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Vessel Owners Seek “Tenure Elongation” For Contracts, Reduced Interest Rates , e.t.c..SPONSORED COMMUNIQUE

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By Moses Aremu

A strategy meeting to discuss modalities for a vastly improved indigenous vessel utilization in Nigeria was held on Wednesday, February 20, 2013, at the Cedar Hall in the premises of Lonadek Consultants in Lagos.

The meeting was convened to come up with action items for ensuring that Nigerian vessel owners enjoy a right-of-first refusal in all future vessel contracts and that the existing contracting strategy is designed to favour Nigerian companies, with the country’s financing context taken into consideration.

Attendees included Emeka Ndu(C-I Leasing), Pere Nduku(Seabulk Offshore), Chibuike Ogwuibe(Century Bumi), Uwem Udoh(Coastland Energy), Bunmi Akomolede(Brone Survey), Adesola Osidipe(CNS Marine) Jide Sotande-Peters(Altitude Energy). Ibilola Amao(Lonadek)  moderated the proceedings.

A submission by the Nigerian Chamber of Shipping strategy group proffering “solutions for the increase of the competitive capacity of indigenous capacity of indigenous operators from the upstream sector of the maritime industry” was circulated to participants the day before.

The conversation, which turned out to be a real strategy and national development session, lasted  1 hour 55 minutes with the following recommendations:

All Category I & II vessels must be Nigerian and Nigerians must be given a right of first refusal for Category III vessels.

There is a need for a watchdog that would compel the IOC’s to treat Nigerian vessel owners as fairly as they treat foreign vessel owners.

Most contracts awarded by IOCs do not guarantee utilisation and can usually be cancelled within a short time frame, as low as 30 days. Minimum contract duration should be set at 5years with optimum utilization. Cancellation clause is unhealthy for Nigerian business capacity growth and should be removed. Indeed, the contract termination clause often inserted by IOCs using the services of Nigerian marine vessels should be cancelled.

Most Nigerian Banks currently grant loan at single digit of around 9%.This is rather high, and is too close to double digits. In other to achieve 4-6% interest rate from financial institutions, there is a need to engage and educate the bankers in particular on the nature of the marine/maritime business. A review of the contract lifecycle to five (5) years and above will also incentivise banks to reduce interest rates.

For effective administration of the Nigerian Content Support Fund(NCSF), only contributors and those with marine vessel related operations should have access to the funds. The NCSF should serve as collateral for operators when marine vessel owners are requesting for loans from banks Import duties charged on indigenous vessels should be reduced to 1% so as to enable them compete favourably with foreign vessels and also, enhance in-country growth and development. Temporary Import Permits should continue to be charged, but should be tied to the duration (i.e. within three, six, nine and twelve months respectively) of the contract of the foreign vessel in question.

Intervention by the Federal Government of Nigeria on the issuance of the Temporary Import Permit would be helpful. The call for a Nigerian body to categorise vessels as Brand New, Used and Old is not necessary for the time being. As the marine business is international in nature, applicable rules and classifications go beyond what may apply in Nigeria. Since there are international bodies that accredit and audit vessels, such responsibility falls to them. Such calls may be revisited when the country has developed significant in-country standards that would be acceptable by the international community.

The use of bonds to overcome high customs duty is highly recommended. The option however, needs to be investigated if it is a viable line of action e.g. insurance bonds and cash In order to protect indigenous operators, regulatory agencies such as the Nigerian Maritime Administration and Safety Agency (NIMASA) and the Nigerian Content Development Monitoring Board(NCDMB) need to be sensitized with regards to certain tendencies, by some IOCs, to impose Marine and Maritime Laws and Policies from their home countries on indigenous vessel operators. However, indigenous operators themselves should strive to attain certain level of certifications that are acceptable globally.

NIMASA  requires strengthening so that it has autonomy, utilizes highly skilled and vibrant surveyors and inspectors who can close out surveys in the shortest possible time. It should also have correspondent offices in international waters, and educate, enlighten and work closely with insurance companies.

Challenges are experienced during bidding and uploading stages of a contract, on the bidding portal. The process is still very manual and requires improvement. The NCDMB should publish a list of companies that have successfully registered on the portal as well as successful bidders once selected by operator(s).

The Nigerian Chamber of Shipping should be empowered to function as an authority that regulates Marine Contractors within the Oil and Gas industry, thus filling the yawning gap that is currently in place. However, “Industry Advisory Team (IAT)” or Subject Matter Experts (SMEs) should also be included in the Chamber, so as to bring to bear, the dynamics of the operation of Indigenous Marine Vessels, with focus on asset owners.

A Nigerian Content Development Monitoring Board(NCDMB) Liaison office needs to be established in Lagos for proximity, easy access and ease of administration.

All the participants at the event had a general consensus that we should all work towards achieving and maintaining international standards and that the OVID qualification was extremely useful.

Outside of these recommendations comes some contribution from Phillip Matthew, a marine consultant and CEO, PEM offshore. He notes that Nigeria should promote The International Marine Contractor’s Forum (IMCF)’s Common Marine Inspection Document (CMID) “which is skewed towards the requirements of captains and navigators and is a better at qualification/classification of vessels of below and above 500GRT”.
He argues that the Offshore Companies International Marine Forum (OCIMF)’s  Offshore
Vessel Inspection Database (OVID) , is skewed towards Marine Engineers and “does not recognise the difference between vessels  of 500GRT and above and as such places very unnecessary requirements on owners of smaller vessels and would result in an unnecessary financial burden on
Nigerian vessel owners” .

 


Egbe’s Party For Local Content, by Chris Paul Otaigbe

 

 

Weltek had the chairs and the tables set out as if it was preparing for a glistening bridal party.

On a recent Wednesday afternoon, at its premises in Port Harcourt, Nigeria’s main oil city, the engineering service firm had laid out seats for “important guests”  under three large canopies.  The setting looked surreal, if not incongruous, for a weekday. Ordinarily, this office facility would be busy with technicians and engineers working on heavy duty equipment to move out to a deep offshore facilityfor an Oil and Gas project.

What makes it more intriguing is that this homegrown Nigerian company is as busy as they come. It is currently engaged in Engineering, Procurement Installation and Construction(EPIC) of topsides facilities on the Floating Production Storage and Offloading(FPSO) vessel located on the Bonga Field, Nigeria’s flagship deepwater field.

Weltek is also designing, fabricating and installing wellhead safety control panels on the two wellsAroh-1 and Aroh- 2 on the onshore Aroh field operated by NPDC, an arm of thestate hydrocarbon company NNPC. The company is actively carrying out anupgrade of Flow station instrumentation and control from pneumatic to electronic using foundation field bus technology for five (5) Flow stations on three Shell operated fields: Cawthorne Channel, Awoba and Krakama fields in the east of Nigeria.

This is quite a bit on any company’s plate, let alone a Nigerian company’s.

So why is Weltek throwing a party on a workday?

It so happened that the projects outlined above were at the heart of the reasons why Weltek was entertaining guests. The company wanted to strutt its stuff. An explanation. If you were a Nigerian company carrying out engineering services, there’s a prevailing assumption that you could really just be a commissioned agent; that you didn’t really have the equipment; you don’t have quality staff to handle really technical stuff; that you were taking advantage of the new environment of local content advocacy, to grab for yourself a share of the pie.

Weltek belongs to a body, named Petroleum Technology Association of Nigeria(PETAN). Its founder and CEO, Pedro Egbe, used to be chairman of this association, which is determined to change that perception.

In short, that Wednesday afternoon’s social outing was a programme designed to stage an exhibition of some equipment, locally manufactured by this Nigerian company, or acquired and being used by staff of the company, to do Deep Offshore projects in Nigeria.

This event was to showcase Weltek, as an example of a PETAN member, who has grown technical capacity and works wholly as a technically honed Nigerian company.

Mr Egbe’s guests this afternoon, naturally includedEmekaEne, who is the incumbent Chairman of PETAN and, more pointedly,Ernest Nwakpa,  Executive Secretary(ES) of the Nigerian [R1]  Content Development and Monitoring Board (NCDMB) -The Facility Exhibition was to show and prove to Nwakpa and his team that a Nigerian indigenous company has the capability to stand shoulder to shoulder with any oil service company in any part of the world.

This point was emphasized in Egbe’s opening remarks as he recounted hisrelationship with the NCDMB Executive Secretary. “Ernest and I have been in thisfor a very long time trying to see how Nigerians can benefit by working from theresources that belong to them. The last attempt I remember was even in my village,we were the only Nigeriansin the group with  a lot of foreigners and we weretrying to convince them about how we as Nigerians can work with what we haveavailable to us – our local, natural resources.Then he wasn’t ExecutiveSecretary.”

Egbe, 60, has been in the forefront of pushing the Local Content issue in his over27 years in the Oil and Gas Industry. His passion to get more Nigerians toparticipate in the nation’s Oil and Gas Industry made him combine forces withcolleagues who share the same aspiration with him. “PETAN started on thepremise that we should not as a people, just work and when we die, have ourcompanies die as well. We wanted to work in a system where our governmentunderstood our problems, our dilemmas and ensured that our businesses could out-live us. That is why in 1990, we formed a corporate PETAN, and fought from thatyear till we were heard by the government. And today, I thank God we have theLocal Content issue addressed in our laws. This could not have become lawwithout drivers, people like Ernest and his team have tried to dedicate themselvesto the task and PETAN has not relented in ensuring that what we fought for,came to pass.

The exhibition showcased certain innovations and upgrades that were hitherto done outside the shores of Nigeria.

Some of the most challenging work that Weltek was doing was the flow station information technology systems upgrade in the Cawthorne Channel, Krakama and Awoba fields. “In the NCDMB Law”, Egbe explained to guests,“these areas are seen as things that could be achievedeventually, maybe in many years to come but we want to show today that such things could be achieved by Nigerians in this country”. He also claimed that “The SNEPCO BONGA North Topside project is the first grand field contract for a Nigerian deep off-shore field awarded to an indigenous company.”

Egbe, in the company of Weltek’s Executive Director Igweka Uche, led the guests to the various facilities in the company’s compound.

When they returned, the PETAN Chairman, EmekaEne, expressed his excitement to have witnessed the level of development he had just seen. “I don’t know how to say this,it’s a pleasure, and I mean this in the real sense of the word, to see progress, to acknowledge progress, to see the LocalContent drive become a reality. Executive Secretary, you can take back these words [to your board]:the LocalContent is working. It translates into know-how, technology, multiplying the value in the people’s skills, skills that can be applied over and over again in different scenarios. Every single time a milestone is breached, it becomes the stepping stone for the next milestone.Many people may say a thing is impossible but once it’s done, the limit of impossibility is stretched to the next level. More and more, translating value in our industry is becoming the key to growing local content and its impact. As the Weltek Chairman inferred, you don’t see the rest of the pyramid, what you see is the tip of the pyramid today. There are multiples of sub-contractors who worked on different components that fit into this whole system and this is the key. PETAN as an organization has brought together players in the oil industry that are interested in creating value and we see this as a very good example of what can be achieved at this level”.

Nwakpa, Nigeria’s Local Content czar, acknowledged what he called the patriotic zeal of those Nigerians who decided to own facilities that will add value to the Nigerian economy rather than playing agent to foreign companies in Nigeria must be appreciated. “That’s why people like Pedro, and the people that started PETANmust be recognized for their pioneering efforts.If we did not have a group that had already started practicing the Nigerian content, fighting for the Nigerian content, if we couldnot show what we had done with the policy, we would not have been able to convince the players to follow the policy of government. So, everything we are seeing today actually started from the efforts of PETAN, and we must give them kudos all the time. I remember in the early days, when we were drafting the Law and workingon the policy papers, PETAN had the likes of Pedro, Ugo Ralph Ekezie, and then the younger ones like Emeka [Ene]. The philosophy being discussed then wasdomiciliation, Don Pedro insisted that domiciliation would still allow foreigners to do the work, that it should be about indigenous entrepreneurship. We agreed that that was where we wereheaded but it had to be a gradual process”.

 


 [R1] Is it Nigeria or Nigerian Content….Board?

 


Ugandan Businessmen Call For Local Content

Ugandan private sector interest group, the Association for Uganda Oil and Gas Service Providers(AUOGS), has called on government to include opportunities for local firms in the Petroleum Bills tabled before Parliament.

The country’s legislative arm is debating two bills – Upstream (Exploration, Development and Production Bill 2012) and Mid-stream (Refining, Gas Processing and Conversion Transportation and Storage Bill 2012). The Upstream bill instructs Exploration and Production companies as well as their agents to give preference to goods and services produced or available in Uganda unless they are more expensive or of inferior quantity and quality to those that can be imported. The AUOGS however argues that the provision could be interpreted to the disadvantage of indigenous companies. “Who determines whether the services by local firms do not meet the international specifications?” the lobby group contends. “There should be an independent body to scrutinize whether dealers meet the required standards.”

The AUOGS asks the Natural Resources Committee  of the Parliament-which  has been gathering views from the public to include enough clarity in the law to ensure that local firms benefit from local content opportunities set aside for them.

“Government needs to be clear what a Ugandan company is”, AUOGS Chairperson Bob Kabonro told the committee, “is it one registered in Uganda or one owned entirely by indigenous Ugandans?”  He declared that “there has been lack of enabling laws on the provision of goods and services”.

Emmanuel Baluyi, the lobby group’s lead counsel, requested that laws should give preference to indigenous contractors, encourage joint ventures between indigenous companies and foreign companies and ensure uniform financial and legal accounting standards for ll international oil companies that operate in Uganda.

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