A Review of the Nigerian Energy Industry

Nigerian govt frustrates 70% content attainment – Oando

Michael Eboh

11 December 2012, Sweetcrude, Lagos – The quest by the Nigerian government to achieve 70 per cent local content in the oil and gas industry is unrealisable, owing to government’s failure to create an enabling environment says Mr. Femi Adeyemi, Chief Financial Officer, Oando Plc.

Speaking at a KPMG forum for stakeholders in the oil and gas sector, Adeyemi said the Federal Government has failed to create the enabling environment for local players to thrive in the sector.

According to him, the amount of documentation required in carrying out business in the local content regime is cumbersome and unfavourable to businesses.

“Also, a single oil rig, some times costs as much as between $3 billion and $4 billion, how many local companies can afford that, especially with the current economic realities on ground and government’s attitude towards driving reforms in the sector,” he declared.

He further stated that the documentation process is frustrating investments by indigenous oil companies, as it takes as much as six months to a year to get approval for certain ventures, undertaking and activities, thereby putting investments at risk.

“There is a particular situation where my company purchased a certain oil and gas assets and we applied to the relevant agencies in the petroleum sector to get approval to enable us commence the use of the facility. It took almost a year for us to get approval for the use of this asset.

“In this situation, one would wonder, especially in an instance where the asset is purchased with loans from banks. The banks will be expecting the repayment of the loan, while the interest on the loan will be accumulating irrespective of whether the asset has been deployed or not.

“All these will put investment in the sector at risk, as many investors would be discouraged from undertaking new ventures among others.”

Adeyemi also gave reasons why the company is yet to start the building of its refinery, years after it secured the licence, blaming it on the subsidy controversy and government’s reluctance to clarify certain issues as regards payment on proceeds from the refinery.

“We didn’t go ahead with building the refinery because we asked the federal government to clarify certain issues concerning subsidy and payments on the products of the refinery, the government told us it is not yet clear and finished on certain issues and that we should go ahead and build the refinery, that before we finish or after we finish, it might have probably decided on how to go about it.

“We didn’t go ahead, because it is surprising how the government wants us to invest such huge resources in building a refinery without a clear idea of government’s direction,” he stated.

He expressed support for the Petroleum industry Bill, PIB, currently before the National Assembly, saying that the Bill will help address certain anomalies in the oil and gas sector and help provide a clear investment direction for investors.

He maintained that for the PIB to achieve its stated objectives, it must stipulate clear and unambiguous roles for all players in the petroleum sector and provide clear rules by which participants can play.

He said, “The PIB should be seen to address issues concerning the ownership of assets and requirements for removal, taxation and treatment of investments and interest.

“It should create incentives for investments. The way the Nigerian oil industry is, presently, it is not only the government that is subsidising, but investors also. At the end of the day, stakeholders will begin to rethink their investments in the sector.”

Adeyemi, however, stated, “There are too many vested interests in the oil sector. The interests are diverse, hence they can not be a single solution that meets the requirements of all. We have wasted too many opportunities to get it right, it is necessary we act now.”

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