‘IOCs undermining Local Content Act’

Ernest Nwapa


11 September 2014, Lagos – Federal Government’s drive to involve local oil firms in the oil and gas sector is being thwarted by some oil majors that are bent on maintaining the status quo and denying indigenous companies their place as enshrined in the Nigerian Local Content Law, The Nation has gathered.

The  Act, which became operational in 2010, gave Nigerian oil companies the leverage to be given first consideration in the award of contracts in virtually every area in the sector, including oil blocks, oil field licences, oil lifting licences,  in addition to being considered for award of contracts in all projects for which they have demonstrable competences and proven capability  in the oil and gas industry.

The Act says there shall be exclusive consideration to Nigerian indigenous service companies which demonstrate ownership of equipment, Nigerian personnel and capacity to execute such work to bid on land and swamp-operating areas of the Nigerian oil and gas industry for contracts and services contained in the Schedule to this Act.

However, this legal provision which is binding on all operators in the energy sector, is being  flouted by some foreign players.

It was gathered that some  foreign companies, amongst them, Nigerian Agip Oil Company (NAOC)  and General Electric (GE), are working in unison against the provision and the intent of the Local Content Act,  to edge out an indigenous oil servicing company, ARCO Petrochemical Engineering Company Plc, in an existing Gas Turbines and Equipment  Maintenance Contract Working Agreement.

The intent of the scheme, it was learnt, is to introduce another foreign firm,  Plantgeria Nigeria Limited, with no pedigree of any related experience, to take over the job from ARCO

A source who asked that his identity be veiled, said the surreptitious action of NAOC and GE, if allowed to stand, will negate everything the Local Content Act represents.

The source explained that the object of contention is the Obob/Kwale/Ebocha Gas Plant Rotating Equipment Maintenance Contract, involving Nuovo Pignone, GE and ARCO.

The five-year contract was awarded by the Board of NNPC  sometimes in 2006 to Nuovo Pignone,  together with Arco Petrochemical Engineering company Plc, a wholly Nigerian company as the local Technical Partner, for the maintenance of the OBO/Kwale/Ebocha gas plants.

It was learnt that the Nigerian Agip Oil Company (NAOC) later changed the contract terms and awarded the same contract to GE on its own terms. By the new arrangement, Arco was reduced from being a partner to a sub-contractor.

However, just under a year of the commencement of the contract, the Niger Delta crises erupted, leading to the evacuation of GE’ expatriate staff from the site. On their exit, Arco’s engineers and technicians took up the challenge and maintained the plants for over six months before the crises abated and the evacuated GE expatriate  staff eventually returned to site.

Apparently surprised that ARCO successfully performed the task for that length of time without any hitches, and for unexplained reasons, GE turned against ARCO, reduced the scope of Arco’s jobs and introduced a third-party company, Plantgeria, to perform part of Arco’s scope of work in the contract.

“But surprisingly” the source exclaimed, “GE poached 19 of Arco’s engineers and technicians to do the job.”


– The Nation

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