Transcript GLOBAL LOCAL CONTENT SUMMIT 2009

GLOBAL LOCAL CONTENT SUMMIT
2009
LOCAL CONTENT POLICY IMPLEMENTATION - A
NIGERIAN PERSPECTIVE
A Presentation by Olawale Akoni SAN
Managing Partner Babalakin & Co.
www.babalakinandco.com
OUTLINE
 Introduction
 Nigerian Local Content Policy Thrust
 Policy Objectives
 Existing Legal Framework
 NOGIC and the PIB
 Implementation Challenges
 National Content in other jurisdictions
 Recommendations
 Conclusion
Introduction
Government’s interest in developing indigenous
manpower and encouraged patronage of locally
manufactured goods and services dates back to the
enactment of the Petroleum Act 1969. This was followed
by the Government’s Policy on same which was drawn
up in 2004 thus making it clear that the concept is not
nouvelle in any way. The challenge for us lies with the
actual implementation of LC due to the absence of the
proper framework and the “will power” as both appear to
elude us as a nation.
This presentation will examine Government’s policy on
developing LC and the existing framework for implementing
the policy within the Nigerian Oil and Gas Industry. We
would also discuss the existing and proposed legislations
which forms the legal framework for LC and some of the
concerns mitigating against attaining the desired objectives.
Defining Local Content (LC)
LC has been defined as the quantum of composite
value added or created in the Nigerian economy
through the utilisation of Nigerian human and
material resources for the provision of goods and
services to the petroleum industry within acceptable
quality, health, safety and environmental standards in
order to stimulate the development of indigenous
capabilities*
*Synchronized Report on Enhancement of Local Content in the Upstream Sector of the Oil and Gas Industry n Nigeria
The LC Policy
The Government’s LC policy was launched in 2005 with the
following objectives:
o Increased participation of Nigerians in the oil and gas industry
oEncourage utilization of local raw materials and services
oReduction in the number of expatriate staff of industry
operators
oCapacity building through the development of local expertise
oGradual increase in revenue accruable to Nigerians from the
oil industry
oAchievement of 70 per cent local content implementation by
2010
Policy Thrust
The LC policy seeks to put in place a framework that would
guarantee active participation of Nigerians in Oil and Gas operations
without compromising standards in order to stimulate steady and
substantial development of indigenous capacity.
It also seeks to add value to indigenously manufactured goods and
services as well as locally sourced raw materials by encouraging
maximum utilisation of local raw materials and human resources
in the manufacturing goods and provision of services within the
Petroleum
industry.
The overall aim is to promote steady measurable and sustainable
growth of Nigerian Content.
Efforts at Implementing the Policy
Further to the introduction of the LC policy, there was a need to set up both
organizational and legal frameworks which would serve as drivers of LC development
in line with the set objectives.
Organizational framework - A Nigerian Content Division (“NCD”) was set up in
March 2005. Upon creation, the NCD was placed under the supervision of the NNPC
GMD's office. A Nigerian Content Consultative Forum (NCCF) was also inaugurated
with Committees covering Fabrication, Engineering, Manufacturing, Banking &
Insurance, Shipping & Marine,Well & Drilling as well as Logistics services.
The NCD has been active in:
•Measuring growth in LC implementation
•Managing indigenous skills and capacity development
•Monitoring compliance through consistent interactions with the LC units of industry
operators
• Developing strategies for Capacity building and improved competency of indigenous
labour.
Efforts at Implementing the Policy
Legal framework - Beyond the organizational framework,
legislative efforts have also been made towards achieving
Government’s set objectives in respect of LC. First was the Nigerian
Oil and Gas Industry Content Development Bill (“NOGIC”) which
was proposed in 2006 with emphasis on providing legal backing for
the LC policy. The Bill has seen been passed by the Senate and the
House of Representatives has since sent its final report on the Bill to
the Committee of the whole House. It is hoped that the Bill will
soon be passed into law.
There has also been an effort of Government to consolidate all
Petroleum Industry related legislations into a single industry specific
law, (the Petroleum Industry Bill) which is presently before the
Nigerian National Assembly. Since LC is an integral part of the
industry, the PIB also contains LC provisions.
NOGIC and the PIB
 The NOGIC is a sector specific Bill to provide for the
development of Nigerian content in the Oil and Gas
Industry through the provision of a Nigerian Content
plan, and the supervision, coordination, monitoring
and implementation of the Nigerian Content Policy.
The NOGIC repeals the provisions of the Petroleum
Act which relates to LC and any other enactment
contrary to its provisions.
 The PIB was introduced in an effort to establish a
legal and regulatory framework and set standards for
operators within the Nigerian petroleum industry. It
is LC inclusive with one of its parts providing for LC
whilst considering existing and future legislations in
respect of same.
Comparing NOGIC and PIB
Whilst both Bills recognise the importance of LC, there appears to be certain
variations in the mode of implementation and set standards in achieving the
policy objectives.
Definition – There is a concurrence on what LC represents as the PIB
borrows the definition provided by NOGIC.
In a bid to show how both laws have sought to advance the implementation of
the LC policy, we shall examine the relevant provisions on the following areas:
National Content Plan
Process for the bidding and award of licenses
Quotas
Nigerian Content Plan (NCP)
NOGIC provides for the submission
of a NCP stating that operators
bidding for any license, permit or
interest must submit a NCP to the
Board.
The PIB provides that the plan as to
compliance with local content
regarding the training and recruitment
of Nigerians, should be submitted
within 12 months of the grant of a
license.
Process for the bidding and award of
licenses
NOGIC provides that the first
consideration in all awards of oil
blocks, oil field licenses, oil
lifting licenses and in all projects
should be given to Nigerians.
No corresponding or contradicting
provision in the PIB.
Quotas
NOGIC provides that companies
operating within the Petroleum
Industry can have up to 5 per
cent of its management positions
as expatriate positions to take
care of investor interests.
The PIB provides that 95 per cent of
all managerial, professional and
supervisory grades should be occupied
by Nigerians.
Implementation Challenges
Concerns on the success or otherwise of the LC drive centers around the policy
implementation and the challenges which may be faced by both the institutions and
the laws.
Some of the perceived challenges are:
 Inadequate indigenous capacity - manpower, skills and technical know-how
 Absence of the relevant legislations to give implementation required backing
 Quality - Keeping up with standards which are to be in harmony with
international norms
 Transparency and sincerity of the operators in support the LC drive
 Funding – Indigenous companies have limited access to international finance.
 Indifference of the Regulators
 Security issues
• Niger Delta unrest
• Corporate Social Responsibility
Implementation of LC in other
jurisdictions
Norway
The Norwegian Government introduced policies to establish a
preference for Norwegian goods and services, technology transfer
and research cooperation.
The Ministry of Industry established a Goods and Services Office
(GSO) to act as a watchdog agency monitoring the IOCs’
contracting and procurement procedures.
The GSO was also responsible for stimulating the local supply
industry through joint ventures and targets were set for local
participation that were monitored and reviewed.
Over the years, the Norwegian LC implementation has become a
model for other oil producing countries.
United Kingdom
Following the an increase in oil prices in the early 70’s British
authorities encouraged more UK companies to engage in oil
operations and this led to the establishment of the Offshore Supply
Office to assist UK firms gain a large share of the petroleum supply
and the service market.
By the 1990s the UK’s focus changed from increasing local content
to supporting UK service companies develop export markets thus
taking LC to a higher pedestal.
The Government also established the Oil and Gas Industry Task
Force (OGITF) with the mandate to keep the UK’s energy service
and supplies industry highly competitive. The support given by the
UK Government to its service companies has resulted in the
companies developing into first class global companies.
Recommendations
 Swift passage of the relevant laws
 Increased interest of all stakeholders as Government cannot
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achieve desired success by itself
Efficiency of regulators
Resolution of the Niger Delta crisis in order to encourage
indigenous investors and guarantee security of investments.
Establishment of training programs to develop capacity
Increased support for the growth of indigenous companies
especially in the area of funding and technology acquisition
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