PEOPLE SHOULD COMPLY WITH LETTERS OF THE LOCAL CONTENT LAW

The Nigerian content law has the capacity of placing Nigerians in control of the oil and gas industry within the shortest possible time, says Ernest Nwapa, executive secretary of the Nigerian Content Development Board.

Nwapa, becomes the first head of the regulatory agency saddled with the responsibility of actualizing - or ensuring compliance by operators - to the Nigerian Content Development Act signed into law recently by President Goodluck Jonathan.

The law seeks to grow indigenous capacity in the industry and halt the foreign dominance with its attendant capital flight and revenue loss to the economy.

Nwapa, linked the inability of Nigerian firms to compete for jobs with foreign multinationals in the industry to lack of technical and human capacity.

'The greatest fear for capacity building is availability of work,' Nwapa said.

'But now that it is very clear what work must be done in Nigeria as stipulated in the Nigerian content Act, we will then challenge the Nigerian companies and this challenge will not mean we are pushing them into doing things at all cost,' he added.

Nwaapa spoke to Daily Sun at an interactive session held by PETAN in Houston, USA recently and said funding for the regulatory agency would not pose a problem as the law has created a Fund that all players must contribute one per cent of every contract sum they execute in the industry. The Fund will be utilised among other things to grow indigenous capacity in the industry.

Excerpts:
Managing funding challenges
The Nigerian content act makes provision for capacity building fund called the Nigerian Content Development Fund to the extent that the sum of one per cent of every contract to any operator, contractor, subcontractor, alliance partner or any other entity involved in any project, operation, activity or transaction in the upstream sector of the industry shall be deducted at source and paid into the fund.

The fund shall be managed by the Nigerian Content Development Board and employed for projects, programmes and activities directed at increasing Nigerian content in the oil and gas industry.

So the question of begging people to help with funding is totally ruled out.

Capacity building problem
The greatest fear for capacity building is availability of work. But now that it is very clear what work must be done in Nigeria as stipulated in the Nigerian Content Act, we will then challenge the Nigerian companies to bid for jobs and this challenge will not mean we are pushing them into doing things at all cost. Rather, we are telling them to go out and find the capacity. The international oil companies are already there.

Before this law, it was an option to choose who you are going to work with. But now the law makes it imperative for local firms to be involved. So by this law the international firms have to partner where the law says go and partner with the local firms where they cannot do it by themselves, and so this partnership will enable the local firms to build the capacity over a period of time.

So the strategy is there, we have tested it before and it works very well.

The moment a Nigerian company works with a foreign company for two, three years, it becomes a very good partnership especially for the local firm in terms of experience or capacity growth. Capacity building is always boosted by work. If you send a child to get a degree in engineering, the only way to make him an engineer is to put him through the practical aspects by exposing him to the intricacies of engineering work.

If he does not work, he is not an engineer. If you build a fabrication yard of the highest standard, if you don't put work in that yard, that is not a yard. So the key thing is to make sure that investments are being made in the business end - sometimes that is what people call contracts, at the same time you need people to execute it and when the two come together that is what people usually call capacity building. That is the strategy that we are adopting to have growth.

Enforcing compliance
Today there is a law in the industry. And where there is a law no responsible company wants to break the law. In fact, many of the international companies are not in a position to break any law because their home countries even prevents them from breaking any law where they are operating. So we have taken the first step by enacting the law. The second phase is the implementation and we will make sure that people with domain knowledge are running the business. I don't have to tell you that I know the concepts, principles and the strategies for local content development. So I think we can handle that aspect very well.

If you want to talk about things that happened before the law was enacted, that is the issue; but with the law, there is no room for disobedience. When you make a policy statement, you can now work around it to enforce compliance. So government can make a pronouncement that they want to use to achieve a particular objective and also ensure that people comply.

But once a law is made, and this law says any subsequent agreement, any other thing that we are going to do from this day onward, about the Nigerian oil and gas industry is subject to the provisions of this law, then all parties must comply. We are not going to disrupt the business of the industry but we are going to manage what we are seeing now and try to absorb it into the provisions of the law. However, going forward, any new agreement must comply fully with the letters and the spirit of the Nigerian Content Law.

Domiciliation of assets in Nigeria
When a company submits its documentation for technical evaluations, and when it submits its Nigerian content plan, the Act stipulates as a condition that there must be evidence that the company is registered in Nigeria with assets. So if you are going to be a shipping company or you are providing marine services, you will demonstrate that 50 per cent of the assets that you will use to perform that job a0re in the hands of Nigerians.

It is registered by Nigerians so that payments made for that asset will be there. It is not a case again where I can go and rent a vessel from Greece and then I pay $100 to the man who rents the vessel and he takes only $5 and sends $95 outside. Now if you own part of that vessel or half of the equity in that vessel you will get the greater share of the profit being retained in Nigeria, which is the sense here with the law.

Govt to assist with pipe-mill plant
The Minister has the capacity to make recommendations or regulations on the critical capacities that we need to put in place and the Board will implement it in a way that will stimulate investments in those critical facilities. We want to look at establishing a pipe-mill. In fact, you will hear some pronouncements from the government.

We will identify the pipe-mill, the shipyards, docking facilities that will be put in place in Nigeria so that all these vessels that work in Nigeria and get revenue in the country will not sell them out to other countries to do what Nigerians can do. But Nigerians cannot do that business in open water, they need a dock and individuals may not be able to build that but the government using the instrumentality of the Board is going to try to stimulate investment and development in these critical facilities so that more work can be done in Nigeria.

Nigerians can do it
If you know the amount of investments that Nigerian company are making to be able to do what you are asking them to do - that is a direct route to growth. If you do more exploration work you gain more experience. Before, they said Nigerians don't have money to buy drilling rig. But some Nigerian companies have bought three to four drilling rigs. And when you know how to manage drilling rigs, you have solved a whole lot of problem. So we are confident that in the next six months we are going to make a lot of impact in the industry.