A catalyst for Nigerian capacity

Nigeria

Engr. Simbi Wabote, executive secretary of the Nigerian Content Development and Monitoring Board (NCDMB), talks to The Energy Year about how the Board is promoting local modular refining, gas penetration and manufacturing. The NCDMB promotes the development and utilisation of local content in Nigeria and oversees the implementation of local content legislation.

This interview is featured in The Energy Nigeria 2021.

What milestones does the NCDMB aim to achieve by 2027?
Our key goals are to drive the industry’s Nigerian content level to 70%, create 300,000 new jobs and attain in-country retention of USD 14 billion out of USD 20 billion in annual industry expenditure, with active participation of Nigerian companies upstream, midstream and downstream along the oil and gas value chain. All of this will be materialised by 2027. We have been working on these targets for the last 10 years.

To what extent has local content been an anchor of resilience during the pandemic?
When Covid-19 struck, it did not affect oil and gas production in Nigeria. Despite the fact that most expatriates left the country, locals were able to sustain production. However, the pandemic dealt a severe blow to the price of oil, and subsequently the demand for it dwindled as lockdowns materialised. Interestingly enough, our industry showcased an impressive level of resilience, evidenced in the FID on NLNG Train 7, along with the commissioning of other projects during this period. Local capacity managed to fill in the gap left by multinationals. Deliberate local content efforts in the Nigerian oil and gas sector have made it resilient.
In addition, Covid-19 has taught us that we can do much more when it comes to developing capability. It also showed us that we are lacking investment in R&D and new technology. The needs in this space are huge and for this reason we are focusing on R&D for manufacturing equipment, which will end up being cheaper for our oil and gas sector. The pandemic was an eye-opening experience that accentuated the importance of local content and shook the foundations of globalisation.

What key positions are local indigenous companies acquiring in the market?
Although it’s true that some IOCs have divested from oil and gas assets, Nigeria remains a very important and attractive hydrocarbon destination despite its numerous challenges. At the same time, we are witnessing a phenomenon where more and more local companies are gaining market share, thanks to the building up of capacity and capabilities.
What’s more, most of the IOCs are divesting assets because they believe that local companies have developed sufficient skills to produce crude oil on land and swamp areas. As of today, over 15% of the total production in the country comes from indigenous companies and we are going to see a lot more of this as IOCs will eventually drift towards deepwater offshore, where they have an edge with technological and financial strength.
Furthermore, the energy transition also comes into play, as seen in major multinationals shifting their rhetoric towards greener and cleaner forms of energy. To a greater or lesser extent, IOCs are trying to manoeuvre into the renewables game. Yet if fossil fuels remain attractive, it will be possible for local companies to progress and prosper.

What impact has the Nigerian Content Intervention (NCI) Fund targeted?
The NCI Fund is one of the most transparent funds managed in Nigeria. Instituted in 2017, the USD 350-million NCI Fund is managed by the Bank of Industry, which facilitates on-lending to qualified stakeholders in the Nigerian oil and gas industry. You see, one of the key factors when developing local capacity is having adequate funding, as without it local companies cannot flourish. This has been an issue in Nigeria because while in other countries local companies get negative interest rates, here they get double-digit ones, making it difficult to compete in the global arena. The NCI Fund provides the opportunity for indigenous firms to borrow money at single-digit interest rates.
The fund started with USD 200 million, which was all lent to indigenous companies striving for capacity development. As of May 2020, around 94% of the NCI Fund had been disbursed to 27 beneficiaries. Additionally, the NCDMB has received new applications from 100 companies for nearly triple the size of the original fund. Given this appetite, we increased it to USD 350 million. Within that is a special fund of USD 20 million dedicated to encouraging women’s participation in the oil and gas sector; gender parity is something we take seriously. Another USD 30 million was deployed as working capital and capacity-building facility for PETAN [Petroleum Technology Association of Nigeria] member companies.
The NCI Fund has five key products: manufacturing, asset acquisition, contract financing, loan refinancing and community contractor financing. The Women in Oil and Gas Intervention Fund was added after the pandemic struck as another element of capacity building. It has been very successful and all those who borrowed money have begun paying it back in line with their agreement. In addition, in April 2020 as part of the NCDMB’s response to mitigate the economic impact of the pandemic, our Governing Council approved a reduction of the interest rate from 8% to 6% per annum for all loan products.

What is the rationale and importance behind Project 100?
Project 100 is an initiative of the Ministry of Petroleum Resources alongside the NCDMB to holistically support 100 wholly indigenous small-scale oil and gas companies and bring them to the next level. The aim is to enhance their capacities, support them financially through the NCI Fund and help them find opportunities in the industry, in collaboration with NNPC and its subsidiary NAPIMS [National Petroleum Investment Management Services]. Let us take the example of Korea with Samsung or Daewoo: These started as small companies that were supported by the government, and now they are global conglomerates. We aim to do something similar.
The goal of the project is to push 100 companies the extra mile to create a big impact, not only in the industry but also in the nation’s GDP – creating jobs, enhancing industrialisation, increasing the retention of industry spending and substituting imports. Even turning five of the 100 into large players would be a success. That is the philosophy.
The Board started Project 100 in January 2019, appointing 60 companies, and in February 2021 the second phase concluded with a new batch of 40 newly selected beneficiaries out of 609 applications. It has been a huge success.

What is the NCDMB’s contribution to domestic modular refining?
The NCDMB is a regulatory agency, but we are also entrusted with building Nigerian capacity. Our vision is to catalyse the industrialisation of Nigeria through the oil and gas sector. To do that, we focus on government initiatives. For instance, the country has struggled to establish modular refineries, so we felt we needed to prove that the modular-refinery phenomenon is viable. Consequently, we are working on four modular refineries as equity investors: Waltersmith, Atlantic, Azikel and Duport.
As for Waltersmith, we are involved as an equity investor with the rationale that once they are stable, they will have the right to buy us out. The facility was commissioned in December 2020 with a capacity of 5,000 bpd. Likewise, we are equity investors in the Duport refinery, which is expected to be commissioned later this year with a capacity of 2,500 bpd. We are also planning the commissioning of the Atlantic refinery next year, and the Azikel refinery we expect will come on stream in early 2023.

How is the NCDMB encouraging gas penetration?
The potential of natural gas in Nigeria goes without saying. With 203 tcf [5.75 tcm] of gas reserves, this resource is bound to become the cornerstone of the country’s energy transition. What’s more, the Ministry of Petroleum Resources recently declared that Nigeria had entered the “decade of gas” and we are now focused on how we can catalyse that. To this end, we are deeply involved in LPG and CNG penetration across the nation, building LPG and manufacturing plants to ensure the utilisation of gas. This is seen, for example, in our support of Rungas’ 400,000-unit-per-year LPG composite cylinder manufacturing plant in Bayelsa State. We want to get the momentum going, and once it is stable, we will pull back and look at other government pronouncements we need to reinforce. In any case, the NCDMB will play heavily in the gas sector going forward, and we have several projects under NDAs. We are looking at opportunities in the gas value chain to see how we can uphold it.

What is the NCDMB’s role in promoting manufacturing?
We are looking at how to incubate manufacturing, as this is a challenging space in Nigeria. We are building industrial parks: one in Bayelsa, another in Odukpani, near Calabar in Cross River State, and Ikwe, Onna in Akwa Ibom State. By delving into these ventures, we expect to create an environment that reduces costs and increases manufacturing beyond the oil and gas sector. On this note, we hope we will be able to commission one or two of the industrial parks by 2022, guaranteeing a power supply and services for these parks where we want to attract local and international companies. The bottom line of modular refining, gas penetration and industrial parks is creating jobs and spurring economic development.

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