World Report

Tony Chukwueke
Director of the Department of Petroleum Resources

‘The resources available in Nigeria can be used to benefit our neighbours’

ne of the most important issues being confronted in Nigeria’s energy industry today is the need to increase the participation of indigenous companies and manpower.

The federal government is eager to raise the level of what is termed ‘local content’ in the oil and gas sector. By so doing it aims to promote entrepreneurship, build the financial and technical capacity and self-confidence of local firms and increase employment opportunities for Nigerian youths.

By ensuring that more projects go to Nigerian companies, the government also aims to arrest a massive flight of capital from the country as the multinationals look to foreign companies for technical services, materials and equipment rather than to Nigerian firms. Nigeria invests an average of £4.6 billion a year in the oil sector as its equity contribution to joint venture projects, but currently only 10 per cent of it benefits the Nigerian economy.
The government is taking action to change that. Under new federal guidelines, issued at the end of last year, Shell, ExxonMobil, Chevron, Total and Agip have been directed to relocate project-management teams and procurement centres for all their local upstream projects to Nigeria.

The multinationals will also be compelled to use Nigerian companies for technological projects. The Nigerian National Petroleum Corporation (NNPC) will no longer approve projects without a binding agreement by the contractor with a local firm. In future, a minimum of 50 per cent of the total tonnage for floating, production, storage and offloading (FPSO) topsides must be fabricated in Nigeria. Fabrication alone has the potential to create 10,000 jobs in the next three years.

New rules will also increase the percentage of Nigerians employed in the industry in managerial, professional and supervisory positions.

The government’s target is to raise the level of Nigerian content in the oil and gas sector from around 15 per cent at present to 45 per cent by the end of this year and to 70 per cent by 2010.

At the forefront of the drive to increase local content is the Petroleum Technology Association of Nigeria (Petan), an umbrella group for businesses providing specialised technical services to the industry. The association has criticised the response to the increasing participation of local firms by multinational oil producing firms operating in the upstream sector.

Petan’s Chairman, Pedro Egbe, says: “Nigerians have the duty and responsibility to develop their country and create wealth for Nigerians.”

In the oil services sub-sector, companies such as Drillog-Petrodynamics, Pelfaco, Oilserv and Nestoil have already established reputations through their work with the leading players in the industry.