The Rise of Nigerian Oil and Gas Companies In ways like never before Nigerian companies are on the rise, taking on prodigious challenges and overcoming them. They are increasing participation in areas that for long, have been the exclusive preserve of foreign companies. Increasingly, Nigerian companies have become more assertive, more ambitious and more resilient. No where is this more on display than the oil and gas sector and more recently, the power sector which has seen local indigenous companies in partnerships with foreign companies bid big and win big. It is essentially a sign of the growing assertiveness of the young entrepreneurial Nigerians that are clearly unafraid to take risk. And more than that, the opportunities the local content law has opened Nigerian companies to are unparalleled However, and unfortunately, there are those who would rather pull down these companies due to selfish reasons rather than feel a sense of pride in their accomplishments. And not surprisingly, some politicians are taking advantage of some of the needless disquiet caused by competition and sour grapes losers to cast aspersion on a process that cannot be said to lack transparency. Since the multi-nationals, led by Shell, started divesting from some oil blocks and marginal fields, Nigerian companies have put on impressive abilities to raise capital and form alliances with foreign technical partners in the acquisition of these oil assets. This has consequently deepened the level of local participation in the upstream, increased their level of technical competence and sophistication, created thousands of jobs for Nigerians and reduced to some measure, capital outflow from the country. Simon Kolawole acknowledged this much in his column recently, when he wrote: ‘‘One of the biggest achievements in this democratic experience is in the area of local content. Four years ago, President Goodluck Jonathan signed the bill into law and the story has changed positively. When the Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB), Mr Ernest Nwapa, was highlighting the achievements sometime last year, I was very encouraged. Many Nigerian companies, hitherto on the margins and struggling to survive, have gained expertise and improved capacity since the law came into being. For the first time in our history, the Nigerian flag is flying high in the oil sector, especially in technical services and engineering.’’ Continuing, he stated further: ‘‘According to Nwapa, over $200 billion worth of procurements and nearly $10 billion worth of research and development (R&D) used to be sourced to North America, while technical services valued at nearly $80 billion and $39 billion worth of engineering works were done in Europe. The Nigerian Content Act meant $191 billion investment was now being retained in-country and hundreds of thousands of jobs in manufacturing, engineering, sciences and technical services could be created in a matter of years. This, I would say, would be more beneficial to Nigerians than the billions of dollars being shared by FAAC every month. The FAAC one goes into government coffers from where we are not allowed to peep into what they are doing with it. Conversely, wealth generated in the private sector will be more beneficial to millions of Nigerians; especially in job creation and knowledge diffusion (we call it technology transfer). In fact, since local content became a matter of law, a company like Shell has sold its interest in four oil blocks to indigenous companies. Many Nigerian companies have become proud owners of upstream assets and this has in turn led to the engagement of indigenous contractors. They have never had it so good. Nigerian companies are now handling lucrative pipeline construction projects. Things can only get better for them. The more patronage they get, the more they are able to improve their capacities. It is a virtuous cycle.’’ And in yet another remarkable feat of achievement, many local firms have been awarded 60 percent of crude oil lifting rights. And as the Minister of Petroleum, Diezani Alison-Madueke, the major inspirational force behind the aggressive implementation of the local content law, explained, it was all in furtherance of building local capacity. Hear her: “When we unveiled the Nigerian content law a few years back, the overriding principle was to grow indigenous capacity in an aggressive manner and I am happy to report that today, in the oil and gas sector, Nigerian content has been placed on the path of irreversible progress.” She further noted that the oil lifting award to local players remained in line with the aspirations of President Jonathan to effectively transform operations in the country’s petroleum industry. According to her, the advent of the Nigerian content law, has encouraged indigenous investments in critical infrastructure such as marine vessels, petroleum depots and jetties, among other infrastructure. “We have seen robust indigenous investments in marine vessels of various categories and wholly-owned Nigerians vessels have increased astronomically through the years. These vessels are the category one and category two types. Investments in reception, storage and distribution facilities such as jetties, depots, trucks, vessels and modern retail outlets have more than doubled over the past few years and this has helped to increase the nation’s sufficiency level in petrol,” she added. While the rise of Nigerian companies may well signal the new renaissance of Nigeria, not everyone seems to be pleased at this development. As those who lost out always look for flaws, genuine or otherwise, to undermine the process. Only recently, opposition APC, apparently trying to play the political script, called to question how Aiteo and Taleveras were able to out-bid other companies to emerge preferred bidder. It went on to cast aspersion on the integrity of the two companies in the Shell divestment by trying to draw a link with their participation in the swap deal of NNPC and the alleged missing $20billion. The interesting point to note here is that, the party’s complaint had nothing to do with the transparency of the bid process, but the age and alleged inexperience of the companies that won the bid. The party took its complaint further with a call on the House Committees on Petroleum (Downstream), Petroleum (Upstream), Justice and Senate Committee on Finance to investigate Aiteo and Taleveras solely because the two companies had been engaged by the NNPC to lift some of its crude in exchange for imported petroleum products. The APC further wondered whether there was a connection between the crude oil swaps and the $2.85 billion winning bid both firms had submitted for Shell Nigeria’s prolific oil block – Oil Mining Lease (OML) 29 – that the Anglo-Dutch multinational is selling with its 97-kilometre Nembe Creek oil pipeline. The party described as “incredulous that the two firms, with a track record as oil marketers (not exploration and production firms) of less than five years’ experience, could have submitted such a huge bid”, adding that this had put into glaring context what might be the opacity of the barter programme. But in a swift reaction to the party’s statement, Chairman of the House of Representatives Committee on Finance, Hon. Abdulmumin Jibrin, who is also a member of the APC, cautioned the party against jumping into the wrong conclusion over the crude oil swaps and the bid submitted by Aiteo and Taleveras for the Shell oil block and pipeline. He said while he would not want to take issue with the party, as is a loyal member of APC who believes in the ideals and aspirations of the party, he deemed it necessary to advise the party where a mistake has been made. Jibrin further pointed out that given the depth of knowledge his committee and others in the House have on NNPC’s finances, the party should have consulted its members before the statement was issued on the call to probe the swap programme, Taleveras and Aiteo. Giving more insight into the crude oil swaps, he said his committee, for instance, had received several petitions on the programme in the past, and having carried out its own independent review of the transactions, he had come to the realisation that “a lot of information out there on the swap template is over-exaggerated”. He said: “Our House committee has been neck deep in querying and investigating NNPC, Department of Petroleum Resources, Accountant General of the Federation and the Federal Inland Revenue Service on a frequent basis about several transactions that impact on the oil revenues paid into the Federation Account. This includes such transactions as crude oil lifting by companies in exchange for petroleum products. While the importation of petroleum products is not ideal for a crude oil-producing country, but these are transactions that were put in place following NNPC’s inability to meet domestic demand for petrol and other products from its refineries.” He also cautioned the APC against being dismissive over the pedigree of Taleveras and Aiteo, stating: “It is not the age of a company that matters, but its ability to deliver.” Also, commenting on the statement by the party that the $2.85 billion bid submitted by the two firms for the Shell oil block showed that they were stupendously wealthy, Jibrin said this was not indicative of the liquidity of Aiteo and Taleveras as companies are known to raise such funds through a combination of debt and equity. “As is the case with most transactions, oil firms are known to hedge their risk by utilising their network of contacts to pool together their sources of funds. “I do not believe $2.85 billion is sitting in the bank accounts of Taleveras and Aiteo. Even the likes of (Aliko) Dangote finance their big-ticket transactions through debt and equity coming from various partners. This is even more imperative for oil firms, which are known to enter into partnerships to spread the risks associated with E&P activities. So rather than make statements that might look like we are trying to undermine indigenous oil firms, we should encourage them as part of our goal to build local content in the oil and gas sector,” he said. PART2 COMING SOON anchorship.nl
Posted on: Fri, 19 Sep 2014 19:55:40 +0000
Trending Topics
Recently Viewed Topics
© 2015