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NIGERIAN CONTENT IMPLEMENTATION Roadmap for Industrialization by Engr. E.C. Nwapa (FNSE), Executive Secretary, NCDMB November 2012.

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Presentation on theme: "NIGERIAN CONTENT IMPLEMENTATION Roadmap for Industrialization by Engr. E.C. Nwapa (FNSE), Executive Secretary, NCDMB November 2012."— Presentation transcript:

1 NIGERIAN CONTENT IMPLEMENTATION Roadmap for Industrialization by Engr. E.C. Nwapa (FNSE), Executive Secretary, NCDMB November 2012

2 HISTORIC TREND OF NIGERIAN OIL & GAS SECTOR PERIOD1960s – 1970s1980s – 1990s2000s – 2010s2020 POPULATION63 million100 million165 million195 million EDUCATED EMPLOYABLE ADULTS <5%10%30%>50% COMMUNITY DEMANDS InsignificantBasic AmenitiesInfrastructure Participation Equity ownership REVENUE20%50%80%> 60% GDP IMPACT (Contribution) <10%<20%>20% LAWS & POLICIES Petroleum ActJOAs, PSCsNOGICD/ PIB

3  A Threat to Oil will threaten National Survival  Oil & Gas Industry is repositioning to Promote Utilization of Local goods & Services  Building capacity on the back of mega Projects and Operations  Other Linkage sectors need to be mobilized NATIONAL REVENUE PROFILE Over Dependence on Oil

4 PETROLEUM ECONOMICS VS NATIONAL DEVELOPMENT PETROLEUM ECONOMICS NATIONAL DEVELOPMENT ECONOMICS BALANCE Dollar per barrel? Profit for shareholders? How fast to first oil? Government take, taxes, royalties? How many jobs? In country Value creation Legacy, spinoffs, infrastructure? Sustainability, Safety, Environment

5 Operators seek cheapest fastest route to first oil. Govt uses Taxes & Royalties for Development Little attention to value addition from operations Promotes import of Goods & Services Revenue - Focussed Operators consider long term value Govt takes lower revenue for higher ICV Greater attention to life cycle support for ops Promotes development & use of local capacity In-Country Value - Focussed 1 2 Two Strategic Development Options

6 $14b Defining the Roadmap for Change Technical Services $78b $20b $39b$20b $39b$107b$214b $7b$9b Fabrication Engineering Procurement 2006- 2020 Nigerian Content Implementation Bringing Nigerian Jobs Back Hub for oil and gas services Estimated $191 billion could be retained 300,000 new direct job opportunities -(Engineering, Sciences, Technicians etc) Pre-Nigerian Content Implementation Buying rather than selling. Exporting Nigerian Jobs Estimated capital flight $380 billion Estimated lost job opportunities 2 million 10yrs30yrs Research & Development Changing the Pre – NOGICD Act Footprint Bringing Nigerian Jobs Back Over 95% of industry spend Abroad Over 65% of industry spend domiciled

7 A robust supply chain What makes a great oil producing Nation? Facilities Asset ownership Manufacturing Local service coys Drilling Rigs Marine Vessels Drilling Tools Industrialists Pipemills& Machine shops Fabyards & workshops Ship/dockyards Logistics bases OEM Reps & SMEs Valves &' Pumps Spares & components Switchgear & control panels Chemicals & fluids Machinery & equipment Human Capital - skilled workforce In country training and certifying bodies Pupilage programs in local companies

8 We need to maximize value from these activities Drilling Value out of the O & G Chain

9 Thrust of the NOGIC Act 2010 Nigerian Content aspiration derived from the thrust of the NOGIC Act are focused on ensuring that companies benefitting from our natural resources also contribute to economic development of Nigeria. Develop local capacity in key areas such as manufacturing fabrication, engineering etc Promote indigenous ownership of assets and utilization of indigenous assets in oil and gas operations Develop indigenous skills pool across oil and gas value chain Provides mandatory training requirements on the back of projects Creates JQS to manage and track available skills Promote establishment of support industries that will sustain oil and gas industry operations Enhance multiplier effect of oil and gas investments in economy Develop pool of competitive supply chain rooted in oil bearing communities Create customized training and sustainable employment opportunities structured awareness and enlightment campaigns Institutionalize inter-agency collaboration on local content development Integrate NCDMB into planning and contracting process to ensure Nigerian Content COUNTS Dedicated NCDF for capacity building Maximize utilization of Nigerian made goods Maximize utilization of Nigerian human resources Link the oil and gas industry with other sectors of the Economy Focus on community participation in the supply chain Foster institutional collaboration 123 4 5

10 Distribution of Oil and Gas Assets. Foreign Vs Indigenous Snapshot of reserves: Oil-36.22 billion barrels (2.92% of world reserves) Gas- 178 TCF (2.98% of the world reserves) 1.6 Majors Addax, Chevron, Eni-Agip, Exxon Mobil, Shell and Total Control 98% of reserves and production assets 2.Indigenous companies Over 30 operators (Afren, Oando, Seplat etc) Over 30 independents and local operators ( Summit, Conoil etc) Own 2% of reserves DPR: Oil blocks in Nigeria 1.Combined daily production capacity of 80,000 bpd 2.With aggressive equity participation indigenous players will increase market share 3.NPDC making significant progress, hitting the 100 barrels per day equivalent mark. 4. Full Field Development by indigenous companies being promoted NDPR IOCs CONTROL OVER 90% PRODUCTION NOC/INDIGENOUS BUILDING FOR MID-TERM GROWTH OF PRODUCTION SHARE TO 20%

11 New developments in Nigeria for Energy Utilization GAS DEVELOPMENT Nigeria Gas Master Plan Domestic Supply Obligations New IPPs BrassLNG, NLNG Train 7, OKLNG REFINING Greenfield refinery projects – 3 new refineries + 1 Petrochemicals Plant UPSTREAM Deep offshore – EGINA, ERHA North, OPL245, Bonga SW, BONGA NW

12 Stakeholder Collaboration Implementation Model Government Oil companies Service providers  Investment policy  Contracts approval  Bid rounds  NCDF  Capacity development  NC regulation  Interministerial Interface  Legislation on Local content  Legislation on favourable fiscal regime  Nigerian content scope on projects (NCCC)  Capacity development  1% remittance to NCDF  Nigerian Content Consultative Forum (NCCF)  Capacity development  Nigerian Content Equipment Certificate (NCEC)  1% remittance to NCDF  Foreign Direct Investment  Benchmark models (learning from others) International partners NCDMB act as facilitator, bringing together a broad array of stakeholders

13 Various Initiatives in: i)R&D ii)Human Capital Development iii)Steel Pipemills and associated industries iv)Manufacturing and Component Assembly v)Marine Vessel and Rig Ownership vi)New facilities and Upgrade of existing infrastructure vii)Dry Docks and Shipyards Dry dock/shipyard Manufacturing/ Assy Rig/vessel ownerHuman Capital DevSteel millsFacility / upgradesR&D Manufacturing/assembly A MULTI LANE HIGHWAY TOWARDS INDUSTRIALISATION Nigerian Content Road Map

14 NC VALUE (70% - 85%) Based on proportion of value of contracts awarded to Nigerian Companies NC VALUE (12% - 18%) Based on proportion of contract sums spent on Nigerian made goods Real NCPartial NC There is marked increase in contract award to Nigerian companies Spend proportion in Nigeria has peaked Without manufacturing, no further NC Growth – steel products major input in manufacturing No employment growth We need power to “power” Local Content Nigerian Content Measurement

15 100 80 60 40 20 0 FabricationManufacturingEngineering 90% 50% 7% Current Performance levels  NCDMB as facilitator of growth  Sub-optimal utilization of locally made goods by industry  case for strong linkage between manufacturing and oil and gas industry

16 Nigerian Content Roadmap developed to manage challenges, deepen capacity and maximise utilisation of Nigerian goods and services Implementation challenges Strict compliance without disrupting industry activities – Capacity Gaps Handling increased cost + schedule Transparent effective model for NCDF Management Ensuring Quality of delivery Absence of manufacturing capability and confidence to use local goods- Extending implementation to Downstream Growing new organization to meet wide responsibility Funding the Boards operations from appropriation Policy inconsistencies - require legislative streamlining Exposure to frequent litigation

17 Impact of Implementation Programs UTILIZATION OF LOCAL FACILITIES AND ASSETS - Indigenous Companies acquiring and deploying rigs Major rig operators have complied – Seawolf, Oando, Transocean, Pidwal Existing fabrication yards upgrading to accommodate increased workloads – Nigerdock, Saipem, Aveon. New yards being developed – Samsung, HHI, Daewoo Existing pipe mill over 50% capacity utilization. Indigenous marine vessel replacing hitherto foreign

18 Impact of Implementation Programs Before 2010 – Only $200k of over $2Bn spend domiciled Now – 50% of about $3.5Bn spend domiciled

19 Impact of Implementation Programs Nigerian Made Security VesselNigerian Owned DP2 VesselNaming of MV Osayame

20 STRATEGIC INTERVENTIONS Training & Employment Compared to rising prices of oil, the capacity of operating companies to employ nationals has been on the decline since 2008 PUBLIC SECTOR (Regulator) ~30,000 jobs SERVICE PROVIDERS (Services, equipmt) <1 million jobs OPERATOR (Opportunities and finance) ~25,000 jobs LINKAGE INDUSTRIES (Manufactrg) >2 million jobs INTERVENTIONS: 1.(NOGETTS) Project Based Training and Attachment - Over 8,000 candidates captured on JQS Platform Over 1,500 attached to O & G Projects Sponsoring geosciences Training for 1,000 Nigerians Sponsoring environmental remediation training for 3,000 Nigerians 2.Institutional Development - Established OGTAN Establish Engineering Academy with PPP NIW Welding Technology Complex (NIW/NCDMB/Shell) Establish Subsea Academy 3.Expatriate Quota Management - EQ allocation supported by robust succession planning Monitor utilization of EQ slots Productive Employment Social Employment Environmental remediation training sponsored by the Board to create a pool of Nigerians with adequate environmental management skills,to address reoccurring environmental degradation


22 Nigerian Content Employment Initiative (NCEmI)

23 ORAS – Offshore Rig Acquisition and Utilization Key elements of ORAS Strategy: 1.Using a Nigerian Operating Company for Contracting 2.Putting equipment and technology in the Company 3.Phased increase in indigenous equity to meet Acts requirement of 50% 4.Assisting with long term funding and equity Financing

24 Topside Integration capability Training & Certifying Academy Equipment Manufacturing Capability Heavy Industry Fabrication Yard EPC PROJECT TYPICAL PROJECT SPINOFFS

25 Consolidate existing Mill 3 new Pipe mills Start Production by 2015 Cost of $150m each Generate 15000 Jobs 3000 training opportunities NLNG, BLNG focus LNG carrier size Dockyard Complete by 2015 Cost of $250m Generate 55000 Jobs 20 000 training opportunities FPSO Topside Integration Facility Pipe MillsDock Yards TUPNI committed to EGINA topside integration Integration Facility set by 2014 Cost of $150m to $200m Generate 30000 jobs Training opportunities Erha North/ Egina Umbilical facility & Tree assy Start Production by 2015 Cost of $250m each Generate 5000 Jobs 2000 training opportunities Subsea Equipment Manufacturing Complex Legacy Programs. EGINA/GAS MP/ BONGASW/ERHA NORTH/BRASS LNG

26 Guidelines issued to the industry makes NCECs a requirement in tenders Over 300 applications being processed Attributes of certificates issued to date: Establishment of equipment assembly plants Manufacture of equipment parts for repairs/maintenance Manufacture of equipment components Investment commitment of over $600m IOCs are taking initiatives to support OEM presence in Nigeria - Shell Investors supported by Government general and specific incentives STRATEGIC INTERVENTIONS Nigerian Content Equipment Certificate (NCEC)

27 1.Categorization of oil and gas service companies 2.Industry data base for skills verification. 3.Verification of available in-country capacity 4.Effective information exchange across stakeholders 5.Compliance Monitoring 6.Test data uploaded 7.Launch Q2 2012 NOGIC JQS STRATEGIC INTERVENTIONS Nigeria Oil & Gas Industry Content Joint Qualification System Expatriate Quota Utilization and Succession data Marine Vessels data Contract Processing data Equipment Ownership Nigerian Content Compliance Certificate Data Skill Base Tracking Training and Employment data Nigerian Content Plans and reports repository

28 Direct Capacity Development intervention by the Board Equity Participation to stimulate Investments in Critical facilities Skills Development & Job Creation interventions Provide Guarantees for low interest lending Industry Advisory committee & SPV to strengthen Governance Fund will not be depleted NCDF 1% Upstream contract sums 30% Direct Intervention Lte 70% Guarantee Ltd Industry Advisory Committee Fund Managers (BGL/UBA global) Other Participating Commercial Banks Nigerian Content Development Fund Model (Clause 104 of the Act) Letter on NCDF implementation

29 35 COMPLIANCE MONITORING & ENFORCEMENT STRATEGY ( COMES) Nigerian Content Governance on Monitoring ….COMES THIRD PARTY INSPECTION TASK FORCE Section 68 – Prescribes fine or cancellation of the project for non compliance Compliance monitoring activities of the Board has brought about : 1.Reversal of contracts hitherto awarded in contravention of the NOGICD Act 2.EPC contractors and operators taking extra effort to build local capacity for their critical input needs 3.


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