Nigeria wants 70 % of budget plan for local content

Apr 18, 2005 02:00 AM

The Federal Government of Nigeria and its joint venture oil partners planned to spend about $ 60 bn (N 7.98 tn) over a 10-year (2005-2009) period, in a bid to meet set targets on crude oil reserve and production capacity. Seventy % of the expenditure, or $ 42 bn, according to a Federal Government directive to the Nigerian National Petroleum Corporation (NNPC), must go directly to the national economy.
A breakdown of the industry expenditure showed that the NNPC and its partners planned to spend $ 27.5 bn or 65 %, on procurement, $ 10.6 bn, (25 %) on construction and another $ 10.6 bn on fabrication. The industry also planned to spend $ 16.9 bn, or 40 % on manufactured items while engineering activities will gulp $ 4.2 bn.

NNPC joint venture partners are Shell, ChevronTexaco, ExxonMobil, Nigerian Agip Oil Company, Elf Petroleum Nigeria and Pan Ocean. The partners account for over 90 % of Nigeria's crude oil production capacity put at between 2.5 and 2.8 mm bpd. The Federal Government has, however, set a target of achieving an output capacity of 4.1 mm bpd by 2010 and oil reserve of 40 bn barrels.
In the execution of the projects to meet these targets, both the NNPC and its multinational oil companies had been directed to ensure that the Federal Government's aim of raising local content in the industry to 70 % over the same period must be met.

The joint venture partners, set up machinery in motion to execute the government's directive. The two parties set up a Steering Committee for the purpose. The Committee has also constituted seven sub-committees, namely Fabrication, Engineering, Manufacturing, Banking/Insurance, Shipping, Well and Drilling Services and Petroleum Engineering.
Speaking at the inauguration of the sub-committees in Lagos, the head of the steering committee and the Group General Manager in charge of Local Content at NNPC, Mr Joseph Akande, said that a framework for successfully meeting the Federal Government's target on national content has been developed.

The sectorial committees, according to Akande, have the responsibilities to:
-- define strategies to meet and exceed Federal Government target
-- provide approach for upgrading skills and technology of indigenous companies
-- develop initiatives to guide transfer of skills and technology to local companies
-- liaise with local companies to identify opportunities and modalities for investment, and
-- meet monthly to review generated initiative by the committee.

Akande said that currently, there is low level of national content within the Nigerian oil and gas industry, with 80 % of the present $ 8 bn annual average spending going abroad. The current contracting strategy in the industry, he said, involves multinational oil companies issuing invitation to tender (ITT) to international engineering, procurement, installation and construction (EPCI) contractors who bid for contracts either solely or in consortium with some local companies.
The quantum of work which ends up being allocated to the local companies is limited due to the perceived low capability of such companies, he said.
"To address the issue, the Federal Government has set new aggressive targets for national content in the Nigerian oil and gas industry. The Federal Government insists that a minimum target of 45 % Nigerian content by end 2006 and 70 % by 2010 must be achieved," Akande said.

He said that government has therefore directed that the front-end engineering design (FEED) for all projects, construction of all storage tanks and fabrication of all piles, buoys, jackets, must be done in Nigeria by end of 2005. Also, contract packages for the floating, production, storage and offloading (FPSO) vessels are to be offered for bid on the basis of carrying out integration within the country from mid 2006.
"Clauses that create impediments for/exclude participation of local companies should not be included in any ITT, while the harmonisation and application of international codes and standards to support utilization of locally manufactured products such as paints, cables, etc, to improve capacity utilization in local industries is expected to take effect by the second quarter of 2005," he added.
Akande said that about 2,000 fresh jobs opportunities await Nigerian engineering graduates next year when implementation of these directives begin.

Source: This Day
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