The signing of the Memorandum of Understanding (MoU) for the $100 million Nigerian Content Intervention Fund (NCI Fund) by the Nigerian Content Development and Monitoring Board (NCDMB) and Bank of Industry (Bol) last week, may yet open a new vista of opportunity for indigenous oil and gas companies.
Under the Mou agreement signed by the two organisations, Bol shall manage the funds on behalf of NCDMB and provide periodic reports on the progress of the fund.
‘‘NCDMB is desirous of dedicating an amount of money from the NCDF for the purpose of on-lending to promote the growth and development of Nigerian Content in manufacturing entities connected with specific sectors of the Nigerian oil and gas industry and is appointing BoI as the Custodian and Manager of the Funds for the purpose thereof and BoI has accepted to act as the Custodian and Manager of the Fund,’’ explained Bol.
Prior to the establishment of NCDMB in 2010, over 90 percent of contracts in the oil and gas industry were carried out abroad.
The Nigerian Oil and Gas Industry Content Development Act of 2010 subsequently midwife the creation of NCDMB with the mandate to increase indigenous participation in the oil and gas industry, build local capacity and competencies, create linkages to other sector of the national economy and boost industry contributions to the growth of Nigeria’s National Gross Domestic Product (GDP).
But in order to reverse the trend and ensure that indigenous operators begin to build capacity, the The NOGICD Act 2010 established the Nigerian Content Development Fund (NCDF), which is now known as NCI Fund.
NCDMB recently disclosed that indigenous participation in the nation’s oil and gas industry has increased to about 35 percent from the 10 percent it was six years ago.
Manager, Strategy and Policy Development Division at NCDMB, Mr. Abdulmalik Halilu, stated that the percentage of Nigerian Content in the oil and gas industry had increased from less than five percent before 2010 to 14 percent in 2014 and 35 per cent in 2015.
He assured that that the Board’s interventions were expected to increase local content levels to 50 percent by 2017.
What NCI Fund seeks to achieve
The NOGICD Act 2010 which established the Nigerian Content Development Fund (NCDF) in 2012, now NCI Fund seeks to address financial and liquidity challenges of Nigerian companies operating in the industry.
The fund, according acting Executive Secretary, NCDMB, Mr. Daziba Patrick Obah, shall be used to finance existing and intending manufacturers and other Original Equipment Manufacturers (OEMs) in the Nigerian oil and gas industry to; procure fixed assets (machinery and ancillary equipment); provide working capital (initial stocks or increase in stocks of raw materials, spare parts and components); and lease industrial and business equipment.
Obah, disclosed that the fund has grown to about $600 million, adding that it represents the sum of 1 per cent from every contract awarded to any operator, contractor, subcontractor, alliance partner or any other entity involved in any project, operation, activity or transaction in the upstream sector.
The money, he said, is to be deducted at source by contract awarding entities and paid into designated accounts kept with custodial banks under the programme.
In actualising the NCDF’s mandate, the Act also empowers the NCDMB to engage financial advisers to de-fine modalities for the fund’s utilisation as well as identify and attract other sources of funds to augment the aspiration. Under the old order, NCDF was jointly managed BGL and United Capital Plc.
Steps to accessing NCI Fund
In explaining the modalities for accessing the $100 million NCI Fund, acting Managing Director of Bol,Mr.Waheed Olagunju, explained that intending beneficiaries who have previously executed contracts in the industry must be up-to-date with their remittances to the Nigerian Content Development Fund (NCDF),adding that Bol will obtain the confirmation from the NCDMB before any application can be successful.
The NCI Fund, according to him, will attract a single digit interest rate of eight percent with a tenor ranging from one to 10 years, a maximum moratorium of 12 months (from date of loan disbursement),$10 million maximum obligor limit and assurance of speedy processing.
Given further insights into the NCI Fund, acting Executive Secretary, NCDMB, Mr. Daziba Patrick Obah, said as part of operating model for utilisation of NCDF, two Special Purpose Vehicle (SPVs) were incorporated to oversee the Fund’s administration while an NCDF Advisory Committee comprising industry representatives (IOCs, PETAN, OGTAN, BOI) was inaugurated to provide oversight and guide the Board on utilization of the Fund.
‘‘Fund’s utilisation was anchored on the principle that the Fund should not be depleted within the short term taking into consideration the feedback from the industry, a case was made for a redesign of the operating model in favour of direct on-lending to Nigerian Oil and Gas Service Providers (NOSPs)
The NCDMB boss assured that transactions that were already consummated under the partial guarantee arrangement will not be terminated but managed to final settlement, adding that the Board will continue to work with stakeholders to develop financial products that address other unique financial requirements of the NOSPs
As part of the package,BoI shall have the responsibility of appraising, disbursing, implementing and monitoring the projects as well as recovering the loan and interest from the approved projects.
Other responsibilities of the fund manager include; execution of projects, reports and returns, accounting and audit inspection, security of the funds and insurance and utilisation of the loan.
Stakeholders express worry/optimism
Chairman, Petroleum Technology Association of Nigeria (PETAN), Mr. Bank Anthony Okoroafor, lauded the resolve of NCDMB to retrace its steps by ensuring that operators and largely PETAN members benefit from the fund.
‘‘This fund that we are talking about is our money because it is the one percent contribution of PETAN members.”
Recall that the duo of Okoroafor and the pioneer PETAN Chairman and Managing Director of Oilserv Limited, Mr. Emeka Okwuosa, had in May, at the Oil Technology Conference (OTC) in Houston Texas, `USA, expressed worries about the state of the fund. Both had alleged that the workings of the fund were shrouded in secrecy as only two firms have benefitted an insignificant amount so far.
But in defense of the NCDMB, Obah said contrary to claims that only two firms had benefitted, about three companies actually accessed the fund. He named the companies to include Ladol, Starz and Vandresser.
The PETAN Chairman equally challenged the board to raise the bar by working to ensure that the $100 million given to Bol to is grown at about $ 600 million so that the board in partnership with Bol could set up the biggest shipping yard in Nigeria in order to arrest the huge capital flight in that sector.
‘‘The purpose of this fund is clear. For many years, operators have been shouting that they cannot access this fund. There are many indigenous players that have capacity but are constrained due to funding challenge, yet we have a pool of fund idling away. And unfortunately the banks are mean. They are not partners in progress,’’ he said.
He advised Bol to ensure that the process is seamless and simple for genuine oil and gas operators to be able to access the fund, saying the reason why the old model failed was because it had a lot of cumbersome process that got operators discouraged along the line.
He disclosed that PETAN would monitor the progress of the fund in order to ensure that in no distant time the $600 million is made available to Bol, adding that the idea of building the largest shipping yard in Nigeria would ultimately create about 12,000 jobs.
Economic contributions of Nigerian content policy
As far back as 2013, NCDMB said the implementation of the local content Act had saved Nigeria a capital flight of about $380 billion and a job loss of 2 million in the oil and gas sector.
According to the immediate past Executive Secretary of NCDMB, Mr. Ernest Nwapa, prior to the advent of the Act, more than 90 percent of the jobs in the industry were done abroad.
Specifically, he stated that $214 billion worth of procurement and $9 billion worth of research and development were done in North America, while $78 billion worth of technical services and $39 billion worth of engineering work were done in Europe,with Asia dominating the fabrication aspect to the tune of $39 billion.
The NCDMB boss had stated that with the coming into place of the Act, $107 billion procurement, $20 billion fabrication, $14 billion technical services, $20 billion engineering and $7 billion research and development are domiciled in Nigeria.
Nwapa had also said that $191 billion could be retained, while 300,000 new direct job opportunities are expected in such areas as engineering, sciences, technical services and manufacturing.
For ExxonMobil, its investments in the Nigerian content is valued at over $1 billion (N156 billion.In 2011, its subsidiary, Mobil Producing Nigeria, MPN, became the first oil company in Nigeria to deploy Nigerian-made pipes (30kms) in its pipeline network. MPN worked with an indigenous pipe manufacturing company to develop new specifications for Double Submerged Arc Welded Helical (DSAWH) pipes that would meet international standards for low pressure and shallow water applications.
Also, in 2012, MPN completed the fabrication of three wellhead platforms fully developed in Nigeria.
In June 2016, Nigerdock completed Total’s Ofon Phase 2 Wellhead Platform, supporting the oil firm to increase oil production from 25,000 barrels per day (bpd) to 65,000bpd.
The disclosure was made by the Managing Director/Chief Executive, Total Upstream Companies in Nigeria and Chairman, Nigerdock Nigeria Plc, Messers Nicolas Terraz and Anwar Jarmakani at the sail away of Ofon Phase 2 Wellhead Platform, held at the Snake Island Integrated Free Zone (SIIFZ) in Lagos, Monday.
‘‘The delivery of the new well-head platform that we are celebrating today will now pave the way for the drilling of additional wells and ramp-up production to 65,000bpd of oil and three million cubic meters of gas per day. This delivery is therefore a key milestone in the Ofon 2 project execution, ’’ NicholasTerraz, Managing Director/Chief Executive, Total Upstream Companies in Nigeria had said.
— 25th July 2016