LEVERAGING NIGERIAN CONTENT FOR GREATER OPPORTUNITIES
Presentation at the PETAN OTC 2012 Panel Session
by
Engr. E.C. Nwapa (FNSE), Executive Secretary, NCDMB
May 2012
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
Distribution of Oil and Gas Assets. Foreign Vs Indigenous
Indigenous players positioned to be in the league
of High Performance Energy Companies (HPEC)
More fields ready for indigenous players - OML
26,30,34, 40 & 42
DPR: Oil blocks in Nigeria
Majors allocating oil fields for Full Field
Development using local capabilities as part of
R&D program
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
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
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
Introduction of the Nigerian Content Act
Signed into law by Mr. President in April 22 2010
Established the Nig Content Devt and Monitoring Board
Inaugurated Governing Council for the Board August 2010
NCDMB commenced operations in Yenagoa in June 2010
NCDMB has steered non-disruptive implementation for 2 years
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
• 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
2
Maximize utilization of
Nigerian human resources
• 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
3
Link the oil and gas
industry with other sectors • Promote establishment of support industries that will sustain oil and gas industry
of the Economy
operations
• Enhance multiplier effect of oil and gas investments in economy
4
5
Focus on community
participation in the supply
chain
Foster institutional
collaboration
• Develop pool of competitive supply chain rooted in oil bearing communities
• Create customized training and sustainable employment opportunities
• structured awareness and enlightment campaigns
• 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
HMPRs Medium Term Targets - 2010 to 2015
Retain $10 billion out of $20 Billion average annual industry spend
Create over 30000 direct employment and training opportunities
Establish 3 to 4 pipe mills to service industry demands
Develop 1 or 2 dockyards and maximize use of existing shipyards
Increase indegenous ownership of marine assets to 60% minimum
Integrate indigenes and businesses in the oil producing areas
Capture 50 to 70 % of banking, insurance and legal services
NIGERIAN CONTENT ROAD MAP
Realizing the Vision – Instrument for the industrialization of Nigeria
R&D
Steel mills
Facility / upgrades
Human Capital Dev
Rig/vessel owner
Dry dock/shipyard
Manufacturing/ Assy
Manufacturing/assembly
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
Stakeholder Collaboration Implementation Model
Investment policy
Contracts approval
Bid rounds
NCDF
Capacity development
NC regulation
Interministerial
Interface- RMRDC on
R&D
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
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
• Interface
• Exposure to frequent litigation
Nigerian Content Roadmap developed to manage challenges , deepen
capacity and maximise utilisation of Nigerian goods and services
Nigerian Content Measurement
Partial NC
Based on proportion
of value of contracts
awarded to Nigerian
Companies
•
•
•
•
Real NC
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
No employment growth
Current Performance levels
100
80
90%
60
50%
40
20
7%
0
Engineering
Fabrication
Manufacturing
NCDMB adopts 3 pronged approach to promote utilization of locally
Manufactured goods
• Issued Research and Development guidelines
to industry operators & service providers
•
• Enforcing compliance with provisions and
schedule of Act on material utilization on
projects and operations
• Promoting local manufacture of materials used
in the industry
COST BENCHMARK TEMPLATE FOR LOCAL MANUFACTURING
Imported Pipes
Value
abroad
Cost
allocation
Locally Manufactured Pipes
Local
input
Cost element
1
Raw Material
(imported)
2
Raw Material (local)
3
Custom Duties
4
Excise Duties
5
Taxes
6
Inland transport (
port to factory)
7
Inland Transport
Factory to site
8
Finance costs
(foreign)
9
Finance costs
(local)
10
Wages
11
Amortization for
equipment
12
Power generation
Locai
Input
Cost
allocation
In country
Value
Remarks
STRATEGIC INTERVENTIONS
Asset Ownership
….
Status of Marine Vessels Utilization
Pre NOGIC
• Domination of foreign crew men and rig operators
• Ownership of vessels and rigs lies with foreigners ~$3
billion in capital flight
Today
• Indigenous players dominate category 1 vessels –retention of
$1.8 billion
• Structured intervention for more Nigerian ownership of
category 2 vessels- potential for retention of >$1.5 billion
2+1yr Contracts
Low Cost
Highest spend is on category 2 vessels – AHTs/LHTs, DP PSVs, DSVs, Pipe Lay Barges
Operators have put in place robust plan to replace foreign owned with indigenous owned vessels.
26
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
1.(NOGETTS) Project Based Training and Attachment • Over 6,000 candidates captured on JQS Platform
• Over 1,500 attached to O & G Projects
• Developing geosciences Training
• Developing environmental remediation training
2.Institutional Development -
LINKAGE INDUSTRIES
(Manufactrg)
>2 million jobs
• Established OGTAN
• Establish Engineering Academy with PPP
• NIW Welding Technology Complex (NIW/NCDMB/Shell)
Productive Employment
• Establish Subsea Academy
3.Expatriate Quota Management • EQ allocation supported by robust succession planning
• Monitor utilisation of EQ slots
TYPICAL PROJECT SPIN-OFFS
FPSO topside
Integration capability
Subsea Training &
Certifying Academy
Subsea Equipment
Manufacturing Capability
Heavy Industry Fabrication
Yard - $ 250million
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
•3 new Pipe mills
•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
•NLNG, BLNG focus
•Erha North/ Egina
•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
STRATEGIC INTERVENTIONS
Indigenous Marine Vessels Utilization
Category 1
Marine Vessels Ownership
Economic and Technical Benefits
•Issued guidelines for utilization and
•Impact on the economy
Categorization
Category 2
•Obtained commitments for replacement
•Retention of Nigerian jobs in marine
of
crew
foreign
vessels
extracted
from
operators.
Category 3
•Directed marine providers, to upload
•Growth of indigenous capacity and
details of vessel fleet unto NOGIC JQS
sustainability of services
•Organized
•Impact in linkage industries – merchant
workshop
with
marine
providers to establish opportunity
shipping,
Ports
development
and
Utilization
•Mandate vessel providers to carryout
maintenance in Nigerian yards
27
STRATEGIC INTERVENTIONS
Offshore Rig Acquisition Strategy
Indigenous Rig Acquisition
Land Rig
•Mandate Use of Nigerian Operating Company
for Contracting.
•Domicile equipment and technology in the
Company.
Jack up Rigs
•Phased increase in indigenous equity to meet
Acts requirement of 50%.
•Assistt with long term funding and equity
Financing
Semi subs/
Drillships
28
STRATEGIC INTERVENTIONS
Line Pipe Mill Pilot Scheme
PILOT SCHEME DESCRIPTION
Site Map
2500km of pipe
Replacement of vandalised and aged pipelines
Proposed
Layout
Water distribution projects
Partnership roles
NCDMB – Buy Land (SPV)
Shell + Operators - (Jetty)
Yulong - Equipment
STRATEGIC INTERVENTIONS
Equipment Components Manufacturing
Industry guideline mandates all OEMs to domicile manufacture of equipment components, parts,
packages and systems in Nigeria
Equipment Parts
Equipment Packages
Growth
Components and Frames
2011
to
Year
2017
STRATEGIC INTERVENTIONS
Nigerian Content Equipment Certificate (NCEC)
•The Board is issuing NCECs to
companies
that
have
met
the
requirements
•About
52
applications
being
processed
•IOCs are taking initiatives to support
OEM presence in Nigeria
•Guidelines issued to the industry
making NCECs a requirement in
tenders
STRATEGIC INTERVENTIONS
Nigeria Oil & Gas Industry Content Joint Qualification System
NOGIC JQS
• Expatriate Quota Utilization and
Succession data
• Marine Vessels data
• Contract Processing data
• Equipment Ownership
• Nigerian Content Compliance
Certificate Data
• Skill Base Tracking
1.Categorization of oil and gas
service companies
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
6.Test data uploaded
reports repository
7.Launch Q2 2012
Nigerian Content Development Fund Model
(Clause 104 of the Act) Letter on NCDF implementation
30%
NCDF
Direct Intervention Lte
70%
1% Upstream
contract sums
Guarantee Ltd
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
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
Legal firm
Engineering firm
Accounting/ Audit Firm/Forensic
Auditor
Engineers, Geologists, Subject
matter specialist
Industry experienced
professional
NCDMB Personnel
35
36
INSISTENCE ON COMPLIANCE HAS CREATED FACILITIES
BK TUBULARS – OCTG THREADING FACILITY
Before
Today
INSISTENCE ON COMPLIANCE HAS CREATED FACILITIES
TOTAL PREMIER – OCTG Welding/Threading Facility
April 2011
January 2012
IT IS WORKING
NIGERDOCK – Drydock and Fab Yard
BEFORE
TODAY
IT IS WORKING
GLOBESTAR – invested in new fabrication capability
SAIPEM FAB YARD New NC work scope required over $100 million jumbo yard
TODAY
BEFORE
IT IS WORKING
ONNE FZ – Offshore Logistics Base
BEFORE
TODAY
Hub for
logistics and
industry
services for
Nigeria and
GoG
LADOL – Offshore Logistics Base
BEFORE
TODAY
Major service
PROGRAMS & ACHIEVEMENTS
Programs
Scope
Achievements
Benefits
Indigenous ownership of Assets
Marine Vessels
ownership and
utilization,
Cabotage
compliance
Ownership
Manning
Maintenance
Utilization
Rigs ownership and
utilization
Ownership
Manning
Maintenance
Utilization
Equipment
ownership and
utilization
Minimum of 50%
ownership of
equipment to
execute projects by
indigenous company
or Nigerian
subsidiary
85% of category 1 vessels in operation
owned by Nigerians these include crew
supply vessels, mooring launch vessels,
shallow draft vessels etc
Firm commitment from operators to replace
49 foreign category 2 vessels with Nigerian
owned. of foreign category 2 vessel with
Nigerian owned
Established vessel maintenance capability Dry-docking facility at NigerDock ( the
largest in West Africa )
$1.8Bn out of &3.5Bn spend retained
in the Nigerian economy
Retention of over 3,800 jobs and
creation of about 300 new jobs
Stimulus for investment in dry dock
and shipbuilding facility
Guidelines issued to industry on onshore
and offshore rigs ownership and utilization
Achieved Indigenous ownership of certain
rig types -semi-submersible , swamp and
land rigs (Oando, Seawolf, Bell Oil and
Gas)
Retention of about $500 million in the
economy
Indigenous companies with capability and
which own equipment used in their
operations are now exclusive players in land
and swamp
Indigenous companies with equipment and
subsidiaries of multinationals which own
minimum of 50% of equipment used are
allowed to bid for offshore work
Indigenous companies have
developed capacity and now have a
say as major stakeholders in
partnerships with multinationals
Retention of over 50% of spend from
projects executed in the Nigerian
economy
PROGRAMS & ACHIEVEMENTS
Programs
Scope
Achievements
Next steps (6 months)
Domiciliation of
Equipment component
manufacturing
Public notice to industry, to submit
domiciliation plan for equipment
component manufacturing
Significant progress with concrete plans for
domiciling manufacture of equipment
components -52 applications for NCEC
within 7 months
Operators are developing their own
framework to promote and encourage
OEMs to set up manufacturing facilities in
Nigeria, in line with the principles of the
ECM
Monitor implementation of
domiciliation plan.
Increased utilization of existing HSAW
pipemill by industry (over 100km of steel
pipe being serviced by SCC Abuja )
Firm commitment received from 2 investors
to set up facility –Yulong 250,000Mt LSAW,
Vigeo 200,000Mt HSAW
Steer industry to put more work
in SCC
Manufacturing
Equipment
Components
Manufacturing
(ECM) Initiative
Nigerian Content
Equipment Certificate
(NCEC)
Steel pipemill
scheme
Maximize utilization of
existing facility
Promote establishment
of pipemills
Hold stakeholder workshop to
elicit consensus on
implementation of ECM initiative
Monitor project development
activities for new pipemills
Support direct investments
where necessary
Local manufacture of Promote utilization of at
drilling mud
least 60% of barite
needs of the industry
from Nigerian deposits
Structured collaboration with AMAPOB on
local manufacture of barites
Promoted studies by SGS to validate
quality of Nigerian barite deposits as
meeting industry standards
Steer industry to source barites
from Nigeria
PROGRAMS & ACHIEVEMENTS
Programs
Scope
Achievements
Establishment of a private
sector led center for skills
development and
international certification in
the field of engineering
Project concept put together for
engineering training center of
excellence
Packaged geosciences training to
train critical skill requirement in the
industry
Completed first set of welders
training
Benefits
Training
Infrastructure
development,
training and
employment
opportunities
Direct facilitation of
training in critical industry
skill requirements
Oversight on project
based training
opportunities
In country training facilities for oil and gas
type skills
Manage capital flight associated with
offshore training
Knowledge transfer
1000 candidates to be trained on
environmental management
Retention of at least 30% of environmental
remediation budget in community
Over 500 candidates trained on the back
of oil and gas projects – welding,
Packaged environmental
pipefitting, scaffolding, engineering design
remediation training to address
etc.
recurring environmental challenges Over 50% trainees have been placed on
sustainable employment
Industry is already promoting
foreign trainers to conduct critical
trainings in Nigerian facilities
Nigeria Institute of Welding New multimillion dollar facility
Will provide certification for welders and
modelled after International Institute weld integrity tests on projects
of welding with capacity to certify.
PROGRAMS & ACHIEVEMENTS
Programs
Scope
Achievements
Next steps (6 months)
Supplier Development
Nigerian
Content
Development
Fund (NCDF)
Partial guarantee -70%
Direct investment -30%
Guidelines on remittance developed;
remittance of 1% ongoing
NCDF operating model developed and
discussed with CBN
Selected 3 service companies for pilot
implementation -partial guarantee facility
2 SPVs incorporated to oversee the NCDF on
behalf of the Board
Obtain approval to launch pilot
scheme –partial guarantee
facility
Nigeria Oil &
Gas Industry
Content Joint
Qualification
System
NOGIC JQS
Data base for industry
skills, capacity and
project opportunities
Built NOGIC JQS infrastructure in Yenagoa
Manage test phase
and Disaster Recovery Center in Abuja
Prepare for launch
Engaged stakeholders and obtained feedback
from end users
Go live event held in August 2011
PROGRAMS & ACHIEVEMENTS
Programs
Scope
Achievements
Benefits
Some Infrastructure Development & Facility Upgrade
Saipem
fabrication
(Tier 1)
Fabrication yard
upgrade
Nigerdock
fabrication
(Tier 1)
Fabrication yard
upgrade
Globestar
fabrication
(Tier 1)
Fabrication yard
upgrade
Dormanlong
Fabrication yard
upgrade
Training
facilities
Heavy Fabrication and
Subsea training
facility/Academy
Completed yard expansion project
(jumbo yard)
Capability for high tonnage fabrication and
lead-out
Retention of existing jobs
In-country capability for fabrication, dry
Established and commissioned largest
docking, training and maintenance.
dry docking facility in West Africa
Technology transfer
Acquired capability for high single
Retention of spend associated with ship
tonnage fabrication and lead-out.
repairs and maintenance
Major aspiration/project launched for
Creating ship repairs industry within
deep offshore skill base with FPSO
Nigeria to service vessels operating in
integration capacity. Expected completion
Nigeria and West Africa.
- 2015
Employment generation
Fabricated first subsea tree frames and
Capability for high single tonnage
subsea modules in Nigeria
fabrication and lead-out
Retention of existing jobs
Self sufficiency in domestic supply
Obtained certification for pressure
Local facility maintenance capability
vessels manufacture
Established Nigerian foot prints in West
Fabricated pressure vessels for IOCs
Africa
including Shell Gabon
Over 10,000 jobs to be created.
Installed major galvanizing facility serving
Retention of about $5.4 billion from FPSO
LNG and telecommunications industry
value chain
Private sector led training facilities for Oil
Hyundai establishing a fabrication
and Gas skills
training academy
Akersolutions to setup subsea acadey