Indigenous companies in the oil and gas industry which exhibit competence and ownership of requisite equipment will henceforth enjoy first consideration in the award of contracts in the sector, BusinessDay has learnt.
“Nigerian independent operators shall be given first consideration in the award and selection of operators of oil blocks, oil field licences, oil lifting licences and in all projects for which contract is to be awarded in the Nigerian oil and gas industry, subjected to the fulfillment of such conditions as may be specified by the Minister,” reads section 3(1) of the amendment bill which is now awaiting third reading before the House of Representatives before final passage.
This recommendation is contained in the report of the Nigerian Oil and Gas Industry Content Development Act 2010 which was considered at the Committee of the Whole on Tuesday, and enjoyed overwhelming support of members of the House of Representatives.
The bill, seen by BusinessDay, is an ammendment to the 2010 Act and has been scheduled to pass through third reading, having gone through the consideration of the relevant Committee. Section 3(2) also states that “there shall be exclusive consideration to Nigerian indigenous service companies which demonstrates 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.”
It further provides for compliance with the provisions of the Act and promotion of Nigerian content development shall be a major criterion for award of licences, permits and any other interest, in bidding for oil exploration, production, transportation and development, or any other operations in Nigerian oil and gas industry.
Members also adopted the Committee’s recommendation in section 104(1,2) for the establishment of the Nigerian Content Development Fund, and the deduction of “one percent of every contract awarded to any operator, contractor, sub-contractor, alliance partner or any other entity involved in any project, operation, activity or aims transaction in the Upstream sector of the Nigerian Content oil and gas industry” from ‘source.’ Section 104(3) further provides that “not more than 10 percent of the monies accruing to the Fund in any year shall be spent by the Board on its operations, including general and administrative expenses, whether as operating or capital expenditure.
“At least 70 percent of the fund shall be disbursed to qualified Nigerian indigenous companies for in-country capacity development by way of long-term, low-cost asset acquisition loans and infrastructure or facilities development support, equity investment, direct grants for in-country research and development (R & D).
The report which proposed the establishment of a Nigerian Content Development and Monitoring Board, emphasised the procedure that will guide, monitor, coordinate and implement the provisions of the Act. Section 7 of the amended bill, also mandates “operator, contractor, sub-contractor, alliance partner or any other entity involved in a project” to submit a Nigerian content plan to the Board, demonstrating compliance with the Nigerian content requirements of the Act. Section 38(1, 2) of the bill further stipulates that the operator shall submit to the Board and update, every six months, the operators Research and Development Plan as well as outline a revolving three to five year plan for oil and gas related research and development initiatives to be undertaken in Nigeria, together with a breakdown of the expected expenditures that will be made in implementing the R & D, as well as provide for public calls for proposals for R & D initiatives associated with the operator’s activities.
In a bid to remove bottlenecks in the industry and ensure adequate investment, section 48(1 and 2) of the bill, proposes that “the Minister shall consult with relevant arms of government on appropriate fiscal framework and tax incentives for foreign and indigenous companies which establish facilities, factories, production units or other operations in Nigeria, for purposes of carrying out production, manufacturing or for providing services and goods, otherwise imported into Nigeria.
“Where there are established contractual and procedural impediments to local capacity development, the Minister shall on the recommendation of the Board, approve definitive incentives that will eliminate such impediments and aid investment.” Likewise, the bill provides for the setting up of a Nigerian Content Consultative Forum (NCCF) which shall provide a platform for information sharing and collaboration in the Nigerian oil and gas industry ,with respect to: upcoming projects, information on available local capabilities, screening and ranking of qualifying capacity development initiatives from indigenous Nigerian companies for financing support by Nigerian Development Fund subject to section 104(5). The NCCF shall comprise of international operators, Nigerian independent operators, Government and regulatory agencies and representatives from the following sectors, including fabrication, engineering, finance services, legal and insurance, shipping and logistics, materials and manufacturing, information and communication technology; Petroleum Technology Association of Nigeria, education and training, as well as other professional services nominated by the board.
