Nigeria to earn $ 1.92 bn from local content growth

Jul 07, 2004 02:00 AM

The Nigerian economy is to earn over $ 1.92 bn (over N 261.12 bn) from a 10 % growth in local content in the upstream oil and gas exploration and production sector by the end of this year.
The development followed disclosures by the National Petroleum Investment Management Services, a subsidiary of the Nigerian National Petroleum Corporation (NNPC), that local content which currently accounts for 14 % of total industry expenditure will go up to 24 % by the end of the year. Mr Philip Nwachukwu, the new group general manager of NAPIMS made the disclosure while speaking on how the organisation intends to meet Federal Government target to raise local content development to 45 % by 2006 and 70 % by 2010.

The NAPIMS boss explained that the only way his organisation can ensure the target is met is to increase it by 10 % each year till the government target is met, indicating that by end of 2005 upstream oil industry local content will hit the 34 % margin.
In a sector which currently accounts for $ 8 bn in expenditure annually, the 34 % growth indicates that the contracts/work order valued at $ 2.72 bn will be localised in year 2005. It is further expected that by the end of 2006, the local content development will go up to 44 % and result in contracts/work order valued at $ 3.52 bn being localised.

The Nigerian upstream oil and gas sector currently accounts for only 14 % local content development, indicating that contracts valued at only $ 1.12 bn is executed in the country each year
"Our objective I have told you is to meet what government has set, that is 45 % by 2006. We are working towards that and it means that there has to be substantial growth. So we are talking about at least 10 % every year until that date for us to be able to achieve that which is a big task. We are working towards that. But the oil industry is not in isolation. It works within an environment and that environment determines its success. We can do all we can to achieve this milestone but others have to cooperate,"he pointed out.

Mr Nwachukwu lamented the current state of the Nigerian educational system, noting that it was a straight line kind of system which has little room to cater for the needs of the oil and gas industry
"In the UK for example, they have what you call the MVQ. When you are in secondary school and you are not academically inclined, you are not a grammar kind of person, you have your own direction, you do MVQ. This is a more practical kind of training, it could be mechanical, cookery, whatever. We have not been successful in getting the steel plants to work. Government can not do everything. What about the private entrepreneurs, can't they do something?," he queried.

The NAPIMS boss also disclosed that unlike in the past when the oil and gas industry depended a lot on foreign expertise, there are currently Nigerian owned companies which use local materials and other resources in the development of the industry.
"If you go to Port Harcourt today, you will see a number of yards are comingin. A company like Saipem which used to be Saibus has a yard and is investing heavily. Since last year they have invested about $ 10 mm to open up a yard. We have Globestar yard in Warri which used to be owned by McDermott in the old days. Today they have refurbished the place and it has been doing a lot of work for us. We have ensured that facilities such as well head platforms that are not too heavy, not too complicated are fabricated in Nigeria and more facilities for deep water development are being done here," he said.

He pointed out that some international oil service companies have pulled back from areas where they do not have competitive advantage anymore.
"Recently we had Halliburton’s. Their barite subsidiary teamed up with Ocean & Oil. That was a strategic move because what the company realised was that there are so many Nigerian companies in the mud engineering area, and they can't compete.”

Mr Nwachukwu also disclosed that there are some tenders for some industry services with a preponderance of Nigerian companies submitting bids.
"Why? Because international companies don't have the competitive advantage anymore. In terms of salary, if you pay a Nigerian, say N 200,000 a month, translate that, it's less than $ 2,000. But hardly will you find those expatriates, whom when you add all their allowances and everything, that will be earning $ 2,000, it will be much more than that. But for a Nigerian, if you pay him that it's good money for him. So we have a lot of Nigerian companies that are doing good business in the industry today," he pointed out.

Source: Vanguard Media
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