NIGERIAN CONTENT IMPLEMENTATION
Roadmap for Industrialization
by
Engr. E.C. Nwapa (FNSE), Executive Secretary, NCDMB
November
2012
HISTORIC TREND OF NIGERIAN OIL & GAS SECTOR
PERIOD
1960s – 1970s
1980s – 1990s
2000s – 2010s
2020
POPULATION
63 million
100 million
165 million
195 million
EDUCATED
<5%
EMPLOYABLE
ADULTS
10%
30%
>50%
COMMUNITY
DEMANDS
Insignificant
Basic Amenities
Infrastructure
Participation
Equity ownership
REVENUE
20%
50%
80%
> 60%
GDP IMPACT <10%
(Contribution)
<20%
>20%
LAWS &
POLICIES
JOAs, PSCs
NOGICD/ PIB
Petroleum Act
NATIONAL REVENUE PROFILE
Over Dependence on Oil
A Threat to Oil will
threaten National
Survival
Oil & Gas Industry is
repositioning to
Promote Utilization of
Local goods &
Services
Building capacity on
the back of mega
Projects and
Operations
Other Linkage
sectors need to be
mobilized
PETROLEUM ECONOMICS VS NATIONAL DEVELOPMENT
PETROLEUM
ECONOMICS
BALANCE
NATIONAL
DEVELOPMENT
ECONOMICS
• Dollar per barrel?
• How many jobs?
• Profit for shareholders?
• In country Value creation
• How fast to first oil?
• Legacy, spinoffs, infrastructure?
• Government take, taxes, royalties?
• Sustainability, Safety, Environment
Two Strategic Development Options
Revenue - Focussed
1
Operators seek cheapest fastest route to first oil.
Govt uses Taxes & Royalties for Development
Little attention to value addition from operations
Promotes import of Goods & Services
2
In-Country Value - Focussed
Operators consider long term value
Govt takes lower revenue for higher ICV
Greater attention to life cycle support for ops
Promotes development & use of local
capacity
Changing the Pre – NOGICD Act Footprint
Bringing Nigerian Jobs Back
Pre-Nigerian Content Implementation
2006- 2020
Nigerian
Content the
Implementation
Defining
Roadmap
for Change
Buying rather than selling.
Exporting Nigerian Jobs
Estimated capital flight $380 billion
Estimated lost job opportunities 2 million
Bringing Nigerian Jobs Back
Hub for oil and gas services
Estimated $191 billion could be retained
300,000 new direct job opportunities -(Engineering,
Sciences, Technicians etc)
$14b
$78b
Technical Services
$39b
$20b
Fabrication
$20b
$39b
Engineering
$214b
$107b
Procurement
$9b
$7b
Research &
Development
Over 95% of industry
spend Abroad
30yrs
10yrs
Over 65% of industry
spend domiciled
What makes a great oil producing Nation?
A robust supply chain
Facilities
Asset ownership
Industrialists
Pipemills& Machine shops
Fabyards & workshops
Ship/dockyards
Logistics bases
Manufacturing
Local service coys
Drilling Rigs
Marine Vessels
Drilling Tools
OEM Reps & SMEs
Valves &' Pumps
Spares & components
Switchgear & control panels
Chemicals & fluids
Machinery & equipment
Human Capital - skilled workforce
In country training and certifying bodies
Pupilage programs in local companies
Drilling Value out of the O & G Chain
We need to maximize value from these activities
Thrust of the NOGIC Act 2010
Nigerian Content aspiration derived from the thrust of the NOGIC Act are focused on ensuring that
companies benefitting from our natural resources also contribute to economic development of
Nigeria .
1
Maximize utilization of
Nigerian made goods
2
Maximize utilization of
Nigerian human
resources
3
Link the oil and gas
industry with other
sectors of the Economy
4
5
•Develop local capacity in key areas such as manufacturing fabrication,
engineering etc
•Promote indigenous ownership of assets and utilization of indigenous assets in
oil and gas operations
•Develop indigenous skills pool across oil and gas value chain
•Provides mandatory training requirements on the back of projects
•Creates JQS to manage and track available skills
•Promote establishment of support industries that will sustain oil and gas
industry operations
•Enhance multiplier effect of oil and gas investments in economy
Focus on community
•Develop pool of competitive supply chain rooted in oil bearing communities
participation in the supply
•Create customized training and sustainable employment opportunities
chain
• structured awareness and enlightment campaigns
Foster institutional
collaboration
•Institutionalize inter-agency collaboration on local content development
•Integrate NCDMB into planning and contracting process to ensure Nigerian
Content COUNTS
•Dedicated NCDF for capacity building
Distribution of Oil and Gas Assets. Foreign Vs Indigenous
IOCs CONTROL OVER 90% PRODUCTION
DPR: Oil blocks in Nigeria
Snapshot of reserves:
Oil-36.22 billion barrels (2.92% of world
reserves)
Gas- 178 TCF
(2.98% of the world reserves)
1.6 Majors
•Addax, Chevron, Eni-Agip, Exxon
Mobil, Shell and Total
•Control 98% of reserves and
production assets
2.Indigenous companies
•Over 30 operators (Afren, Oando,
Seplat etc)
•Over 30 independents and local
operators ( Summit, Conoil etc)
•Own 2% of reserves
NDPR
NOC/INDIGENOUS BUILDING FOR MID-TERM
GROWTH OF PRODUCTION SHARE TO 20%
1.Combined daily production capacity of 80,000 bpd
2.With aggressive equity participation indigenous players will increase market
share
3.NPDC making significant progress , hitting the 100 barrels per day equivalent
mark.
4. Full Field Development by indigenous companies being promoted
New developments in Nigeria for Energy Utilization
GAS DEVELOPMENT
•Nigeria Gas Master Plan
•Domestic Supply Obligations
•New IPPs
•BrassLNG, NLNG Train 7, OKLNG
REFINING
•Greenfield refinery projects – 3 new refineries + 1 Petrochemicals Plant
UPSTREAM
•Deep offshore – EGINA, ERHA North, OPL245, Bonga SW, BONGA NW
Stakeholder Collaboration Implementation Model
Investment policy
Contracts approval
Bid rounds
NCDF
Capacity development
NC regulation
Interministerial Interface
Legislation on Local content
Legislation on favourable
fiscal regime
Government
Nigerian content scope
on projects (NCCC)
Capacity development
1% remittance to NCDF
Oil companies
Service providers
International
partners
Foreign Direct Investment
Benchmark models
(learning from others)
Nigerian Content
Consultative Forum
(NCCF)
Capacity development
Nigerian Content
Equipment Certificate
(NCEC)
1% remittance to NCDF
NCDMB act as facilitator, bringing together a broad array of
stakeholders
Nigerian Content Road Map
R&D
Steel mills
Facility / upgrades
Human Capital Dev
Rig/vessel owner
Dry dock/shipyard
Manufacturing/assembly
Manufacturing/ Assy
A MULTI LANE HIGHWAY TOWARDS INDUSTRIALISATION
Various Initiatives in:
i)
R&D
ii) Human Capital Development
iii) Steel Pipemills and associated industries
iv) Manufacturing and Component Assembly
v) Marine Vessel and Rig Ownership
vi) New facilities and Upgrade of existing infrastructure
vii) Dry Docks and Shipyards
Nigerian Content Measurement
Partial NC
Real NC
Based on proportion of
value of contracts
awarded to Nigerian
Companies
Based on proportion of
contract sums spent on
Nigerian made goods
NC VALUE
NC VALUE
(70% - 85%)
(12% - 18%)
• There is marked increase in contract award to Nigerian companies
• Spend proportion in Nigeria has peaked
• Without manufacturing, no further NC Growth – steel products major input in manufacturing
• No employment growth
• We need power to “power” Local Content
Current Performance levels
100
80
 Sub-optimal
utilization of locally
made goods by
industry
90%
 case for strong
linkage between
manufacturing and
oil and gas industry
60
 NCDMB as
facilitator of growth
50%
40
20
7%
0
Engineering
Fabrication
Manufacturing
Implementation challenges
• Strict compliance without disrupting industry activities – Capacity Gaps
• Handling increased cost + schedule
• Transparent effective model for NCDF Management
• Ensuring Quality of delivery
• Absence of manufacturing capability and confidence to use local goods• Extending implementation to Downstream
• Growing new organization to meet wide responsibility
• Funding the Boards operations from appropriation
• Policy inconsistencies - require legislative streamlining
• Exposure to frequent litigation
Nigerian Content Roadmap developed to manage challenges ,
deepen capacity and maximise utilisation of Nigerian goods and
services
Impact of Implementation Programs
UTILIZATION OF LOCAL FACILITIES AND ASSETS •Indigenous Companies acquiring and deploying rigs
•Major rig operators have complied – Seawolf, Oando, Transocean, Pidwal
•Existing fabrication yards upgrading to accommodate increased workloads –
Nigerdock, Saipem, Aveon .
•New yards being developed – Samsung , HHI, Daewoo
•Existing pipe mill over 50% capacity utilization.
•Indigenous marine vessel replacing hitherto foreign
Impact of Implementation Programs
Before 2010 – Only $200k of over $2Bn spend domiciled
Now – 50% of about $3.5Bn spend domiciled
Impact of Implementation Programs
Nigerian Made Security Vessel
Nigerian Owned DP2 Vessel
Naming of MV Osayame
STRATEGIC INTERVENTIONS
Training & Employment
Social Employment
PUBLIC SECTOR
(Regulator)
~30,000 jobs
Compared to rising prices of oil, the capacity of operating companies
to employ nationals has been on the decline since 2008
INTERVENTIONS:
SERVICE PROVIDERS (Services,
equipmt)
<1 million jobs
OPERATOR
(Opportunities and finance)
~25,000 jobs
LINKAGE INDUSTRIES
(Manufactrg)
>2 million jobs
1.(NOGETTS) Project Based Training and Attachment •Over 8,000 candidates captured on JQS Platform
•Over 1,500 attached to O & G Projects
•Sponsoring geosciences Training for 1,000 Nigerians
•Sponsoring environmental remediation training for 3,000
Nigerians
2.Institutional Development •Established OGTAN
•Establish Engineering Academy with PPP
•NIW Welding Technology Complex (NIW/NCDMB/Shell)
Productive Employment
Environmental remediation training sponsored by the Board to
create a pool of Nigerians with adequate environmental
management skills ,to address reoccurring environmental
degradation
•Establish Subsea Academy
3.Expatriate Quota Management •EQ allocation supported by robust succession planning
•Monitor utilization of EQ slots
Oil and Gas Training Centre of Excellence Model
GOVERNMENT
INDUSTRY
NIW+
OTHER
OGTAN
COYS
PETROFAC +
OGTAN
IPS, SITP
IADC
PTI
AKER
SUBSEA
ACAD
SCHLUM
TECH
CENTRE
MAN
ORON
CPSK
Nigerian Content Employment Initiative (NCEmI)
1
Pupilage program
- Job categories
- Criteria for selection
- positions to train for
- Skills required
- Duration of training
- Certification
2
Nomination of Candidates
- - - Minimum qualification
- Age
- Skills
(NCEMI)
3
OGTAN and PETROFAC
Training Center
-Training curriculum
-Training Duration
- Types of Certifications
- Job categories
- facility incountry for
training
4
Prequalificatio
Technical
Commercial
publish candidates
for specific service
areas
Acknowledgemen
t
Qualification List
Select TCE for
NCEMI
Employment
Qualification
List
Provisional
employment letter
- Update Nigerian
content plan section
Employee costs included in
commercial template ,
Show actual position to be
ORAS – Offshore Rig Acquisition and Utilization
Key elements of ORAS Strategy:
1. Using a Nigerian Operating Company for
Contracting
2. Putting equipment and technology in the
Company
3. Phased increase in indigenous equity to meet
Acts requirement of 50%
4. Assisting with long term funding and equity
Financing
TYPICAL PROJECT SPINOFFS
Equipment
Manufacturing Capability
Topside
Integration capability
EPC
PROJECT
Training &
Certifying Academy
Heavy Industry Fabrication
Yard
Legacy Programs.
EGINA/GAS MP/ BONGASW/ERHA NORTH/BRASS LNG
FPSO Topside
Integration Facility
•TUPNI committed to
EGINA topside
integration
•Integration Facility set
by 2014
Pipe Mills
•Consolidate existing Mill
•NLNG, BLNG focus
•Erha North/ Egina
•3 new Pipe mills
•LNG carrier size
Dockyard
•Umbilical facility & Tree
assy
•Complete by 2015
•Start Production by 2015
•Cost of $250m
•Cost of $250m each
• Generate 55000 Jobs
• Generate 5000 Jobs
•20 000 training
opportunities
•2000 training
opportunities
•Start Production by 2015
•Cost of $150m each
•Cost of $150m to
$200m
• Generate 15000 Jobs
•Generate 30000 jobs
•3000 training
opportunities
•Training opportunities
Dock
Yards
Subsea Equipment
Manufacturing
Complex
STRATEGIC INTERVENTIONS
Nigerian Content Equipment Certificate (NCEC)
•Guidelines issued to the industry makes
NCECs a requirement in tenders
• Over 300 applications being processed
• Attributes of certificates issued to date:
•Establishment of equipment assembly plants
•Manufacture
of
equipment
parts
for
repairs/maintenance
• Manufacture of equipment components
•Investment commitment of over $600m
•IOCs are taking initiatives to support OEM
presence in Nigeria - Shell
•Investors supported by Government general
and specific incentives
STRATEGIC INTERVENTIONS
Nigeria Oil & Gas Industry Content Joint Qualification System
NOGIC JQS
•Expatriate Quota Utilization and
1.Categorization of oil and gas
service companies
Succession data
•Marine Vessels data
•Contract Processing data
•Equipment Ownership
•Nigerian Content Compliance
Certificate Data
•Skill Base Tracking
2.Industry data base for skills
verification.
3.Verification of available in-country
capacity
4.Effective information exchange
across stakeholders
•Training and Employment data
5.Compliance Monitoring
•Nigerian Content Plans and reports
6.Test data uploaded
repository
7.Launch Q2 2012
Nigerian Content Development Fund Model
(Clause 104 of the Act) Letter on NCDF implementation
30%
NCDF
Direct Intervention Lte
1% Upstream
contract sums
Direct Capacity Development
intervention by the Board
Equity Participation to stimulate
Investments in Critical facilities
Industry
Advisory
Committee
Fund
Managers
(BGL/UBA
global)
Skills Development & Job
Creation interventions
70%
Guarantee Ltd
Provide Guarantees for
low interest lending
Industry Advisory committee &
SPV to strengthen
Governance
Fund will not be depleted
Other
Participating
Commercial
Banks
Nigerian Content Governance on Monitoring
….COMES
COMPLIANCE MONITORING & ENFORCEMENT STRATEGY ( COMES)
THIRD PARTY INSPECTION TASK
FORCE
Section 68 –
Prescribes fine or cancellation of the
project for non compliance
Compliance monitoring activities of the Board has brought about :
1. Reversal of contracts hitherto awarded in contravention of the NOGICD Act
2. EPC contractors and operators taking extra effort to build local capacity for their critical input needs
35
THANK YOU FOR LISTENING
35