THUMPS UP: Shortening Contracting Cycle in Oil Industry


The federal government through the Nigerian Content Development and Monitoring Board (NCDMB) recently signed a Service Level Agreement (SLA) with the oil companies operating in Nigeria under the aegis of the Oil Producers Trade Section (OPTS), to reduce the long contracting cycle, which had hindered investments in Nigeria’s oil and gas industry.

Under the SLA signed in Lagos, the 28-member OPTS companies will comply with the provisions of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act, by submitting to the NCDMB, documents like their quarterly job forecasts, Nigerian Content plans, bidders lists, Nigerian content evaluation criteria, Nigerian content technical bids and other relevant information in relation to industry contracting and procurement cycles.

On its part, the NCDMB has committed to respond on specific timelines and should it fail to meet the set deadlines, the oil companies can proceed with their tendering processes after duly informing the agency.

The Executive Secretary of NCDMB, Mr. Simbi Wabote, signed on behalf of the agency, while the Managing Director of ExxonMobil Nigeria, Mr. Paul McGrath, signed on behalf of the OPTS in the event witnessed by the Managing Director of the Nigerian Agip Oil Company (NAOC), Mr. Massimo Insulla; Managing Director of Chevron, Mr. Jeff Ewing; and the Managing Director of Total Exploration and Production Nigeria, Mr. Nicolas Terraz.

Nigeria’s oil and gas industry has long contracting cycle of 24 – 36 months from the period of invitation to tender to the period of successful award of oil and gas project, unlike some other producing countries where it takes less than six months for a project to be awarded.

The long contracting cycle has resulted in project delays and escalation of costs of projects, which have prompted investors to take their funds to countries with shorter cycle, thus denying Nigeria of the much needed investments to achieve the targeted 4 million barrels of crude oil per day output and 40 billion barrels reserves base.

The NCDMB had in May 2017 signed similar SLA with the Nigerian Liquefied Natural Gas (NLNG), which has since improved the turnaround time of approvals between the two establishments.

Speaking at the event, Wabote explained that the SLA with the OPTS was in furtherance of the Board’s efforts to meet the target set by the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, for the industry contracting cycle to be shortened to six months.

He noted that through the efforts of the NCDMB, the cycle had been reduced significantly to 14 months from 24-36 months.

Wabote stressed that operations of the oil and gas industry were time sensitive, adding that a shortened contracting cycle would cut the cost of projects considerably.

Indeed, long contracting cycle and the protracted reform in the oil and gas sector are two major challenges that have hindered investments in the oil and gas sector for almost two decades.

While efforts are being made to conclude the reform with the recent signing of the Petroleum industry Governance Bill (PIGB) by the National Assembly, the signing of Service Level Agreement (SLA) by the federal government and the oil companies will reduce long contracting cycle and encourage investors to sign Final Investment Decisions (FIDs) of projects that have been on the drawing board.

For successfully engaging the local and international operators to sign the SLA to reduce costs of projects and boost investments in Nigeria’s oil and gas industry, the NCDMB deserves thumps up.