Long Contracting Cycle Threatens Multi-million Dollar Oilfield Investments


Ejiofor Alike
The long tendering process in Nigeria’s oil and gas industry is threatening multi-million dollars’ worth of investments in chemicals deployed in oilfields, according to participants at the recent Second National Oil and Gas Production/Process Treatment Chemical Seminar held in Lagos

In his presentation at the event, a former President of Nigerian Society of Chemical Engineers (NSChE), Dr. John Erinne said long contracting cycle had created uncertainty in investments in oilfields.

He said the longer-than-necessary tendering cycle in Nigeria, was six times longer than that of the country’s rival oil producer in Africa, Angola.

“Investments in the industry are in the excess of $80million and $100 million. So if you work that back into Nigeria it depends on the exchange rate you are using because we are in regime of multiple exchange rates. When you are in one tender waste up to five years, it is extremely frustrating. It makes you operate in an atmosphere of uncertainty. But if you know that the tender starts today and in six months it will be decided who is successful and who is not then it helps you to plan; it helps you to chat your course and determine where you are heading to,” he said.

In their separate remarks, the Managing Director of Blue Sea Company, Mr. Doyle Edeni; Chairman of event, Dr Innocent Akuvue and representative of Baker Hughes, Mrs. Tine Unachukwu argued that the pervasive influence of the federal government in the oil industry is one of the major causes of delay in oil contracting time.

According to them, long contracting cycle is costing Nigerian companies operating in the sub-sector loss of up to $700 million annually.
A number of companies, Akuvue said, are springing up and are active in the treatment chemical industry.
According to him, to be effective, many companies are investing in blending plants for blending chemicals for their operations.
He argued that it takes 36 months to get an oil contract signed in Nigeria, as against six months in Angola.

“The delay in contracting time is mainly caused by overwhelming operational and bureaucratic bottlenecks, fuelled by government involvement in the sector,” Edeni said.
To improve Nigerian content by practitioners and professionals in the treatment chemical arm of the midstream sector, Erinne who doubles as the Chief Executive Officer of Matrix Petro-Chemical said; “What is most important for us is for the government to maintain a well balanced regulatory regime; workable and beneficial to all.”

“You have to note that those regulations meant to protect people and businesses don’t end up strangulating them. This makes you to loose the entire essence. So you have to balance it somewhere in order to get the desired result. So, that is the most important thing we desire from government and that is key in creating the enabling environment for businesses to thrive,” Erinne said.

“Commercial banks don’t have the kind of funds that are suitable for that kind of investments and where they have, interest rates are extremely unfavourable to the investors, so we need government to assist in ensuring that investors in productive ventures so as we are involved in can have access to reasonable funding,” Erinne added.

Earlier, the guest lecturer at the seminar, Mr. Ese Otakoro said in a lecture entitled: “Peculiarity of compliance with NOGIC Act with particular reference to oilfield chemicals,” that the global trends had shown that there was a focus on industrialisation as a means of development.

While urging the federal government to adopt the Norwegian model, Otakoro argued that norway has the most outstanding success in local content with one of most successful content act implementation; enacted in 1985 after the Royal petroleum Act of 1972.