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The enactment of the Nigerian Oil and Gas Industry Content Development Act (the Local Content Act/NOGICD Act) in 2010 pitched the expectation of many that the Nigerian oil and gas industry may have been positioned as a prime catalyst for a rounded national economic development. To actualise the central objective of progressively domesticating the Nigerian petroleum industry, the Local Content Act instituted specific measures which if carefully implemented, are designed to ensure the cultivation and the development of the Nigerian economic and human capacity, and the competiveness of Nigerian companies operating in the oil and gas industry.
In the light of the crippling effects of the fall in the price of crude oil particularly in relation to the Nigerian economy, the theme of the NOGICD Act should be right in the mix of efforts towards resolving the current economic crisis. With more emphasis on local content in the Nigerian oil and gas industry, additional jobs could be created as well as trigger a reduction in the foreign exchange requirements of Nigerian business.
This article examines the important legal requirements for the implementation and enforcement of the Local Content Act.
The stated mission of the NOGICD Act inter alia, was to provide for the development of Nigerian Content within the Nigerian oil and gas industry. The NOGICD Act defines “Nigerian Content” as:
“…the quantum of composite value added to or created in the Nigerian economy by a systematic development of capacity and capabilities through the deliberate utilization of Nigerian human, material resources and services in the Nigerian oil and gas industry.”
The foregoing definition contains key words and/or phrases which require closer analysis and scrutiny in order to accurately situate the essence of the NOGICD Act. Also, such scrutiny is essential in order to identify the specific responsibilities which the Act envisages or allocates to particular stakeholders towards the realisation of its objective. These phrases are: quantum of composite value added to the Nigerian economy, systematic development and utilisation of Nigerian human, material resources and services. These elements of the NOGICD Act shall be more closely examined later in this article.
Until recently, activities in the Nigerian oil and gas industry has been dominated by the oil majors such as Shell, Chevron, ENI, ConocoPhillips, ExxonMobil, Total and other major International Oil Companies (IOCs). During this period, the prospection, exploration and production for hydrocarbon were in the exclusive control (although in partnership with the Nigerian National Petroleum Corporation (NNPC) of these IOCs. This meant that the participation or involvement of Nigerian professionals in the industry was restricted at the time to that of employees of any of the IOCs.
Although, the NNPC is often designated as the senior partner under the legal and contractual arrangements governing the commercial relations between the IOCs and the NNPC, both the technical capacity and financial requirements needed for the actual operation of the assets are often almost absolutely provided by the ‘junior’ partners.
Whilst the Federal Government of Nigeria has had a long term goal of structuring a Nigerian oil and gas industry in which Nigerians and Nigerian companies will become dominant actors, this desire had lacked the requisite consistent and coherent regulatory framework for its realisation.
However, notable improvements have occurred in the past decades as a result of specific micro-level policy steps of the Federal Government of Nigeria. The first key action was the indigenisation policy initiative initiated through the Petroleum (Amendment) Decree No. 23 1996. The Act empowers the President to declare certain petroleum field located within contract areas or leaseholds as marginal field. The purpose of this provision is, inter alia, to facilitate the participation of Nigerian companies in the oil and gas sector.
This indigenisation policy has led to the emergence of a significant number of Nigerian independent operators and oil and gas services’ companies.
Some of the Nigerian independent operators include Neconde Energy Limited, SEPLAT Petroleum Development Company Plc, Atlantic Energy, Midwestern Oil and Gas Limited, Conoil, Sahara Energy, SAPETRO, Oando, Shoreline, Transcorp, and the Nigerian Petroleum Development Company (NPDC).
The commercial operations of these Nigerian (otherwise known as indigenous companies) companies cut across the upstream, midstream and the downstream sectors of the industry. Furthermore, many of these companies have gradually gained prominence both in Nigeria and in the global oil and gas industry having demonstrated the requisite technical and commercial abilities to be competitive in the very lucrative but volatile global industry.
The NOGICD Act was enacted to further advance this objective. Six years after its enactment, the NOGICD Act is emerging as a major catalyst to a broader economic development in Nigeria through the enablement of economic activities, technical/technology transfer, value addition and job creation. The expectation among Nigerians is that through the NOGICD Act, Nigeria may finally be able to make its oil wealth to work for the benefit of Nigerians and for the development of her economy.
As a result, the NOGICD Act established specific targets and imposed duties and obligations on the regulators, the operators as well as other Indigenous companies pertaining to each stakeholder’s responsibilities vis-a-vis the intendment of the Act. Therefore, the specific obligations imposed on institutions and/or agencies of the Federal Government of Nigeria such as the Minister of Petroleum Resources, the Nigerian Content Development and Monitoring Board (the “Board” or “NCDMB”), and some private sector entities will be examined.
Obinna Dike
