Following its progression in securing a huge percentage out of its set target in Local Content Development in the oil and gas industry, the Nigerian Content Development and Monitoring Board, NCDMB, says the African Continental Free Trade Agreement (AfCFTA) presents a critical legal framework that can be leveraged to achieve the collaborative local content strategy in Africa.
The executive secretary of the Board, Simbi Wabote, who spoke on the theme: “Sub-Saharan Africa Local Content Collaboration Strategies,” at the 7th edition of the Sub Saharan Africa International Petroleum Exhibition and Conference, SAIPEC in Lagos last week stressed that the main objectives of the strategy are to explore ways to breakdown barriers, promote cross-border collaboration amongst governments and businesses, provide peer review mechanisms, and share experiences and ideas on industry sustainability and growth.
NATIONAL ECONOMY, reports that the Nigerian Oil and Gas Industry Content Development (Local Content Act) 2010 was enacted to promote the indigeneous participation in the Nigeria’s oil and gas industry for the purpose of improving the economic and social well being of those engaged in operating in the oil and gas industry.
The Act provides for the development of Nigerian content in the Nigerian oil and gas industry, Nigerian content plan, supervision, coordination, monitoring, and implementation of the Nigerian content.
The Act stated the requirement of any company or organization that intends to operate in the Oil and Gas Industry in Section 2 of the Local Content Act, which states that “all regulatory authorities, operators, contractors, subcontractors, alliance partners and other entities involved in any project, operation, activity or transaction in the Nigerian oil and gas industry shall consider Nigerian content as an important element of their overall project development and management philosophy for project execution.”
The Act defines Nigerian content in Section 106 as “the quantum of composite value added to or created in Nigeria through the utilisation of Nigerian resources and services in the petroleum industry resulting in the development of indigenous capability without compromising quality, health, safety, and environmental standards.”
The sole purpose of the Local Content is to increase Nigerian participation in the oil and gas industry by prescribing minimum thresholds for the use of local services and materials for the promotion of technology and skill to the Nigerian labour in the oil and gas industry.
The Local Content Act is a vital instrument that empowers Nigerian companies to contribute tremendously towards the development of the Nigerian economy by encouraging value addition, job opportunities, and furthermore the award of different oil contracts and undertakings.
In fulfilling this objective, Section 4 of the Local Content Act established The Nigerian Content Development and Monitoring Board which is vested with the responsibility “to make a procedure that will guide, monitor compliance by operators, coordinate and implement the provisions of the Act within the industry. The Local Content Board is empowered to execute its duties under the Act to ensure that all provisions contained in the Act are complied with.
Strengthening Africa’s Capacity
The NCDMB sees implementation of the strategy in Africa as broadening and enhancing regional capacity and providing Africa the opportunity to scale up human capital development.
But here Wabote, affirms that key factors necessary for achieving a collaborative strategy must first be put in place.
According to him, for the strategy to work there is need to address, legal framework, funding, infrastructure, human capacity development, and research and development.
He said, “The advent of AfCFTA created the world’s largest free trade area by integrating 1.3 billion people across 54 African countries, with the objective of tapping into a combined Gross Domestic Product (GDP) of over $3 trillion.”
This, he observed is indeed a very huge collaboration platform that will present tremendous gains to the entire African continent, adding that it is in recognition of the enormous opportunities that AfCFTA presents that Nigeria has started working towards unleashing the collaboration potential.
He recognised the AfCFTA as the practice of local content on the continental level and commended the foresight of the league of African leaders who adopted AfCFTA in 2012 at the 18th Ordinary Session of the Assembly of Heads of State and Government of the African Union (AU) in Addis Ababa, Ethiopia.
Speaking on investment in infrastructure, he said this has a significant impact on the economic growth of any nation.
Wabote cited a study carried out in the year 2020 by GI Hub found that the economic multiplier for public investment (including infrastructure) is one and a half times greater than the initial investment in two to five years. This is much higher than other forms of public spending.
For instance, he said that the Dangote Integrated Refinery and Petrochemical Company – with an installed capacity of 650,000 barrels per day (bpd) which is expected to come on stream within the year will afford Nigeria and other African countries the partnership opportunities for sourcing petroleum products and fertiliser.
Also, the recently commissioned Lekki Free Zone and facilities like the SHI-MCI FPSO Fabrication/ Integration in Lagos equally presents opportunities for collaboration for the construction of FPSO and other offshore oil and gas facilities.
“These infrastructures and others that exist in various parts of the African continent provide massive opportunities for cross-border energy collaboration among African countries.
“Similarly, infrastructure like the West Africa Gas Pipeline (WAGP) and the ongoing AKK gas transmission infrastructure provides a means for serving regional and African markets.
“The developmental strategies to start from a cluster within a country and grow organically across borders continue to work well in the provision of roads, gas pipelines, fiber-optic cables, railways, and other infrastructure across the continent,” he noted.
He told participants at the event that the Nigerian oil and gas industrial parks the Board is developing across seven locations in Nigeria represent one of the ways it is providing infrastructure for the manufacturing of components to serve local and regional markets in a collaborative way.
He said, “We are on track to complete major construction works at the sites by end of this year. Let me use this opportunity to invite interested businesses and investors in the area of manufacturing in any of these industrial parks to contact the Board for allocation of plots for development.”
Speaking on funding which is critical for executing major oil and gas projects, he said the NCDMB is promoting the need for African countries to come together and create an Africa Local Content Bank that would support it in its energy development quest.
He was excited to note that the African Petroleum Producers Organization (APPO) has welcomed the suggestion and they have since taken it on board much to the Boards delight.
Wabote informed the gathering that the APPO has signed a Memorandum of Understanding (MOU) with the African Export–Import Bank (Afreximbank) for the creation of an Africa Energy Bank to address the financing challenges of oil and gas projects caused by the paradigm shift from fossil energy to renewable energies in the era of the Energy Transition during the 8th African Petroleum Congress and Exhibition (CAPE VIII) held in Luanda, Angola and that the NCDMB is currently supporting APPO on how to make the funds available.
When operational, the Africa Energy Bank will foster the development of major energy projects across Africa, he said.
He also noted that human capacity development is pivotal to the successful implementation of local content as every intervention will be powered by humans – either through intellect, skill set or both.
The Nigerian experience regarding human capacity development is that Nigerian youths are very eager to learn and acquire new skills, he noted pointing, “Their willingness is so much that some of them are willing to pursue education and training abroad.”
Again, he said, “With this realisation, we have put in place several capacity-building initiatives including vocational skill acquisition as a means of empowering them.
“Our intent is to develop and groom our required workforce and even export the workforce to other regions.
“There is however the need to effectively harness this pool of workforce and one means through which that can be achieved is for us African countries to come up with a framework that will enable skill or workforce exchange program so as to leverage the available African skills as a means for developing local content in the African Energy sector.”
The ES, also described the Research and Development (R&D) as one parameter that should be given considerable attention as it is pivotal for achieving sustainable development in Africa
He said, “Africa’s Energy sector has its inherent challenges just like any other region does. However, we all come together and focus on R&D with the intention of taking a critical look at the challenges and coming up with economical home-grown solutions that will address those challenges in a sustainable manner. Such solutions can even be exported to other parts of the world.”
He further said, “These collaboration strategies are underpinned by the fact that the continent of Africa is blessed with enormous human and natural resources which together make the continent a preferred destination for investors.
“The African continent currently holds 7 per cent and 13 per cent of the world’s proven crude oil and gas reserves respectively which underscores the fact that Africa stands to play a major role as the world seek energy security and stability.
“With crude oil reserves exceeding 125 billion barrels and gas reserves of more than 500 trillion cubic feet, he said that there is still a lot of refining potential that remains untapped as the combined crude oil refining capacity in Africa is currently about 1.7million barrels/day for a continent that requires refining capacity of at least 10 million barrels/day.
“At the sub-surface level, there are immense collaboration opportunities in exchange of data in respect of geological formation spanning across several countries,” said Wabote noting that some of these partnerships have resulted in the creation of Joint Development Zones amongst countries in the regions.
He recalled that at the World LNG Summit held in Athens, Greece in November 2022, the consensus amongst delegates was that there is need to reverse under investments in gas development and the LNG projects to the much needed flexibility, resilience, and stability in the energy eco-system.
“At the core of the consensus is the need to have supply diversification so that there is no room for an hostage situation to a single supplier.
“This provides a huge opportunity for African countries able to negotiate and put in a place a win-win model for gas processing investments for exports and in-country utilisation.
“This will greatly enhance in-continent utilization of produced energy to address energy poverty and improve quality of life for the African people,” he said.
In Nigeria, he said the federal government has put in place the Decade of Gas initiative to promote the development and utilisation gas resources within the country.
“We are working on LPG penetration to the last mile, CNG for power and Autogas, flares commercialisation, and domestic LNG plants.
“We believe as we address these challenges in Nigeria, we continue to see the pathways to neighboring countries into the regions and across the continent,” he added.
He noted that the Board’s collaboration with industry practitioners and various stakeholder groups has helped the agency to achieve a remarkable performance in the implementation of its 10-year strategic roadmap.
“We currently at 54 per cent Nigerian content out of the 70 per cent Nigerian content target by the year 2027.
“We are pleased to note that this performance is recognised within the African continent and amongst global institutions such as the World Bank.
“We continue to render support to sister African nations based on referrals and direct contact as they develop their unique local content framework, and I am pleased to note that we are using this platform to showcase one of such collaboration with the signing of MoU with the delegation from Republic of Senegal,” Wabote said.
