Nigeria first began producing oil almost 60 years ago and is today one of the world’s largest oil producers. But for most of these years, the industry had been dominated by International Oil Companies (IOCs) who were kept in monopolistic positions because they possessed the financial clout and technical expertise that limited the involvement of indigenous firms in Nigeria’s largest export.
Five years ago, daily production attributable to Nigerian companies was less than 120,000 barrels of oil per day (bopd). Nigerian private sector companies owned just 6 percent of Nigeria’s daily production, despite owning over 30 percent of licences. Today, this picture has changed considerably. Indigenous firms are no longer content with being minority partners and have started to develop the financial resources and technical expertise to make them formidable forces within the industry – bolstered by their ability to own and operate their own assets independently or in favourable partnerships with international companies. This shift has resulted in an over 100 percent jump in the percentage of Nigeria’s oil production which can be attributed to indigenous players and equally, significantly increasing the contribution that indigenous companies make to the national economy.
In order to deliver more value and achieve the growth that has been delivered, indigenous companies have had to address two key deficits, specifically, the long-held lack of technical and financial expertise to deliver projects independently. That glass ceiling has been well and truly smashed in the last decade.
Nigeria has the opportunity to establish one of the largest and most value-creating domestic upstream industries in the world if it can continue to domesticate the technical skill and the financial resources and expertise that have emerged over the last decade. But the industry is fragile, and its emergence has come at a time of almost unprecedented volatility in global oil markets.
The skills gap in the oil and gas sector has been a major obstacle to its growth. It is this human capital that builds, maintains and services these assets and delivers value. Investing in the development of sector-specific skills is an essential component of sustainable growth and major steps forward have been taken over the last decade, success that must be built upon, and not reversed.
Established in 1990 to participate in the government of Nigeria’s programme to increase indigenous participation in the oil and gas sector, indigenous player Oriental Energy Resources has long prioritised investments in the development of Nigeria’s human capital. The recognition that building such capacity can improve the country’s economic performance is central to the company’s operations and CSR strategy. Oriental has invested significantly in developing the required indigenous technical skill to operate assets and has over the last decade contributed to funding arrangements that have delivered US$2.8 billion of investment into Nigerian projects. These funds have been used to establish production and deliver Nigeria’s largest marginal field, directly in line with the government’s agenda and long-term vision of increased indigenous participation and value retention which saw it allocate oil blocks to indigenous companies. The Ebok project, which produces over 30,000 bopd, is a clear example of success in government indigenisation projects and the largest producing marginal field in the country.
These investments don’t just result in technical skills development, but also deliver directly into the national coffers. So far Oriental has paid well over US$500 million in royalties, US$125 million in transaction taxes, US$21 million to the NDDC as part of its broader contribution to the development of the Niger Delta, and US$15.6 million directly on capacity building and developing the local community.
We are encouraged by the growth in indigenous participation in the oil industry and celebrate success stories like Oriental Energy Resources. Indigenous companies have a vested interest in growing local technical capacity and make sustainable investments which, in turn, will play a role in establishing a sustainable basis for the long-term growth of the Nigerian economy. Where they deliver value, they should be encouraged and supported.
Ralph Akpan
