Local Content saves Nigeria US$2bn on LNG Train 7

The pragmatic implementation of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act has saved Nigeria the sum of US$2bn in the Engineering Procurement and Construction (EPC) contract for Nigeria LNG Train 7 Project.

The Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB), Engr. Simbi Kesiye Wabote dropped the hint on Thursday at the 2020 Annual Capacity Building Workshop organised by the Board for the Judiciary.

The workshop was held via zoom and it drew over 117 participants, including Justices of the Supreme Court, Appeal Court, National Industrial Court, Federal High Court and external solicitors.

Wabote delivered the keynote address at the workshop and stated that contrary to wrong insinuations held in some quarters, ample evidence has proven that sustainable Local Content practice reduces the cost of oil and gas projects in addition to creating job opportunities and economic prosperity.

He gave example with the LNG Train 7 EPC bid, where Saipem Contracting Nigeria and its consortium won the contract with a much lower bid than its competitor, leveraging its commitment to Local Content and investments in Nigeria in the last 50 years.

He said: ”In the LNG Train 7 project contract which was recently concluded and awarded, the difference in price between Saipem that had established itself in Nigeria and the second lowest bidder that was coming from outside the country was US$2bn. That’s a huge sum of money that this country would have lost if not for the drive for the development of Local Content.

“The other consortium had no footprint in-country and it proposed to put extra US$2bn on the back of the project to develop local capacity to execute the project. This is evidence of cost savings associated with the development of Local Content.”

Admitting that developing Local Content and building capacity would always entail some costs at the beginning, the Executive Secretary insisted that such costs ultimately gets reduced overtime and creates much needed jobs and stability in the polity.

He also clarified that the focus of Nigerian Content implementation is not Nigerianization, rather it encourages domiciliation of capacities and promotion of foreign direct investments and home grown investments.

He assured that the NOGICD Act would always protect investments in-country, adding that companies that build capacities are given first right of refusal in industry projects. “The law is a protective instrument for businesses. There are cable manufacturers in Lagos. If there is any opportunity to supply cables to oil and gas companies in Nigeria, those companies have the right of first refusal.”

On the possibility of recording 100 percent Nigerian Content in the sector, the Local Content boss clarified that “the aspiration is neither possible nor desirable, especially for a developing country like Nigeria. You still need foreign direct investments. The industry is a very vast business, with high intensive technology. You still need to leave some space for foreign participation and investment to grow the industry. But you are going to see 70 percent. That is our aspiration, growing from five percent which was the level when Nigerian Content started.”

Speaking further, the Executive Secretary said Nigerian Content implementation led to the development of huge infrastructural and human capacities, which kept the operations of the oil and gas industry running smoothly at the height of COVID-19, notwithstanding the exit of most expatriates. ”Despite the impact of COVID-19 and expatriates leaving the country, Nigeria’s crude oil production never stopped. We still produced to the limit that were stipulated for us by OPEC. This confirms that Nigerian Content helped the oil and gas industry and ensured that we never felt the impact of COVID-19,” he said.

The Chief Justice of Nigeria, Hon Justice Ibrahim Tanko Muhammed delivered the opening remarks at the workshop, represented by Hon. Justice Olukayode Ariwoola JSC. He described the implementation of Local Content policies across the globe as an apparatus through which citizens of oil rich countries derive value from crude oil resources.

He also thanked the NCDMB for enhancing the capacity of the judiciary to dispense justice from an informed and contemporary position, particularly as it related to Local Content development and oil and gas operations.

Mrs. Rose Chukwuonwe, a Director of Periscope Consulting and former Coordinator Legal Services NCDMB set the background of the workshop. She indicated that one of the Board’s mandate as enshrined in the NOGICD Act, is to build in-country capacity and capabilities of key stakeholders and the legal sector is one of such important groups.

She noted that the workshop was expected to deepen the Justices’ understanding of the philosophy and objectives of the NOGICD Act, increase their understanding of the provisions of the Act and aid seamless implementation and enforcement of the Act.

The workshop was also expected to bridge the knowledge gap, create needed awareness of the workings of the Act and build the necessary synergy for effective implementation and enforcement of the NOGICD Act, she added.

In his comments, the Director of Legal Services, NCDMB, Barr. Mohammed Babangida Umar, stated that “no matter how good your law is, if you don’t have the support of the judiciary it becomes difficult to succeed.”

He assured that the Board would continue to build the capacity of the judiciary, especially the Justices, ”to enable them have a good understanding of the Local Content law, so that when matters around the Act come before them they will be in a good position to dispense Justice.”