‘Implementation of Nigerian Content Act is by Collaboration’

10 Dec 2012

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Mr. Ernest Nwapa

Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB), Mr. Ernest Nwapa, speaks with Ejiofor Alike on the level of progress in the implementation of the Nigerian Content Act and other industry issues
The Practical Nigerian Content Conference that has just ended in Yenegoa, Bayelsa State, attracted the top executives of all the International Oil Companies (IOCs), Nigerian National Petroleum Corporation (NNPC), indigenous oil companies, service providers and all the relevant stakeholders in the oil and gas industry. Is this an indication that the entire oil industry is going to key into the Nigerian Content implementation?

I think what we saw at the conference was another demonstration that this whole implementation package has come of age. There is still a long way to go in terms of the results we are seeing but in terms buying and alignment, the entire industry has keyed into the programme. You know, with all the crowded programmes of the chief executive officers of the IOCs; the indigenous companies and the Group Managing Director of the NNPC, as well as the representative of the Minister of Petroleum Resources, they all found time to come at the same time.

This has sent a very strong signal to the staff of the Nigerian Content Development and Monitoring Board (NCDMB), stakeholders and the people of Bayelsa State that this is serious government and industry business. So, it is something that we must really sit back and see how we can build on this alignment. It gives us the impetus to go back and start doing some of the big things for which you need support. I am going back with my team and review some of the actions that we have taken that made people to be so committed to this and consolidate those actions.

As you know, we have the support of government at the highest levels – both the President and the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke,  have shown tremendous support and this is the leadership that we are relying on to drive this. We have the people behind us; we have the industry behind us; we have the operators and the multinationals – everybody and they have come here. It is good for the spirit of the people of this area, who has just suffered from the devastating flooding to see that the oil industry is alive and well and in a position to partner the people of this area.

How successful are you in ensuring that the local communities key into this local content because we heard what the Governor of Bayelsa State said at the conference that the board should have community content?

The governor is right. The governor made a very strong point that although it is a Nigerian Content but it is necessary to have community focus and that is the main essence of the thing. We have to continue to create the awareness so that people in the oil-bearing communities know more about the opportunities and the method and ways of participating.

The way the industry was run from the capital cities of the country had exposed people living in those urban areas to the business more than the communities. But that is changing. It is not something that can happen overnight. It takes time to see the impact of government policy and you cannot stop people, who are already there. What you do is to create opportunities for new entrants and in creating these opportunities, we find that one of the greatest things you need to do is awareness to showcase the opportunities; to bring people into these endeavours. That is one of the reasons we insisted on having this conference in Yenegoa.

When the flood incident happened, there was an option to change the venue but we refused. We insisted that rather than change the venue, we would have it at a later date because we still wanted to bring these things to the grassroots. Although Bayelsa is where oil production started but it is the most deprived oil-producing state in terms of per capita production. So, we are happy that this happened here; we are happy that there was a special programme made for the youths and we will continue to pay more attention to things that are targeted at the local communities. In terms of the work itself, there are provisions in the Nigerian Content Act that certain recognition should be given to the communities and every operator has certain scope. So, you hear about community contractors; you hear about scholarships being given to people. We, on our own part, carry out training programmes and we make sure that we select trainees from the local communities.

The Petroleum Technology Association of Nigeria (PETAN) and your board signed a Memorandum of Understanding (MoU) at the conference. What is the significance of this MoU to Nigerian Content?
We, the board, have decided that the era of getting work in the oil industry; making money and taking the money away to enjoy your life, without creating employment is over. We also recognise that carrying out training without providing for jobs at the end of the training is not enough.

So, what we said is that to qualify to play in the industry, you have to demonstrate to the board in clear concrete terms that you are running an employment programme and a pupilage programme. In other words, you have to demonstrate that if you get this work, it will generate certain number of employment opportunities. If you don’t show that evidence, you will not get the job. The best people to collaborate with are PETAN because most of the people, who are bidding for substantial jobs, are the PETAN members. So, instead of putting a mandate on them, we have done it in a voluntary way.

We are designing a guideline to issue instructions and they said okay, let us work together on it. That is why we signed that MoU so that we won’t get resistance. The implementation will now be worked out by both parties. How it will work is that companies will employ people and put them on the pupilage programme; while the board will start training programmes for these new employees. Already, you are employed into a position that if the company gets work, this is the role you will be playing. If you are a mechanical engineer, we will take you and start training you so that in two years’ time, when that project will be ready to start, you will be prepared to join the project.

So, instead of waiting for the project to be awarded and taking people for training and they only work as trainees during the project, we train them in anticipation of the project and we feed them to that project when the project starts. So, we will spend the one percent upfront on training them and we will bring the Petroleum Technology Development Fund (PTDF) into the scheme. This thing is that starting point. We will then take it when we do the pilot and show how it is working and we bring PTDF into it and we will build on that. We believe that PTDF will be an interested party in this because they have been looking for how to use the people that they have trained in the industry.

Beyond the communities, there is concern among the operators that the board’s processes take very long time. In other words, the contracting cycle is too long. An operator once complained at a forum in Lagos that they brought in a rig but could not use it for nine months. What is your reaction to this?

I have said in different fora that the issue of delays because of paper work is symptomatic. The root cause of delays is absence of capacity. We are focusing on creating capacity, so that we ensure that capacity is created. Before NCDMB was created, the issue of long contracting cycle was there. The delayed contracts are not caused by the NCDMB. It is not created by the NNPC. It occurs because people go to far places to get goods and services.

The decision to give a job is taken after it satisfied technical grounds. How will you determine that when most of those things are not even in Nigeria? People go on inspection of all these rigs abroad and they have to take a decision and you have to determine ownership and where they are being manufactured. If we succeed in what we are doing in the next three to five years and there are three pipe mills in Nigeria, there will be no need for us to go to China and India to inspect pipe mills. If the pipe mills are located here, we won’t need to go to NCDMB to find out if it meets the requirement.

The operator will just go straight to the pipe mill for local source of material. If the operator buys the material locally, it won’t be NCDMB’s business. It is left for the operator to check if quality specifications meet the requirement. All they need to do is market survey. These Nigerian indigenous companies buying marine vessels are not even doing too much tendering. True, I have been on five committees looking at processes. We tried to reduce it but nothing has changed because if you don’t have something, you will go outside searching for it.

When you tell people to bring goods and services, it does not matter whether you own those goods and services. You are free to go and lease them. So, everybody can be a player. Now, if you have 200 people, pursuing one contract, it takes time to whittle it down to one. If you have a supply chain that is based on importing everything, then everybody can be an importer. You are now using traders to do oil and gas business and it is that trading aspect that is creating the delays. But we have to do the diagnosis; delays are caused by the absence of capacity and we are working to create capacity. Once we create capacity, it will automatically reduce the processes.

When the Act was enacted most people believe that the board will apply maximum force and send many people to jail before it can work. But we are not aware of even a serious court case and everybody has keyed into the Act. What is your operating model?

I think it is collaboration. From day one, the board looked at the power points - areas of key impacts and it was clear that the operators have a big hold on the industry. You know the NCDMB has a development aspect of it and the monitoring aspect of it. You don’t focus on monitoring what you have not developed. The local supply chain is weak and was almost non-existent, to be honest with you. Therefore, in trying to build, you must collaborate.

If you begin to run after people saying you must buy this from Nigeria, and there is nowhere to buy it from Nigeria, what are you monitoring?

So, our focus was: ‘come, let us build; come, let us get people, who are interested to invest.’ In doing that, we attracted a lot of investment and the people – both the operators and the service companies saw a clear roadmap that was designed. Under the able leadership of the honourable minister, we designed a clear strategy with a clear intent. You know that when you talk about political will, this is a clear demonstration of political will. The honourable Minister directed the board to go out there and address seven key areas between now and 2014. It was a very clear target on employment; training, facilities, pipe mills; community interventions and funds, to make the industry and the country to see growth.

If you look at each of those things, we have taken these targets very seriously. The targets are not for the board alone. The mandate from the minister is that the board should go out and work with the industry. She did not say that the board should go and flog the industry into line. She said that the board should go and work with the industry.

So, when the leadership is saying ‘go and work with,’ it means you should bring people round the table. Before we came for this year’s conference, we had collaborative meetings with the Managing Directors of the International Oil Companies (IOCs), where we discussed new areas of intervention. We want to start looking at new areas – crude oil transport. I will not go out there and tell the IOCs that they must start transporting their crude oil in Nigerian tankers.

I should ask them: How do we start this thing and they will tell me the difficulties. But then, to make things happen, you have to face difficulties. I have told them that they have to operate on the challenges and we are going to analyse the challenges and find solutions to the challenges. That is how we did everything that we have done here. But do not get it wrong; it does not mean that we have not reversed many things.

I can show you correspondence where operators awarded contracts to companies that are not exactly Nigerian companies as required and by simple letter, we asked them to reverse it and they reversed it. So, when you are in an operation, even in some jurisdictions, if somebody tries to carry out illegal activity and you warn the person and the person turns back, then there will be no need to apply punishment. What you want is for the people to comply.

If you send warning letter and the person reverses his decision, there is no basis to apply sanction. That is why you would not see us saying that we have shut down a project. Our focus is not on revenue generation; our focus is on getting the industry to do the right thing and put capacity in this country.

The spirit we have used is based on collaboration. We are happy for what we are getting and we have opportunities for growth. We have to show people that the government is serious and that President Jonathan has made that commitment that he is going to change the landscape of the industry and the honourable minister has given us the target and strategy to make it happen. So, we have to show the steps; we have to show the progress we are making to make people believe in it and to make people come out and put more efforts towards that goal.

Tags: News, Business, Nigeria, Ernest Nwapa, NNPC

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