Fawibe: NCDMB Should Give Priority to Local Firms in NCDF Utilisation

Last month made it 11 years that the Nigerian Oil and Gas industry Content Development (NOGICD) Act was enacted and without doubt, the past 11 years had been a mixed bag. One major player in the local content orbit of the nation’s oil and gas industry, who knows of every corner of the NOGICD room, is Dr. Diran Fawibe, Chairman/Chief Executive Officer, International Energy Services Limited (IESL). A pioneer staff of the Nigerian National Petroleum Corporation (NNPC), Fawibe is one of the early founding fathers of Nigeria’s national oil company. As one of the few, who erected the fundamentals that hold the architecture and superstructure, that is today’s NNPC, Fawibe, who looms large in the local content arena of the oil and gas community, says there are some areas of interventions that deserve more attention; especially concerning access to support fund by the indigenous oil services companies. With over five decades of active service to the industry, Fawibe is a doyen of the hydrocarbon industry, not only in Nigeria, but in the global community; so his views are taken seriously in the industry. Kunle Aderinokun and Chris Paul engage this quiet, but noble encyclopedia and roadmap of Africa’s largest oil producer on issues concerning the state of play in the controversy-ridden industry. He is blunt in saying the bitter truth, but appreciative of progress made thus far. Excerpts:

What is your take on the impact of the COVID-19 pandemic on the Nigeria’s oil and gas industry?

It is easy to state that the Nigeria Oil and Gas industry has been very much affected by COVID-19. But the problem of the industry started before the pandemic; and it is anchored on one single factor; the PIB. The Petroleum Industry Bill is a critical factor in the development of the industry. Through this piece of legislation, solutions to the industry crisis can be tackled effectively.

Various stakeholders have said severally that a situation where uncertainty is permeating the atmosphere, it will be difficult for investments to flow into the industry.

For many years now, we have lost the opportunity to put the industry, particularly the upstream on a sound footing; whereby investments will be made. Nigeria is reputed to have lots of reserve particularly in the deep water terrain.

Nigerian indigenous companies are trying but they don’t have the financial wherewithal, the resources and even the technology to be able to exploit the resources in the deep water space. So, the IOCs that have the technology and the deep pockets, who can invest in and develop the assets therein have complained time without number about the absence of the legislation governing the industry; particularly the fiscal regime.

We have some issues in the system that have made them complain that Nigeria has been shortchanged in the income distribution especially; as it relates to the industry. But I don’t know whether they have actually done the country much good.

Because if you look at what has happened over the last 10 years, with the loads of Investments that have left Nigeria… some of the IOCs have even divested and taken the money to other countries. This has not helped us as a country.

We have heard so many promises and assurances that the bill will be passed into law. Now that the global attention to oil is shifting to renewable, I fear we may find ourselves in a dilemma as the appetite for oil is no longer as strong as it used to be.

Some of the IOCs are now putting some of their money in the development of renewable energy.
Another problem that predates COVID is the price. Since 1973 when we had the first energy crisis, the price of oil has never been stable.

If you look round now, you will find that most of the IOCs are practically doing nothing. As a matter of fact, most of the indigenous companies are doing far better when it comes to activities. I don’t want to single out firms but check out the American companies; how much are they doing? When you visit their offices now, they are like ghost towns.

Save for Shell that is working on the Bonga South-west etc, their counterparts are not doing as much. Total is trying. We did a roadshow with some of the companies with my partners from France, shortly before the COVID.

We visited practically all the IOCs: Shell, Chevron, ExxonMobil, Total and so on. And they all told us, point blank, that they are not doing much because of the constraints they have; among which, are the fiscal regime operating in Nigeria and the impact of a PIB that does not give them certainty.

To make matters worse, the Nigerian government accused them of stealing $62 billion.

Many of us criticised the government for making such a claim because if you had an agreement with a company under a memorandum of understanding (MoU) that when the price of crude oil reaches a particular level, you will reach an arrangement. But when the price exceeded that threshold, you went to beg.

Now, because you are hard-up cash-wise, you now ask to return to the previous arrangement. It doesn’t make any sense. And I am not surprised that nothing came out of it. But that probably damaged the relationship.

If you have a partner that has been working with you for upward of 50 years… It’s like a marriage.

A marriage you contracted over 50 years ago and only for you to come now and say, your wife or husband is a thief; calling him or her names openly… How do you expect such a spouse to feel?

So, instead of appointing a consultant to look into the issue and have a serious dialogue to iron out the differences, Nigerian government resorted to shouting on the rooftops.
Any company that has pride will say, it’s time to go home.

But the companies will tell you that ‘ oh , we just want to concentrate on our deep offshore or we are adjusting our portfolio… but indeed, they are divesting and taking the money elsewhere.

And that is what is happening. So, I believe that COVID is a marginal fraction of the issues plaguing the industry.

There are projects that should be going on that have been placed on hold because the expatriates of the companies are staying back home due to the COVID.

But I also know that many work from home.

You inferred that the indigenous companies performed better than the IOCs. How do you mean?
Let’s put it this way; in terms of the scale of operations, the IOCs are doing better because the indigenous companies are faring much lower. But the most active indigenous company so far in terms of activities is Seplat. And they are doing very well especially regarding gas development.

Then we have some other companies such as Aiteo, Platform among others that are also doing well in their operations; and when you look at it, it would seem the impact of the COVID did not affect them. This is because they recognise that they have to maintain a certain level of operations; otherwise they are out.

The IOCs, too, are still operating; but elsewhere. For instance, ExxonMobil is putting a lot of investments in East Africa. Or, in Ghana where they are developing huge gas reserves.
Although, the finances of these companies are not looking too good at this time. But to my mind, the company that is on the verge of doing something big in the country, today, is Shell.
It is succeeding in renewing its lease on the Bonga South-west and it is looking like work may resume later this year. When you are bringing a project of $8-$10 billion into an economy, it makes a significant statement about the company and the economy.

Back in 2012, Shell had a 10-year plan to partner with the Petroleum Technology Association of Nigeria (PETAN) for the implementation of certain upstream projects as its commitment to the development of local content in the country. What’s the progress on that front now?

Developing local content objectives depends on availability of projects on the IOCs’ table.

For instance, this will be about the third or the fourth time the project will be coming into the market.

In 2015, the project was to go into operation; but in 2016, the industry got the shocking announcement that the project has been put off or postponed. So, local content development with such a company cannot be advanced in a vacuum.

It has to be on the basis of a project that they can ride on.

Some time ago, and I believe they still do, Shell had an internship programme, whereby PETAN members are asked to submit names of young engineers. These young industry operatives are then engaged for as long as one year; and they can be as many as 20 young engineers distributed across the oil companies. Shell takes responsibility for paying the salaries of the trainees for the period.

After the training, the beneficiary companies are encouraged to keep them. We have quite a number of them here, in our company. Some of them are reported to be performing very well.
So, this is part of the effort being employed by Shell to develop the local content in the country.

I am using this to illustrate my point about the contribution of IOCs to developing indigenous oil companies in the country; when it comes to manpower development.

The Nigerian Content Development Board has been more proactive when it comes to taken local content to higher heights. But we could have done much more. All these efforts would have been more visible and more impactful, if the industry had been busier. I recall, when we were doing some projects for Chevron, we took in as many as 30 people. Take Egina FPSO; the three companies IESL, NETCO and Delta Afrique, we took 33 engineers under that project. So, these are among the things that happen in the industry.

When we did the Akpo, Ofon Projects, they approved budget for training Nigerian Engineers.
In the arrangement with the IOCs, they have to set aside a budget for developing Nigerian engineers. On the back of this, many services companies tend to put up facilities for the fabrication of all manners of projects.

Therefore, if the industry is not busy, obviously there won’t be much local content to develop.

Are you happy with the state of the local content policy 11 years after?

I would say relatively so. I have mentioned the underlying problems. I would also let you know that the NCDMB is progressively proactive in trying to develop local capacity, particularly manpower. And we are doing far better today, than we did 10 years ago.

We can point to so many things that Nigerian companies are doing today that they could not do 10 years ago.

We were able to get here because the NCDMB was doing a great job of going everywhere; sensitising the industry and ensuring that those things that could not be achieved before in the industry are accomplished easily today.

The one reservation I have, however, is the fact that I wish the NCDMB would give greater priority to the needs of the local content companies in the area of the utilisation of the Nigerian Content Development Fund.

Some PETAN members are finding it difficult to access the fund. Although, the agency is using the fund to support other areas, but this is an issue of concern that I would like them to give some attention.

But the NCDMB is complaining about inadequate compliance to the fund among other provisions in the Nigerian Content Act. This is one of the reasons why there are moves to enact a law amending the bill to enhance enforcement among others…

I have no objection to that. The law is the law. We know that why the country has found herself in this state is because laws are made; but when it comes to enforcement, it is a different ball game entirely.

If a law has been made, there should be compliance and there should be appropriate sanctions to those who violate its provisions. In other words, if any company is not complying, such an entity should be sanctioned.

And I believe, to some extent, NCDMB has imposed sanctions on erring firms in some instances.

Let me give you an example… By the provision of the law, companies seeking expatriate quota must get approval from the NCDMB before forwarding their request to the Interior Ministry.

As it happens, some companies will go to Immigration and get expatriate quota, NCDMB ensures it checks this and sanction defaulting companies. My company is one of the firms that have been sanctioned in this regard. It is not that we deliberately breached the law because we got these approval before the law was put in place. But as they say, ignorance of the law is not an excuse; and so, we were penalised.

It didn’t matter whether I have been in the industry, actively, for over 50 years or not. My pedigree in the industry as a pioneer staff of the NNPC was not enough to earn me a reprieve from the law.

This is because the provision of the law must be complied with; no matter whose ox is gored. That is the law for you and we all must adhere to its tenets regardless of who we are or our background.

So, we are bearing the sanctions in good faith; because it is being applied judiciously; and I commend the NCDMB for the great job it is doing.

So, if there are areas where companies are not obeying some of its provisions, they should put out a law to seek enforcement.

As one who is grounded in global interactions, policies and politics of the business, what is the state of play today?

The crude oil market is in a state of flux today. There was a time when the 13 members of OPEC were at the helm of affairs as a bloc in the international oil market. Each time they want to meet, the various oil-consuming countries would be panicking; worried about what OPEC’s resolutions would be. But that was the era when OPEC held sway.

OPEC is no longer in such a commanding position now. And it was foreseen when other countries began developing their own assets.

There was also conservation in other countries. Today, you will be hearing of OPEC Plus- that is, OPEC and other countries such as Russia, Kazakhstan. Although, the fold of the organisation has increased; because countries that were not members before that have joined. Angola, Equitorial Guinea, for example, Mexico were not members of OPEC before; and the body was doing its own thing. But now, it cannot do things alone any more.

You will recall that the conflict between Russia and Saudi Arabia began the plummeting of the price of oil last year. Classified as price war, the price of crude oil went down to as low as $30 per barrel.

In the past, that would never have happened; because OPEC was at the commanding height of the market.

So much is happening now such that the level of demand for oil is not on the straight line it used to be. And that is the trajectory that will continue into the future; especially with the renewable energy development that is now gaining prominence in the world energy market and energy mix.

At a point, Nigeria was producing 2.2, 2.3 million barrels daily; there was a time (for a short period), Nigeria was producing 2.4 million barrels per day. But today, Nigeria is producing about 1.6 million barrels per day. It means the oil market is no longer as it used to be.

For Nigeria to meet her financial needs, we used to believe Nigeria must produce 2.2 million barrels daily.

But in a situation where we are forced to produce a little over 1.4 million barrels per day (because there are some months that we have been on that production slope), it doesn’t give the fiscal body of the economy any comfort. Currently, we are producing 1.6 million barrels per day; which is now trying to make up for the shortfall in the past. That illustrates where we are as far as the oil market is concerned.

COVID has caused a lot of problems for the oil-producing countries; because activities in some countries like China, India, and so on got reduced. But now COVID is receding and if things get better in India there may be a substantial reprieve for the industry. Things have picked up in China and that’s why the market is gaining some traction.

Even in Europe and America, things have not reached their peak. When activities return to their pre-COVID-19 levels, there will be higher demand for oil. And the price will go up again.

Unfortunately, the price of crude oil cannot be sustained over a long period of time.
Don’t forget, also, that the Shale Oil in the US is another threat to OPEC.
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