NCDMB can’t advocate for 100% local content now – Wabote
-By Teddy Nwanunobi
A Milan-based company, Saipem, has been alleged to be sabotaging the Nigerian Local Content (NLC) Act in the construction of the $7 billion Nigerian Liquefied Natural Gas (NLNG) Train 7.
It was alleged that the Italian company, who in joint venture with Daewoo E&C Co. Ltd and Chiyoda Corporation (SCD JV), have been awarded by Nigeria LNG Limited the contracts for the Engineering, Procurement & Construction of the Nigeria LNG Train 7 Project to be executed at Bonny Island LNG complex for an overall value above 4 billion USD with Saipem’s share amounts to around 2.7 billion USD, does not intend to get major package items and major value for Nigerian vendors on the project.
“What I have seen developing here is that Saipem (does) not, by any means, wish Nigeria well, especially on the Train 7 Project. The approved vendors’ list and the local content plan (are) clear on materials.
“All non-cryogenic materials, such as; air coolers, gas compressors and associated materials, gas turbines, electric heat exchangers, flares, diesel generator, various classes of valves, metering system, cooling water chilling package and other related materials are to be imported 100 per cent by Nigerian vendors,” a source based in Milan alleged.
It could be recalled that the $7 billion Train 7 NLNG project was awarded to Saipem, Chiyoda and Daewoo Joint Venture (known as SCD JV) in December 2019.
Our source further said that Saipem was believed to have created a system in Milan, where they have split Nigerian 100 per cent scope of work for packages that are completely non-cryogenic.
“Packages like non-cryogenic valves, heat exchangers, pumps, air coolers and other packages which are 100 per cent non-cryogenic have already been broken down into lots 1 and 2.
“Examples: using Lot 1 for the OEM products with minor value package items for Nigerian vendor, and Lot 2 for direct Purchase Order (PO) from Milan office to OEM with major package items and major value, a 90:10 ratio – all with same OEM for same product line originally meant to be imported by a Nigerian vendor 100 per cent.
“This is why Nigerian companies can never ever grow, because (these) people are allowed to poke their fingers into Nigerians’ eyes, and call their bluffs,” the international gas value-chain and LNG expert further disclosed.
Our source urged the appropriate authority to act in the interest of the country and its citizens.
“I weep for Nigeria development in the midst of plenty. In fact, who is monitoring local content on the project. I worked in Brazil years back, and their local content model is unmatched…
“They (Saipem) must not be allowed to touch any non-cryogenic materials meant for Nigerian vendors.
“As I write, packages like non-cryogenic valves, heat exchangers, pumps, air coolers and other packages which are 100 per cent non-cryogenic (have) already been broken down into lots 1 and 2 as described above. Everything should be done to stop this rubbish, and save Nigeria and Nigerians from endless deprivation and poverty.
“I mean, how can a Nigerian company (that) is meant to quote for 100 per cent value be quoting less than 10 per cent of the whole package value? This is absolute wickedness, and must be stopped now. I don’t believe this is happening in today’s contemporary (oil and gas) industry,” the source added.
Efforts made by Valuechain to contact Saipem on the matter including through its official media channel media.relations@saipem.com, were not immediately successful.
But Stefano Cao, Saipem’s CEO, had in a May 13, 2020 statement from the company announcing Saipem’s award by the Nigeria LNG Limited the contracts for the Engineering, Procurement & Construction of the Train 7 Project, said the new project in Nigeria confirms the company’s ability to build solid relationships, qualifying Saipem as a global company.
“The investment decision by Nigeria LNG Limited, which includes several important energy companies, demonstrates that natural gas, in whose value chain Saipem has a recognized leadership, will be pivotal to the energy transition,” Cao added.
In what seemed like a response to the issue that was raised above, the Executing Secretary of the Nigerian Content Development and Monitoring Board (NCDMB), Simbi Wabote, said that NCDMB will not advocate for 100 per cent Nigerian content in the industry.
He explained what would happen, if the Board goes on to implement the Nigerian Content Law 100 per cent.
“We will have to stop oil production in Nigeria, develop non-existing capacity, and then start production again.
“Minimum Nigerian content levels for various industry activities were set in the schedule of the NOGICD Act. In several areas, like engineering, where we had 90 per cent target, we have surpassed the target, and we are doing 95 per cent, and even 100 per cent in some areas. In the low voltage electric cables production, we have also surpassed what the Act prescribed.
“Similarly, there are some areas where we have not met the set target. One of such areas is liquefied natural gas (LNG), which uses specialised and proprietary technology for something like the pressure vessels, and the funding is often tied to technology.
“However, I want to clarify that NCDMB is not advocating for 100 per cent Nigerian content in the oil and gas industry. If we are to implement the Nigerian Content Law 100 per cent, we will have to stop oil production in Nigeria, develop non-existing capacity, and then start production again.
“There are not enough dockyards in-country, where the hull of big vessels, such as the Egina FPSO, could have been fabricated from scratch. Ninety-five per cent of our construction in the oil industry is steel. Yet, we do not have a functional steel mill in Nigeria. The oil and gas industry depends on sectoral linkages, including the power sector to deliver, and some of those sectors are not well developed.
“More so, local content is a marathon race, and not a sprint. This is why we enforce the law with pragmatism,” Wabote explained.
Wabote, however, said that the industry needs big projects to bolster the economy.
“This industry needs big projects to keep the economy vibrant and create opportunities for services companies, generate employment and grow local capacities. In my recent meeting with the Managing Director of Total Exploration and Production Company, I challenged international oil companies to emulate Total E&P, which despite concerns in the oil and gas industry, had continued to invest in Nigeria. They need to show faith in Nigeria, in our oil and gas industry and the economy, because Nigeria is still attractive and rewarding for oil and gas investments,” he said.
It would be recalled that the international oil companies (IOCs) in Nigeria are being restrained from investing in the sector due to the non-passage of the Petroleum Industry Bill (PIB).
Their reluctance may not be unconnected with the fact that the PIB, which was initiated by the Olusegun Obasanjo administration, was yet to be passed for close to 20 years.
According to observers, the repeal, when passed into law, would be able to tackle investments from the sector.
Recently, Ovie Omo-Agege, the Deputy Senate President, stated that Nigeria has, so far, lost about $235 billion to the non-passage of PIB by successive administrations in the country.
Omo-Agege, who spoke at a one-day virtual national colloquium on the PIB organised by NewsGuru.com, also said that Nigeria has been losing $15 billion annually as a result of the delay in the passage of the PIB.
“Nigeria, with more significant reserves, has attracted very little investments. Whereas Egypt, Angola and Ghana, with about half of Nigeria’s reserves combined, have attracted more investments for new projects, because they offer more attractive deepwater fiscal terms to encourage investors,” he said.
Corroborating the Deputy Senate President’s position, Mr. Ndukaku Ohaeri, President of the Petroleum and Natural Gas Senior Staff Association of Nigeria, (PENGASSAN), said the non-passage of the Bill was denying the country lots of benefits that have accrued from the hydrocarbon industry.
“Nigeria has lost so much revenue that could have accrued to government coffers, as existing investments are stalled and potential investors are scared of coming,” he said.
He noted that many other countries that had started the same process of legislation for their oil and gas industries behind Nigeria, had completed the same, and are now savouring the taste of the exercise.
“We appeal to the government, especially the Technical Committee putting finishing touches to the new PIB, to ensure greater stakeholders’ engagements to improve on the final outcome of the Bill sent to the National Assembly for consideration and passage. The passage of this very important piece of legislation will give room for meaningful progress to be made in the oil and gas industry in particular, and Nigeria in general,” he added.