A Review of the Nigerian Energy Industry

Are we implementing a National Strategy for Development?

30 January 2013, Sweetcrude, Lagos – As Nigeria awaits the official announcement of the winner of the bid for the Egina FPSO Project,due process for awarding contracts is being put to test. Bearing in mind that the project has been in the pipeline for almost 10 years, and TOTAL sees the field as an opportunity, it is my prayer that we make the right decision that would showcase the Government of Nigeria as one that follows due process.

Total discovered the Egina field in late 2003 with Egina-1 well and Egina-2 well drilled in 2004. In 2006, Egina-3 and Egina-4 were discovered, followed by Egina-5. The Egina field is a stand-alone FPSO development which Samsung Heavy Industries (Samsung) and Hyundai Heavy Industries (HHI) are bidding for after Technip was disqualified. The Nigerian Content scope was originally expected to cover up to 17,000 tonnes of fabrication and HHI is understood to have offered to build a new facility near Brass Island which would have reduced Nigerian Content cost for the Brass LNG project. Perhaps a strategy of holistic asset development is required now.

Our approach to Nigerian Content needs to be strategic and all-encompassing to include midstream and downstream activities in our energy sufficiency. Brass LNG Final Investment Decision (FID) should build on the assets and investments of government for the Egina project. If we all agree that the contracting cycle must include Nigerian Content evaluation and our strategy is to develop in-country facilities and assets whilst creating jobs and wealth for Nigerians, then we need to use the NOGICD Act as a guide that points an indigenous contractor in the right path to create value throughout the entire energy and petroleum value chain. If the stakeholders in the upstream sector will begin to exploit the law perhaps we would be able to check the bending and breaking the law and due process for short-term gain. What is the big picture is the question that must be placed on the highest authority in the Nigerian decision making process.

The implementation of due process when awarding contracts within the supposedly well-established Nigerian Oil and Gas industry contracting process is currently being put to test with the contention on-going between the project owners and the decision makers who are charged with the responsibility of awarding the Egina Project contract to the Samsung or HHI consortium. Due process is designed to ensure that government and the private sector operate in a fair, equitable, uncorrupted and value-adding manner. The lack of transparency and accountability in Nigeria has made it possible for companies and administrations to extort, collect bribes and inducements, distort the allocation of resources and undermine fair competition. If due process is not followed, investment, growth and development cannot increase and activities would continue in a corrupt and unfair manner. Following due process would enhance contractor’s performance which would stimulate the holistic development of the nation.

What is the agreed contracting process in Nigeria’s Oil and Gas industry? Should the Minister of Petroleum or the President of Nigeria have discretionary rights in the decision process for Oil and Gas projects or should this be the responsibility of the GED, E & P or the GMD NNPC? What approval ceilings should be borne by the afore listed? Who should have the final say (on technical and commercial matters) in the award of a multi-billion dollar project? What does the Nigerian Oil and Gas Industry Content Development (NOGICD) Act say about awarding contracts and who exactly are the promoters of Samsung and HHI?

If these questions are answered and the precedents of Akpo, Bonga, Erha, Agbami, Usan are taken into consideration then we may have a legal case on hand from awarding the contract to either Samsung or HHI. Where is NCDMB and the interests of the majority of Nigerians in this case? It would be very expedient to have the Nigerian Content Consultative Forum arise from its slumber to ensure that technology is transferred, facilities built with maximum Nigerian Content executed. Also, competent Nigerian companies must be given the right of first refusal for any contract as per the Schedule to the Act.

*Dr. Ibilola Amao is the Principal Consultant with Lonadek Oil and Gas Consultants, a firm of technical consultants with their core comp

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