A Review of the Nigerian Energy Industry

Govt stops Total’s oil field devt as contractor floods project with 185 expatriates

FRANCE TOTAL UTS ENERGY14 March 2014, Abuja – In a first major onslaught against multinational companies since President Goodluck Jonathan signed the Nigerian Oil and Gas Industry Content Development Act on April 22, 2010, the federal government, through the Nigerian Content Development and Monitoring Board (NCDMB) has wielded the big stick against Total Exploration and Production Nigeria, by stopping the company’s Ofon II project.

The NCDMB has also banned Italian engineering, construction and drilling contractor, Saipem, as well  as Hyundai Heavy Industries (HHI) of Korea, the contractor for Total from participating in the ongoing and future tendering processes in Nigeria’s oil and gas industry.

Located 65 kilometres offshore Nigeria and in a water depth of 40 metres, the Ofon deepwater field is in Oil Mining Lease (OML) 102.

The Ofon Phase II is a 90,000 barrel –per- day project consisting of construction and installation contract awarded in February 2012 to unlock the Ofon field’s undeveloped reserves, by installing four new platforms – two production platforms, a processing platform and an accommodation platform.

In separate letters to Total and HHI obtained by THISDAY from the Ministry of Petroleum Resources, the NCDMB accused Total and its contractor of gross violations of Sections 28, 33 and 41 (2) of the Nigerian Oil and Gas Industry Content Development Act 2010 and deploying non-compliant assets and expatriates on the project.

HHI was accused of flooding its vessel-Jascon-31 which is working for Total on the Ofon II project with expatriates who do not have approvals from the Board and whose roles can easily be performed by Nigerians.

According to HHI’s letter, which has reference number ES/NCDMB/MED/69/14/001, the Executive Secretary of NCDMB, Mr. Ernest Nwapa, noted that: “There are 184 HHI workers  presently on the project out of which only two are Nigerians while the other 182 are Koreans.

“There are three other Koreans working for HHI as ‘Vendors’ bringing the total number of Koreans on the project to 185. The Koreans deployed on this project by HHI are occupying positions for which there is already in-country capacity for  such positions as welders, painters, technicians, fitters, crane operators, generator operators, labor assistants designated as technicians,” Nwapa said.

Clarifying the offence, Nwapa stated that the Koreans did not have expatriate quota from the board, neither were there Nigerian understudies for each of the expatriates, in violation of Section 33 of the NOGICD Act 2010.

In a separate letter to Total, which has a reference number ES/NCDMB/MED/55/14/001, Nwapa accused the French oil giant of deliberately  failing to comply with the provisions of Section 66 of the Act, which requires operators to ensure that their contractors provide services in line with the requirements of the Act.

Nwapa also noted in the letter to HHI that “HHI is also in violation of Section 28 of the NOGICD Act, which requires that Nigerians should be given first consideration for employment and training on any project in the oil and gas industry.

“Furthermore, in support of its activities, HHI deployed assets that are not in compliance with the provision of the NOGICD Act with respect to ownership of equipment (Section 41. (2),” he added.

He further stated that: “Four years after the advent of the NOGICD Act, when other service providers in the industry have completely steered their activities into compliance, your company continues to operate with absolute disregard to the provisions of the Act.”

He said the board had already notified all operating companies in Nigeria’s oil and gas sector regarding the ban on HHI.

Saipem was also banned for what the board called “abuse of expatriate quota and procurement processes.”

THISDAY gathered that HHI had on receipt of the letter from the NCDMB started to make frantic efforts to secure temporary expatriate quota approvals from the Ministry of Interior, which could allow them to work in Nigeria, but not in the oil and gas industry.

In the NCDMB’s letter to Saipem dated February 28, 2014, the board noted that it had issued several caution notices to the Italian company in a bid to steer it into compliance but they were ignored.

The letter listed Saipem’s violations of the NOGICD Act to include “preponderance of expatriates on Egina project team without provisions for Nigerian understudies; discriminatory use of Nigerian Content Equipment Certificate (NCEC) to the detriment of Nigerian companies with in-country facilities”.

” Your plan to execute 2,900 tonnes of fabrication outside (while only 700 tonnes shall be executed in-country); your plan to source for all 31 Cladded and SS Pressure vessels from China contrary to the requirements of the schedule of the Act. Your company’s plan to source for Globe Control Valves and Panametric  Analysers on Shell’s SSAGS Project despite in-country capacity for such services.” Saipem was particularly accused of procuring goods and services directly from abroad whereas some Nigerian companies have the necessary capacities for the jobs.

The company was also said to be dealing directly with foreign Original Equipment Manufacturers even when those companies have Nigerian partners and representatives.

This action, it is believed, will hurt the Federal Government’s Equipment Components Manufacturing Initiative, (ECMI) which is geared towards promoting  local manufacturing of oil and gas components.


 – Ejiofor Alike, This Day
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