Dwindling Number of Projects Can Undermine Local Content Boost - Africa’s premier report on the oil, gas and energy landscape.

Dwindling Number of Projects Can Undermine Local Content Boost

SIMBI KESIYE WABOTE has invested in a range of midstream hydrocarbon projects since he took charge as the Executive Secretary (ES) of the Nigerian Content Development Monitoring Board (NCDMB) in 2016. He has run with the idea of Nigerian Oil &Gas Parks (NOGAPS), and constructed a 10-year roadmap for nearly tripling the Nigerian local content input (from 26% to 70%). But even he admits that it is “so far, still far”.  In the first of a two-part interview for Africa Oil+Gas Report’s C-SUITE SERIES, he discusses the headwinds, the enablers, and the big wins of his six years in office. Excerpts:

AOGR: You took charge of the NCDMB in the sixth year of the passage of the Nigerian Content Act. Coming from a part of the industry that was perceived as the object of the act, what was the one thing on your mind that you thought had to be addressed in the first, say 30 days?

“Summit Oil will supply crude to Duport Refinery in Edo State…Shell will provide feedstock to Azikel Refinery in Bayelsa”

Simbi Wabote, ES NCDMB: At Shell, where I served for almost 26 years, I had the responsibility to manage local content locally and also eventually, internationally because local content at some point, became a global phenomenon. If you remember the Arab spring in North Africa, started by youths who wanted jobs created. They were protesting Globalization which, allegedly, provided a context in which their jobs were disappearing to China and sent to other Asian countries. Thousands of youths were being trained but there was nowhere for them to go and stuff like that. So Shell asked me , ‘hey we need you to design a global Local Content strategy for us because everywhere we operated, we faced the same problem. Be it in the US, be it in the Middle East, be in Europe, they were facing the same problem which was a reaction to the so-called globalization then.

Here in Nigeria, the population was growing geometrically and people are out of jobs. There are no opportunities for them. I have that passion to say what can we do to change the narrative? I am a patriotic citizen and as such, I should be able to drive it even if I was coming from the IOCs. For the first 30 days or a hundred days, what I needed to establish was (a) to assert myself for people to know that I believe in the course of local content development and (b) is to build the capacity of my staff in the sense that, when I was on the other side, I knew the way government institutions are perceived and looked at in terms of competencies and in terms of ability to match them. I had to make sure that their competencies were developed and I had to make sure that the industry knew that this is a Nigerian that is occupying this seat.

Given the kind of training we had in Shell which essentially is that you must stand for the truth, you must be objective and you must make the right decisions. I didn’t see how that could change me when I took on the position.

What drove the decision that by 2027, you could increase industry spend retained in the country from 26% in 2017, to 70% by 2027. As at today, that’s about five years ago. What needs to happen urgently for you to deliver on the targets fully considering the nature and challenges of the industry?

The first thing I did was ask where was Local Content at the time I took over in 2016, because the ACT was enacted in 2010 and as then, they had the operated for almost seven years before I came on board. I needed to ask myself how they Had fared in terms of the aspirations of the authors of the ACT itself? I bought in KPMG as a consultant to determine where we were in terms of implementation of the ACT. Then together we looked at the capacity in country and established where we were as at 2016 and I then said look, in 10 years’ time, I want us to get to 70% irrespective of where we find ourselves. It is an aspirational target on how we most drive things to get to that 70%. It’s very aspirational but I felt it is doable given the building blocks to attaining that 70%. We had to go through a gamut of workshops to say okay, if you want to attain 70%, what are the things you need to do to get there? We broke things down into five strategic pillars of the things we needed to do and then created some enablers that will enable it happen and of course. Now we have five years to go. But again, like you said, attaining that had a lot of conditions precedence. It wasn’t lost on us. We knew it and we lined up those conditions precedence and then created the enablers to support it.

Of course, one of the greatest factors to get there is the number of projects that we see through and within the system in terms of activities; we took a benchmark where the activities were, we looked at the portfolio of opportunities within a couple of years’ time and factored if those opportunities would be realized, then for sure, we’re going to get there.

We looked at the pitfalls, we looked at the risks associated with it and everything and then we created that roadmap to attaining that 70%. Like every roadmap, you will face challenges as you progress. We see those headwinds, we’re able to address them and we are able to use all the tools we have because part of it is that project must come through.

Out of that desire to attain our milestone targets, we had to work very hard with the minister of State for Petroleum Resources to ensure that the NLNG Train-7 project was sanctioned even in the midst of the COVID-19 because, those are things that will enable that 70% as it were. We looked at other projects in the funnel to say how do we bring them alive? You talk about the Ikike project, which of course saw First-Oil, you saw the active participation of Nigerians there. We looked at the Bonga Southwest, we had thought it would come on stream, but somewhere along the line, it was thrown into the lawn grass again, and then we looked at so many other projects. One of the factors we saw in trying to develop the strategy was the uncertainty in the industry which was instituted by the Petroleum Industry Bill that remained there and our aspiration and desire was to drive and work with all stakeholders to see that that bill became an ACT which of course was achieved. The expectation was that once you clear most of those uncertainties, projects will come. Yes, since it was passed, we can see some bit of inertia within the companies to start to move. But of course, we also faced with the challenge of COVID which hit us and then currently, of course, we are in the election season and most businesses would want to see that that is over before they invest. We still believe that we will attain the 70% because today in Africa and in the world, everybody looks up to Nigeria in terms of what we’ve been able to achieve and pull through in the Local Content arena. We keep pushing and driving that agenda.

One of the things that leap at us when we look at this your growth plan is: “Build effective internal structures in terms of people, skills, processes and systems to support the Board’s operations”. Seven years down the line, do you think you have nailed that down?

Today, the NCDMB is seen as the number one MDA by the Ease of Doing Business assessments. We came from almost 27 to become number one.

And this is as a result of the people. We’ve invested heavily in capacity building of our staff and I’m sure that if you have interaction with them, you will see that we have built their capacity. A lot of our staff feel proud putting on the NCDMB barge and we see that even when we serve in committees with other MDAs. We stand out as NCDMB.. The Ease of Doing Business (a unit in the Presidency) assesses the processes that you have established; how functional they are, how transparent they are. All those were put into a basket. So having attained the number one position, there is no other measure I want to use to test that equally because this was independently done within the office of the Vice President of the Federation; they gave us that rating as the number one agency in terms of ease of doing business and it’s about people processes and the institution itself. I could tell you with all certainty that I don’t know what else is there after number one and that’s what we have achieved.

You don’t want to say that’s number one in Nigeria but it could be a global thing?

What do you mean, comparing globally?

Yes; exactly.

NCDMB is sought after by most African countries that have discovered hydrocarbon. I was in Ghana to deliver the keynote address

“The Africa Energy Fund was an Idea of the NCDMB. We started that advocacy then the idea was taken from us under permission by APPO, the African Oil Producers Association. They had to come to us and say, ‘let’s take this idea and let’s midwife it further’.”

at their Local Content workshop. Every time, every day, you have most of the countries calm down to Nigeria to rob minds with us for us to take them on the path we went through to achieve this objective. It’s not a local accomplishment. Like you are aware, I think one of the local magazines or so also give an award to me as the African Local Content Icon. So it’s to tell you that it’s not a local achievement. Yeah.

One of your concerns, when you took charge, was the dwindling size and value of projects. You said, at the 2017 NOG conference, that domiciliation can only be robust when the (upstream) projects are there. Since then, investment has dwindled and the number of projects have reduced. Are you particularly worried?

Not particularly, but I am very concerned. There are so many factors that you could attribute to that and one of them I have addressed. A key headwind we are now facing again is the climate change issue, which is the raging argument against most of the hydrocarbon related projects. How do we respond to the narrative that highlights fossil fuel as the demon and which threaten to dry up funds that are coming to Africa especially now that every country on the continent is now an oil producing country. These international companies and funders would withdraw funds. What do we do? Let us create the African Energy Fund (AEF) and so we started that advocacy in NCDMB and then the idea was taken from us under permission by APPO, the African Oil Producers Association. They had to come to us and say, ‘let’s take this idea and let’s midwife it further’. I believe that if we don’t do that, there’ll come a time when those investments will no longer come. So we are advocating. When COP-26 happened in Glasgow, the entire fossil fuel was put on the table including gas as part of what will not be pursued. But today, thankfully, gas has been taken out of that and made also green energy as it were. That also helped by the regional conflict between Russia and Ukraine where people now saw the energy challenge because the oil and gas business is not something you can switch off and on.

To develop a field takes you almost four- five years and people have seen that Investments have declined with regards to looking for new finds and the rest of it and the world is heading towards an energy crisis. We keep pushing; we see those hand winds, but we try and say, from our own standpoint, what can we do as NCDMB to support that process?

The NCDMB under you has part funded several midstream projects. Our interpretation is that you want to industrialise the country NOW NOW NOW. It means that you are in a haste but critics may say: why not let this be organic, why are you kind of rushing this?

People who will talk about me rushing it are probably not in this business and they probably don’t understand it. There’s no rush associated with wanting to support the growth of the midstream. If there is anything at all, these are things we should have done like yesterday. As an example, you produced almost 2Million barrels of crude oil every day before but now we are struggling with 1Million barrels of oil which we don’t add any value to. You sell all your crude and you import refined products. I mean, how can you explain that? If you are not in a hurry, what else will you be? You look at your gas and you pride yourself that you have almost 206Trillion cubic feet of gas yet, there is no gas available to run your power plants in the country. And 60% of Nigerians perhaps, don’t have access to electricity. What else will spur you on to be in a hurry, is it when Armageddon comes that you will been a hurry? All we are trying to do is catch up because the world is moving on. Today, with an abundant of hydrocarbon beneath our feet, we are still struggling; the world is thinking of other forms of energy. When are we going to get there if we don’t quickly get to do what we have to do in order to bring Nigeria to where it’s supposed to be?

Some people look at what you’re doing and try to make comparison with other projects that are already in the pipeline or under construction. So they look at Nigeria Oil and Gas Parks (NOGAPS) initiative and they say, that looks like the Gas Master Plan that didn’t happen. Is it now going to happen just because NCDMB is driving it?  Yet some would say that NOGAPS is competing with the Ibigwe Industrial Park and the Utorogu Industrial Park. Why are you competing with all these private resources?

I think if I take it from this perspective, Nigeria is not an industrialized Nation. Manufacturing capacity is extremely low in the country and for us, we want to be seen as acting like a catalyst for the industrialization of this country. We’re not in the forefront. We don’t have enough resources to be in the forefront of it. But, let us do good examples that people can see and say it is doable. That’s where we come in. For instance, when we decided to work with Waltersmith to build a modular refinery, a 5,000 barrels per day modular finery, we wanted to catalyze it and we wanted to prove it that it is doable.  Today, the Waltersmith refinery in Ibigwe is running non-stop; they don’t even have a product storage in their tank because as they produce it is taken away. What we didn’t want to be as NCDMB is to talk about things without showing people that it is doable. That’s where we don’t want to be. We don’t want to keep talking about establishing manufacturing base and we are not showing people that it is doable. That’s why you see us in those Industrial Parks. Our industrial park is just a mini 25 hectares industrial park, but we want to show people that if you put your heart to it, it can be done. If you go to Odukpani today, we’re almost there to commission the industrial park, if you go to Yenagoa, as a matter of fact, in all the flooding that happened in Yenagoa, our Industrial Park was not flooded including our head office because it was taught of about properly and it was constructed properly. We do what we say. We don’t want to be the preacher who tells people to do something but turns around and says look, do what I say not as I do. Ours is to say do what we say and as we do. That’s what we are trying to proveWhen we started working with Waltersmith to start the modular Refinery, it wasn’t what was thought about but we did it and within a record time of 18 months. We got the refinery running. It’s one of those good examples that you can think of and we try to touch other areas; also in the gas business today, almost 70% of our partnership, our investments, are in the gas area. Be it storage facilities for LPG, be it SPC Distribution Network to ten northern states of the Federation. We have no capacity to muscle out anybody, but we have capacity to show people that it is doable.

The Board (NCDMB) recently reported it had secured the approval of its Governing Council for a partnership to produce 123,000 metric tonnes per annum LPG, which is about 10 percent of current demand nationwide, from the Utorogu Gas Plant, in Warri, Delta State. That would mean a partnership between that company on one hand and NPDC and ND-Western, joint operators of the Oil Mining Lease (OML) 34, where the Utorogu field is located. But the feelers from the industry is that this same company approached Seplat for the same thing and the deal broke down because they didn’t even show up to build anything, let alone receive the gas. After the Seplat challenge, which Seplat sources say, smacks of PGID, the sense we get from NPDC is the same sense of frustration with this same company. Are you sure of them?

Southfield Petroleum?

Yes.

Southfield Petroleum is a company we are partnering with in order to produce LPG within the Utorogu field. Currently the company is in discussion with Utorogu gas plant, which is a joint venture between ND-Western and NPDC. First, before the project will go ahead, they will be sure that there is a gas availability and then that commitment has to be on the table because currently where we are at now is the feed development for the project itself; but before we will beat our chest that we have secured that project is to ensure that all the i’s are dotted and the t’s are crossed. It’s within the project development funnel and one thing we must understand about investments in general today is that, if you go and speak to Elon Musk and ask him about how many businesses did he invest in and he didn’t succeed, he will probably give you a catalog of what he tried and he didn’t succeed at but with the ones he succeeded at, he is where he is today. Talk to Bill Gates, talk to Zuckerberg, nobody can tell you that every Investments they’ve been into was a success and that’s the challenge we have in Africa.

The averse appetite for risk-taking is even in us as a people, let alone talking about investment. Take our sense of adventure: some adventures that you see the Caucasians engaging in, you just have to think and ask yourself: How many Africans will want to go and climb Kilimanjaro? How many Africans will want to enter the sea and swim with a shark or with a Whale? These are risks that people take in order to understand nature and these are serious risks. But send an African, particularly in Nigerian man, he will hardly want to take any risks as it were. So with Investments globally, you must continue to push the boundaries and some of them will succeed while some of them will not succeed. But if you want to wait for everything you get involved in to succeed, you’re not going to go anywhere as a person or as a country.

So that -Utorogu-is a good project and it is still work in progress. We’re still pushing and believing that it will come to fruition as quickly as possible.

The NCDMB has succeeded in helping to deliver one modular refinery that has been working now for the past two years. It has also invested in two others, but refineries that are not built on producing fields always have challenges of feedstock supply. What’s the guarantee that these refineries will not be sitting idle?

“We looked at the Bonga Southwest, we had thought it would come on stream, but somewhere along the line, it was thrown into the lawn grass again, and then we looked at so many other projects.”

One of the things we look at in our Investment Portfolio is particularly this risk you have identified because we know that there are some companies that invested in refineries that are not close to producing assets and they’re having some bit of challenges or the people involved are not holders of marginal fields or acreages; those risk are there. But when you look at refineries globally, some of the very big ones are not close to any field or assets. They still procure the crude and they refine and then they sell. Dangote refinery in Lagos is not close to any field. He didn’t own a field when he started the refinery, probably does now, but when he started the refinery project, he didn’t have an asset. He built it on the export mindset. If you go there and you see the intake and outlet, you will know that it is an export mindset. But most of the ones we got involved in are close to producing assets. For instance, the Duport Refinery in Edo State is just about 200 metres from Summit’s oil field and Summit is also a partner in the Duport Midstream. Azikel Refinery that we are involved in is just about 200 metres away from the Shell Gbaran-Ubie gas plant and it is a condensate Refinery and that gas plant produce a lot of condensates and there is an agreement between Shell and him for the supply of condensate. And so we look at all those risks and that’s why we didn’t get involved with a lot of modular refineries that came knocking because the first thing we asked them was where is your feedstock? Where is the agreement for you to get your feedstock? We know it’s always a challenge.

Duport refinery may be ready sir, but we know that Summit is not producing their field as we speak.

As at last week, Summit told me that they were ready because they have done some bit of simulation on their wells and the rest of it; so they too are also working. Yes, Dupont is ready, but they have to align themselves with Summit. Summit like you know, was producing before now. It was heavy on gas and condensate and that Refinery, the Dupont refinery, is a condensate refinery that was designed to receive condensate. I think they are addressing their issues; our inability to open up the refinery right now is predicated on two issues: one is to get DuPont really ready which of course they’ve been trying to do all this while and also to get Summit to also come on stream. I believe very soon they will resolve whatever the issues are and the refinery will start producing.

Let me ask you what you think about this. Do you think Shell will genuinely supply from Gbaran to Azikel knowing that the IOCs don’t typically deal with small projects: 1 or 2 thousand barrels wouldn’t excite Shell will it?

I believe that they will. Like I said earlier, I spent my whole adult life perhaps working for Shell and I know that if Shell commits to doing something, they definitely would do it. They don’t sign an off-take agreement if they don’t mean it because that’s how disciplined they are. I genuinely believe they would do it because I was part of that process; I serve on the board of Azikiel and we went through the process with Shell to sign the off take agreement. The challenge is now for Azikel to get ready and as a matter of fact, earlier this year had to ask me to say “hey, what’s happening with this agreement? We’re still waiting to trigger off that uptake”. They’re really keen and they also see it as a way of also supporting Bayelsa as a State and they also see it as an obligation to support such aspiration. The refinery is just an 11,000 barrels Refinery. So that won’t create any dent with regards to their products supply.

TO BE CONCLUDED.

 

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