TheCable

Abdulrazaq Isa, chairman, Independent Petroleum Producers Group (IPPG), has called for the modification of local content policies to attract foreign investments.

He spoke at the ongoing 12th edition of the practical Nigerian content (PNC) forum, organised by the Nigerian Content Development and Monitoring Board (NCDMB), in Yenagao, Bayelsa state. 

Isa said the government’s effort in prioritising local content in the Nigerian oil and gas industry is paying dividends.

To fully reap the benefits of local content policy, he emphasised the need for sustained efforts to close regional capacity gaps.

Isa, who is also chairman of Waltersmith Petroman Oil Limited, said the agency must also address infrastructure inadequacy that arises from deficiency.

“While we proudly recognise the major role that the local content implementation has played in advancing our oil and gas sector, we must also be mindful to ensure that our local content policies are constantly evaluated to ensure that they are continually fit for purpose and not counterproductive by long term industry growth and cost targets,” he said. 

“Industry continues to face growing pressures to remain profitable and cost-efficient as it faces competition from other investment destinations.

“To this extent, I would like to encourage the NDCMB to review certain aspects of our regulations that may potentially work against the competitiveness of Nigeria’s oil and gas sector in the global marketplace.

“A case in point is the human capital development training requirements where industry participants are required to set aside 3 percent of projects costs, projects above $1 million to conduct local content training.”

While it is laudable, Isa said the industry’s initiative could be seen as a multiplication of levies, as all participants are already required to contribute a separate 1 percent of total costs as Nigerian Content Development Fund (NCDF) levy.

He said this will invariably lead to higher project costs, especially as the companies do not “benefit directly from those payment programs”.

‘LOCAL CONTENT REQUIREMENTS HAVE INCREASED COST OF PROJECT DELIVERY’

Isa said the process of complying with local content requirements has proven to significantly increase the overall cost of delivering projects in Nigeria.

“Again, this unintended outcome requires some detailed review in order to ensure that we’re not losing new investments to emerging investment destinations in the process of driving African content agenda,” he said. 

“Most critical, because of the strict local content requirements, we are gradually also seeing a reduction in the presence of leading international oil and gas service providers, many of whom are seriously reconsidering their presence in Nigeria. 

“Unfortunately, while we continue to prioritise local content development, we must recognise that these international players have a key role to play in ensuring technology transfer and knowledge sharing our local players can benefit from.

“You will agree with me that our local players still lack the requisite capacity to adequately support our deep offshore operations and other specialised operations.”

Therefore, Isa recommended the modification of some of the requirements to ensure that the industry remains globally competitive and sustainable.

This, he said, is in the light of the season of players seeking new investments into the sector.