over-regulatory regime. That is the whole idea. So that you create a lot of flexibility for those to exist but you do not go up to the nuts and bolts in other to stifle the progress of those sectors, but you just want to bring the regulation under one umbrella and not to create spaghetti. That is the thinking behind it. On the issue of whether they want to repeal, it is a different discussion with the National Assembly. I guess when they gather stakeholders they would also understand the dos and donts and the push-backs associated with the methodology with which they want to get there. There would be a lot of stakeholders’ interaction to see how we synergise at the end of the day.

Do you see your drive towards increasing local content above 70 per cent impacting negatively on the Federal Government’s quest to reduce the cost of crude oil production by at least five per cent?

As a matter of fact, local content will only accelerate a reduction in cost of production.  In the next couple of weeks, we would talk a lot more about Train 7 and what local content has been able to do to drive cost down. There are loads of examples of companies that have reduced their cost of production as a virtue of patronising local contractors. Chevron is one of them. One of their big projects with Marine Platform, there were able to reduce the cost by as much as 40 per cent, which is much more beyond the five per cent. You just take even the issue of expatriates in many operating companies versus Nigerians. You would agree with me that your salary today, that of the expatriates would probably be 10 times that of yours. Getting you to work for them, instead of the expatriates, would reduce the cost.

There is no gainsaying that local content does reduce cost. Yes, in certain instance, there has to be an initial investment which may probably be high, but continuously, it comes down low. Another example is the integration facility that we have today in Lagos by Samsung, which was built on the back of Egina. In the next project, if they want to integrate in Nigeria, almost about $300 million would be saved in building that kind of facility for integration. The ultimate and ripple effect of local content is to reduce cost at the end of the day. It very much fits into the issue about cost reduction.

Can you please highlight the achievements of the NCDMB in line with its strategic plans?

Of course our focus is in line with our 10-year strategic road map. We started in 2017 by launching a 10-year strategic road map and between the 10 year roadmap, we have the short, medium and long terms that we intend to achieve. During my speech I talked about the short term programme that we have, which is one to two years . You might think it is long, but for us, we term it as short; then another five years as medium; and another 10 years as long term. If you go back to the strategy, you will discover that we have  almost close out all that we said we would do within the past two years, with a few of them left that we will carry over to next year. Next year, we will then look at the next tranche, in terms of our strategic plan. Most of it is to expand our participation in the downstream sector of the economy; talking about the marginal refineries, the LPG penetration that we hope to push a lot harder, come next year. We wish to enhance our collaboration with the operators as well as other government entities. We talk about establishing reward systems for  those who are really disrupting the local content agenda — positive disruptions, as it were— they will also be rewarded.

Our capacity building effort in times of Science, Technology, Engineering and Mathematics (STEM) education; encouraging it, it will also to be enhanced. We will also play actively in the vocational education sector, which is the gap that we see, that . Today, we do not have good enough and qualified artisans in our various fairs. We hope to really push that as far as we can. By and large, all that we intend to do is in line with the roadmap. We will not deviate from it. We are not organisation of proposals, we are an organisation that focuses on the plans that we have developed in other to implement them strictly without stepping out of them, because we thought these are good plans and if we remained focused we will achieve the 70 per cent by the year 2027.

What in your opinion is fuelling the interest in the PNC?

In my opinion, it is the belief of stakeholders in terms of the programmes and plans that we have in the NCDMB. Secondly, their trust in our being able to drive local content in the industries in a transparent manner;  and I think also the respect that we have been able to achieve in the industries itself is driving them to want to associate. Most importantly is also the pragmatic nature with which we have been implementing our local content agenda. It actually endears the interest of industry stakeholders, because they have seen a lot transparency; they have seen a lot of opportunities that we create once they associate with the Board. That continues to draw them, if you like, to the organization, as well as because of our integrity, our focus, our and determinations and passion to make a difference in the Nigeria economy.  I think that is why they associate with the NCDMB.

What is the current status of other delayed projects?

Luckily, at least Train 7 is almost here. By the grace of God, we believe that come December, we would probably take Final Investment Decision (FID). On the back of Train 7, there are also other upstream projects, like the HI, HA and HK. These are huge upstream projects that are supposed to be developed to supply gas to Train 7 itself. It will be a trigger for other projects. Bonga Southwest as you know, I also work on Bonga Southwest as a staff of Shell, for quite a while, hoping that we would cross that threshold, but every time we try, we face some bit of challenges.  But I sincerely believe that SNEPCO is serious about wanting to do Bonga Southwest. Like with every other projects, if you look

At the gestation period of even the Train 7 that we are talking about, people talked about it for 30 years before it became a reality. Oil and gas sector projects take some time and we are hoping that by next year, hopefully, we will also be taking about FID in Bonga Southwest, if we are able to, on a roundtable, look at some of the challenges, look at some of the issues, that SNEPCO as an organisation have with regards to pushing that project forward. But we will try to talk to the government, their partners, like the NNPC and other agencies of government on the need to look at some of these issues, in order that we continue to have so that we continue to have foreign direct investments in the oil and gas sector. It is a continuous process and we believe that we would cross that bridge when we get there.

We hear of challenges to the Nigerian Content Intervention Fund (NCIF), in terms of challenges in accessing the fund; have these been brought to your notice?

Actually, the only thing that has been brought to my notice with regards to the NCIF is success, success, success. I have not received any complaints. Besides, it is not operators that are applying for the Fund, it is the contractors that provide services. As at today, Bank of Industry (BOI) is approaching NCDMB, requesting additional funds, because with the approvals that they have, they have already exhausted the funds. One thing that you need to be wary about is that if you take the statistics of failed loans with commercial banks, it is quite enormous and when people saw t his funds, as usual with Nigerians, they thought it was free money and they wanted to use the same process with which they collected money from the banks which that they could not pay, to access this fund; we said no, because this is a revolving loan where others would benefit from. You must go through the stringent requirements in order to access the fund.

People like free money; people like money that they would not repay. Today, you know about  the Asset Management Corporation of Nigeria (AMCON) and the debt profile that they have been able to accumulate by purchasing failed businesses and failed loans from some of these people that could not pay. We would not fall into that trap. We would continue to remain stringent. Those who are not leveraged; those who are not exposed in terms of borrowing, and those who have legitimate businesses, actually benefitted from the Funds and are clamouring for more funds. We rather deal with those ones than deal with the ones that want free money, and who do not meet the requirements. All we hear is success and not complaints.

What, in your own perspective is the benefit of NLNG Train 7 to the Nigerian economy?

To the Nigerian economy, as you are aware, it would bring more revenue to the country; more taxes would be paid. To the economy, it means a lot. To Nigerians, it also means a lot. It means creation of jobs. As you have heard, we would have about 10,000 direct jobs that would be created as a result of the Train 7 project. What that translates to is almost 40,000 indirect induced jobs that would be created. It has been over 10 years since we built the last train, this of course would rejuvenate the economy. It is not just the NLNG Train itself; it is also the upstream projects that would also come as a result of the Train 7 project. We expect a lot more in terms of activities in the economy — employment, revenue generation and also to a large extent, quelling the restiveness that we have in the Niger Delta. So, its contribution is quite enormous.

Concerning the Amended Deep Offshore Act, how do you assure operators that the law is in their best interest?

I am happy you made the point that it is a legislation that is long overdue. Most of the investors and international businessmen, who are here, are here to maximize profit as long as their business is concern. Therefore, any attempt to make them pay what government is due would create some level of resistance as it were. There is nothing wrong with the PSC Act that has been amended. And as the minister said, it then provides an opportunity for all of us to work together in order to pass the Petroleum Industry Bill (PIB), as early as next year, such that any agitation or any misunderstanding that they have, we should be able to take them on board as we sign into the law, the bigger PIB. It is a normal process all over the world, when you want to change legislation, they must be agitation, an example is Britain, in the Brexit issue. It is a normal process, it is not anything extraordinary.

I sincerely believe that those concerns would be addressed in a mutually beneficial, because as a country, we need to review our legislations from time to time. Some of these things, we wrote them when we had no understanding of the new frontier, in terms of deep offshore that the international oil companies (IOC) were heading into. Today, we are better informed; with technology, we are also very much aware; and with what is happening globally, where information is available everywhere, we are now in a position to say we have come of age and what to have a re-look at some of those agreements that we entered into. The agitations are normal, but I sincerely believe that we would resolve these issues in a mutually beneficial way, if indeed there is any issue.

Is there any level of engagement the NCDMB would enter into with multinationals to establish their presence at any levels, in their host communities, to give the people some levels of inclusiveness?

At NCDMB, we also live by example. Some of the things that we ask industry players to do, we also try to do them ourselves. That is why you can see the structure that we are building in Yenagoa today. If you move round the building and look at the tiles, 99 per cent of the tiles were procured in Nigeria. The contractor that built this edifice is an indigenous contractor. We have the right level of supervision and the rest of it all. We have shown the example that some of these things we put in those communities are possible and we hope that the IOCs and indigenous will know that establishing their presence in the communities where they explore and exploit hydrocarbons would create some level of sanity and peace for them. However, these are not things you force. These are things you discuss and you create the enabling environment for. What is important is the enabling environment. If you create the enabling environment, I am one of those who believe that they would come. But if you have a hostile environment, where security is a challenge; infrastructure is a challenge; people cannot even get hotels to stay; they cannot get water to drink; you cannot legislate and force that process. It has to be a collaborative effort between the state government, the communities, and the local government with the operating companies to have that harmonious relationship and presence in order to do their work.

Geophysical companies had on several occasions said they are not feeling the impact of local content. What are you doing in that regard?

Geophysical companies usually become active when they are exploration activities as such. Quite rightly so, we have not been investing heavily on exploration in the past couple of years. There are two schools of thought in that regard. Some people think we have accumulated enough reserves and we have not been able to exploit that reserve as much as possible; what is the use investing further in exploration. There is another school of thought that believes that you need to have a reserve addition ratio. As you are exploiting the hydrocarbon, you are adding to it. It is neither here nor there. I know that the government through the Nigerian National Petroleum Corporation (NNPC) has been pushing for more exploration activities which would involve the geophysical companies to actively participate. But I believe that the lull in their business is because of the lack of exploration in the industry.

What are we doing about it? We continue to make the point with the NNPC to say we need to encourage international and local companies to engage more in exploration in order to increase our reserve base. At some point, I recall that while exploration activities picked up, there was some kind of bonus that were paid to discoveries in terms of exploration. 

I do not know if it does exists, but I think it is something we need to look at in order to encourage more exploration. But like the data I had shared, we have almost about 40 billion reserves and we are producing about 2.3 million barrels of oil per day. Angola has about 17 billion reserves and they are doing 1.7 million barrels of oil per day. They have more capacity utilisation than Nigeria. The United States has got almost about 28 billion barrels, but they are producing about 12 million barrels of oil per day. You can see the capacity utilisation in that regard. That is where the two schools of thought come in to say you have 40 billion barrels of proven reserve but your production is just 2.3 million barrels, why do we have to spend a lot more money to continue to discover reserves. On the other hand, you can also argue that Saudi Arabia has about 268 billion barrels of proven reserves but they are producing just about 14 million barrels of oil per day, hence the capacity utilisation is also perhaps low in that regard. But look at their population; they are not as big as Nigeria with about 200 million people, compared to about 70 million people for Saudi Arabia. We need to do more in terms of exploiting the already discovered hydrocarbon.

Major oil and gas projects are still the exclusive preserve of the IOCs?  At what point will indigenous operators begin to handle major projects in the industry?

In terms of giving out the major projects, it is the IOCs that are giving out the major projects, but in terms of executing the major projects; it is mostly the Nigerian companies that are executing the major projects. I think that is where I would want to be, because the international companies have the cash. They have to bring it in and then we add value in the process, by being the ones to execute the projects as it were. So, I think it is a comfortable position to be in at this time.


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