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

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” .