‘Nigeria Incurs Huge Cost On Imported Oil Equipment’

Nigeria is spending a fortune on the importation of oil and gas equipment because of the poor state of local market. At an energy forum in Lagos recently, participants said the country spends billions of dollars on the importation.

Among the participants are Executive Secretary, Nigerian Content Development and Monitoring Board, Ernest Nwapa, the Managing Director, the National Petroleum Development Company (NPDC) Mr. Victor Briggs and former Director, Department of Petroleum Resources, Tony Chukwueke.

Nwapa said efforts were now geared towards domesticating manufacturing of these equipment.

He said there were equipment that could be manufactured locally, adding that the government and operators were planning to ensure such facilities are produced in Nigeria. The need to keep a higher percentage of the yearly oil spend within, he said, was imperative to move the country forward, adding that the country would realize a lot of money from production of vessels, pipe and others.

He said the pilot project of a pipe mill would soon be launched, adding that the idea will help in encouraging local expertise, provide jobs, and save the country a lot of money.

Nwapa said: “We are working with the operators to establish pipe mills for the carriage of crude. Projects worth billions of dollars are going on across the country. We want to see a revamp of the dockyards and subsequent construction of oil vessels. Indigenous marine vessel operators include Aero Marine, Britannia, Vigeo and others. We want to see an expansion of local segment of the oil and industry in the next few years.

“We want to see a situation whereby rigs and fabricated yards are owned by Nigerians, and not foreign oil services companies. We should get our people owing these assets for growth. We are trying to increase what we are doing in terms of facilities and human resources deployed to the sector. That is the fundamental thing the Board is doing. Nigeria has been buying ideas and equipment, a development that has resulted in capital flight and loss of opportunities to employers locally.

Nwapa said the nation was moving towards entrenching the Nigerian Content Perspective in the industry, saying the Board has engaged the managing directors of International Oil Companies (IOCs) on the issue. “We are training people holistically, thereafter, we attach them to a company to demonstrate what they have taught,” he said.

Nwapa said the Petroleum Industry Bill (PIB) has resulted in a change in the mindset of operators, suppliers and vendors, stressing that they have a local content benchmark in what they are doing in the industry.

Briggs said the PIB was having a spillover effect on other sectors, noting that many organisations were introducing local content policies.

He said hitherto, indigenous oil production accounted for less than ten per cent of the upstream operations, but added that local producers have increased their output to over 30 per cent.

“Local producers produce lower quantities of oil because there is shortage of blocks. There is an aspect of PIB that make provision for increase in the production of indigenous companies. When the bill is passed, there would be blocks for operators to work with. The bill ensures that idle blocks are made productive. We are looking at a tax regime of between 55 per cent and 57 per cent for small operators, as against 88 per cent tax rate imposed on them. There is provision for tax holidays as well, explaining that based on this, small firms would be able to play well and grow their businesses.

He lamented the government inability to get enough oil royalties, stressing that things would change when the bill is passed. He said there are lots of gas export projects compared to domestic gas market, adding that PIB will remove cross- subsidization of gas market and its attendant inefficiency.

“There is an aspect of PIB that is devoted to strengthening of the domestic market. The bill will galvanize the interest of the stakeholders when passed into law,” he said.

Chukwueke urged the government to improve oil production for growth, saying no crude oil producer would like the price to crash because of the benefits derived from it.

He advised the government to put in place measures that would improve production, arguing that the development will help the country absorb volatilities in the market.

“The reason oil price has not fallen to $6 per barrel is because countries are not ready to crash for the sake of their economies. They need high price of crude. If Nigeria does not do something now, when the price is crashed, the impact will be on the country, “he said.