Ernest Azudialu – Obiejesi is the founder and executive chairman of Nestoil Group. In a recent interview on CNBC Africa, Azudialu-Obiejesi spoke about talent in the sector, attracting private capital, the Nigerian local content target and the impact on indigenous oil and gas firms. Josephine Okojie monitored the interview. Excerpts
There has been a conversation for several years within the Oil and Gas sector about the need for a transfer of skills to local players to help them have a bigger stake in the industry. And we have actually seen that happening under the auspices of the Nigerian Content Development &Monitoring Board (NCDMB) showing that the local content act is being adhered to. But let us hear your perspective in terms of the journey so far as a player. What are those major changes you have seen that stick out for you?
For me and for us in Nestoil, it’s been quite a long journey. We have been actually in the industry 20 years before the law actually came into effect. However, we cannot deny the fact that this law has helped more Nigerians to participate in the Oil and Gas industry. Before NCDMB and the Local Content Law, the attitude of Nigerians towards projects in the industry was completely different from what it is today. I remember those days there were a lot of expatriates in the Oil and Gas industry. It was almost as if the industry was the exclusive preserve of expatriates. But those of us who were then in the industry, we were also trying to convince the expatriate companies that we can do some of these jobs if given the opportunity. Now you can see the difference when it became a law to allow Nigerians bid for jobs and execute some of the projects. Nestoil played a key role in influencing the perception that Nigerian companies can actually execute jobs in this industry. For some of the pipeline projects that Nestoil executed, we were the first indigenous company to deliver such projects in terms of project scopes. Eventually, companies now looked up to us to say if Nestoil can do it, then we can do it also.
Would you say local companies have the human capacity including skills to deliver on all the projects in the Oil and Gas industry if given the opportunity?
Yes. But you know, as they say, the journey of a thousand miles begins with one step. You need to give people opportunity first for them to even start growing capacity. When Nigerians were given the opportunity, they started growing capacity. And it was now easy for Nigerians in certain levels of technical jobs in the industry. The real thing that has also happened is that Nigerians are now, at least able to deliver on some jobs without expatriate support. We still have a long way to go but we can only improve with more opportunity.
The NCDMB targets 70% participation of local companies in the Oil and gas sector. Is this realistic?
Yes, it is achievable. I can assure you that 70% is achievable. Let me give you a good example of a company like EWT, which is a Nestoil sister company. EWT is able to build pressure vessels that have never been done anywhere in Africa. We have been able to do them in Nigeria. For the Egina project that just finished, we participated in it because we were given the opportunity just to build those vessels and they now found out that because we have built some in the past, we’re able to have the necessary machinery required to build what Egina needs for Total. Nigerian companies acquired these skills and we’ll keep growing the capacity.
Let’s talk about the role of the NCDMB. How they fared so far in terms of enforcement. What is the room for improvement?
Talking from the point of a man who was there before they came into being, I can tell you that they have done quite well. Today are penalties that are actually enforced if you go against any of the laws. International Oil Companies (IOCs) are now required to demonstrate local content event in the number of contracts that are awarded. Most IOCs don’t want to be penalized. That fact that there is a watchdog monitoring compliance and enforcing penalties has been a blessing for local players in the Oil and gas industry.
Would you say that right now that compliance across the board is high?
Yes. We feel it every day. It will interest you to know that as indigenous players, we are not immune from the radar of the NCDMB. We are strictly monitored. We have an expatriate quota as well. We cannot just employ expatriates for any kind of job. I believe that this is the way to go and I am glad that for the Oil and Gas industry, complying with the local content law is becoming a way of life.
Between Nestoil and its sister company Neconde, we learnt that about 95 percent of your employees are Nigerians. Let’s talk about the talent and the quality of talent in the industry. Was it easy for you to attract the right kind of talent for the jobs that are needed?
Yes. Initially, it was not easy because we needed to do a lot of convincing. We needed to do a lot of talking to Nigerians to stay and do some of these projects especially Nigerians who were trained overseas in the Oil and Gas industry. However, with our track record of performance and competitive remuneration and benefits, the mindset is beginning to shift. These talented Nigerians are beginning to realize that this is their own country and it is an opportunity for them to grow the industry while advancing their careers. Today most of our engineers and technical staff are Nigerians.
What’s your overall capacity for training and building capacity in your employees?
Training is the bedrock of our operations. A number of our engineers and technical staff were trained abroad. A lot more were trained here. What we have going for us in this organization is on-the-job training. A number of our employees have built capacity over the years through mentorship and hands-on experience over the years. Some of the expatriate personnel that we hire are specifically briefed to train and transfer knowledge to local talents. I would say it is a combination of formal classroom training as well as on-the-job training. Our biggest assets are our employees. They are committed and dedicated to growing the company for the future.
Now, in the industry, we always talk about investments. The Oil & Gas industry is capital intensive. Government is over-burdened. How do you think local players can address this issue?
First, one thing that we have been looking forward to is the passage of the PIB – the Petroleum Industry Bill. Passing it and creating the environment that is required for investors to do and grow their businesses. The PIB amongst other things provides that policy and governance framework that will guaranty the safety of people’s investments. Investors need assurance that when they put in their money, the legal and policy framework guarantees the safety of those investments. This is the only time you will see huge capital flowing into this industry. This is what has not been done and I think that it should be a priority for the government to ensure that this bill is passed.
Now for the NCDMB, there’s a target of 70 percent participation by the year 2027. We are currently at 40 percent. I mean, share your thoughts with us in terms of how you see us achieving this target and what 70 percent participation would mean for the industry and what kind of changes will be visible if we indeed achieve that?
Yes. I mean, if we achieve 70 percent, by the target date there’s going to be a lot of impacts especially in job creation which it itself reduces restiveness, insecurity and crime. It also means that the country will expend less foreign exchange in hiring and paying for expatriate labour. It would also mean that a number of the machinery that we currently import will be manufactured here thus growing a supply chain pipeline that creates ancillary industries and indirect jobs. I can go on and on. The benefits are so much. The Nigerian economy would be better for it. I must add that the issue of local content is a journey, not a destination. Even when we achieve this target by 2017 there will still be room for improvement. What is important is that we are making the right steps in the right direction.
But what do we do? What are the specific things that we need to do to take us from this 40 percent to 70 percent?
We need to first of all make sure that some of the issues that actually prevent NCDMB from implementing some of these policies to the letter are all looked at. For example, we have issues of insecurity in the Oil & Gas industry, how and why some of the companies managing onshore assets are not doing any of the projects now. We need to look at the financial capacity of most of the banks or at least a policy that directs banks to provide financial support Nigerian companies that are participating in this industry. It is a capital-intensive industry so if there are no special funds dedicated to it, it will affect it. I would also recommend a lot of training centres where Nigerians can be trained. Schools like the Petroleum Training Institute (PTl) need to be revived as the hub for producing talents for the Oil & Gas industry.
For you, what would you say could be that one thing, the biggest problem that could be a major hindrance in achieving the local content target?
The biggest problem that I can see now is actually what I will call an environmental problem. By environmental I mean, the environment where these businesses are which also underbelly the security issue. The environment for doing business can be better. We can certainly do with less insecurity and community disturbances. This is why you see the IOC’s divesting from onshore assets. You know, many times when we hear about these community disturbances, they present themselves like there is not any solution. I mean, these communities are people. And I’m just wondering, isn’t it possible for expanded discussions, dialogue with this community members? Is this a problem that doesn’t have a solution?
You also had an issue with your host community not too long ago with Neconde. How were you able to resolve that?
