In the first instalment of this interview, SIMBI WABOTE, Executive Secretary (ES) of the Nigerian Content Development Monitoring Board (NCDMB), fielded a wide range of questions for this special edition of Africa Oil+Gas Report’s C-SUITE SERIES focused on the headwinds, the enablers, and the big wins of his six years in office. It appears, from those answers, that Wabote regards the Board as a pivotal instrument for industrializing the continent’s largest economy. The responses in this second and the last part, we argue, will indicate how far he has delivered on that agenda. Excerpts:
AOGR: The proposed Brass Methanol Plant will soak up a lot of natural gas. At about 350MMscf/d (350Million standard cubic feet per day), it will be the largest single domestic offtaker of Nigerian Gas. NCDMB is involved in the project. But sitting where you are, how clear is the sight to Final Investment Decision (FID), to construction? What is the single, major obstacle to moving this project away from the drawing board?
ES, NCDMB: For the methanol project, the investment required for it is quite substantial. You’re talking about two-three billion dollars. First, we faced the headwind of the COVID., Everywhere was shut down when we started that process and they couldn’t complete the FEED to be able to announce a financial close as it were. I think the team is working hard. Standard Chartered is the organization that is helping to syndicate for the debt portion of the Investments. The timelines have shifted because of some of these hurdles, including a mop up of global funds with regards to hydrocarbon. But we keep our fingers crossed and hoping that by end of first quarter 2023, they should be in the position to announce a financial close.
Are you very comfortable with how the process is going?
As a board member, I will only tell you that yes, we’re following the process to get to Financial close, but it’s not an easy task because of some of the factors regarding how funds out there were drying up, and people weren’t sure of what kind of project investments they want to put their money in. It is progressing, but has it progressed at the pace and speed that we would have wanted it? The answer is probably no; the climate change challenge, the lack of clarity out there on what some of the hedge funders would want to put their money behind but I guess this COP-27 would have addressed some of those innuendoes that you see or hear. Before the end of this first quarter we might get to that bridge and probably cross it.
The focus of the local content drive has been oilfield services; subsurface as well as surface. For onshore and shallow water projects, top indigenous subsurface companies like Ciscon and Geoplex are “entitled” to get subsurface service jobs while multinationals like Schlumberger, Baker Hughes can only be invited when the locals can’t do the jobs. But these foreign multinationals complain that they are being elbowed out of even deepwater projects. And often, when they do jobs as partners to locals, they don’t get paid. Does this sort of thing concern you?
That’s new to me. I have not heard that complaint before that they are being edged out. I don’t think they are. The Nigerian content Act is very clear in terms of the opportunities for indigenous players in the swamp and land assets. They have a right of first refusal. Some indigenous players have also grown their capacity to where they can also compete in the offshore arena. If we see indigenous players with that kind of capacity, of course in line with the provision of the Act, they have the right of first refusal. But there are a lot of areas within the offshore arena where the locals don’t have capacity yet, particularly in deepwater. We’re talking two kilometres of water above the seabed and stuff like that. The capacity is not there yet. The multinational service providers have an edge to the indigenous players, but where indigenous players have built capacity to compete, of course, they have the right of first refusal in the offshore arena if they have that capacity, but on the onshore and also in the swamp, we have so much capacity in the oil and gas sector that we practically don’t dominate. These multinationals help us with the equipment because most of the indigenous players buy that equipment off them with which they use for their services and a lot of them are happy playing that role in terms of providing the equipment and giving some bit of assurance with regards to the operations. As to not being paid, I think is a general phenomenon. It’s not just with the multinational companies or indigenous players. I recently had a contractor who came to me lamenting he had provided services for a particular indigenous operator, and was not being paid. It permeates the industry; even the multinationals don’t also pay the indigenous contractors that give them services and they argue that their joint venture partner has not paid so they are not paying them. It’s not just within the local companies it is also with the multinational particularly the Joint Ventures find it difficult. There are a lot of court cases that I also get served summons to come and be a defendant on court cases that I have no clue about because local contractors have not been paid by the multinationals. So they bring in NCDMB as co- defendant of those action.
Has it always been like this?
It has been like that for a while where Joint Ventures owe their service providers. Sometimes for up to one year people are being owed. The agreement says that by 45 days you will be paid but a lot of people are being owed. So as far as I can remember, it has been a recurrent decimal particularly with the Joint Ventures. In the Production Sharing Contracts, you don’t have such challenges because all the money is brought in by the multinational so they pay for services that they require but we see it with the Joint Venture; where companies have Joint Venture with NAPIMS or NNPC. Those are the areas where they don’t pay the contractors and the contractors complain and take us to court and stuff like that. It didn’t start today. Even in my days back in Shell, we’ve seen all those for quite a long time now.
When you rank in your mind without naming names, what companies are the worst offenders?
What is the One Achievement You’re Most Proud Of? I would choose the construction of the NCDMB headquarters building. it’s the tallest building in the South-South and South East geopolitical Zone. People talk about difficulty in the terrain in the Niger Delta to get things done. That building was to prove that this is doable in the Niger Delta.
Most of them that are the Joint Venture are in the same basket in terms of paying their contractors and this to a large extent affects the indigenous capacity. I have complained in public forums a lot about this. You come around and tell me an Indigenous contractor that I am pushing, is not providing the desired service but when I check, you’re not paying the guy and you know what it is to take a bank loan in this country to provide service. And if you don’t pay this provider on time, by the time you pay him both interests and capital and everything is wiped out and he comes up with nothing. It’s been a recurrent decimal; it is troubling and it affects the indigenous service providers to a very large extent. It does, to be honest. Let me not name names but, like I said, it is a challenge amongst the Joint Venture companies.
And because it is more with the JVs, one can assume that it must be because of cash call issues.
That’s what it is. That’s what they tell you and that’s what they tell the vendors; that their cash calls are not being honoured. But again, some of their Cash Call discussions are also in dispute because their joint venture partner challenges some of the expenditures and don’t honour some of those expenditures and the rest and so it becomes a cat and mouse thing to say you are not paying me. Hey you didn’t get approval for the service that you had and then, you have a lot of arrears being kept there as disputed arrears. It’s a very fuzzy situation as it were.
Multinational service companies say that the enforcement of Local Content legislation has been, sometimes, a “knee on the neck” for them. Do you sense that?
No, that’s not fair. But one thing you must accept with regards to multinationals is that their main objective as a business is to maximize return on investment to their shareholders. If you leave them, they will achieve this without a care about what happens to you as a country; whether your people are employed. They don’t care if service is procured locally. “I’m going into Nigeria, I want to go and provide this service and the return I will bring is X amount and then somebody is now telling me to do it differently and that would probably cost me a lot more”. They will resist it under normal circumstances. Even so let me be fair, the people I see that are very compliant in terms of Local Content are the multinationals because these are companies that operate globally; they have Global Standards with which their operations are measured. They obey the law to a large extent and the way we have implemented the law, at least since I came on board, is pragmatism.
Having been around the industry for a while, we know what is possible and what is not possible. We do not push people to do things that we know are impossible. We have a pragmatic approach to implementation of the law. The International Oil Companies, International Service Providers, do everything they can to comply within the pragmatic approach of implementing the law. A place where we have problems is those indigenous companies that we have fought for to be given opportunities are the ones who don’t want to comply with the provisions of the law. Which is sad and pathetic in my opinion because these are people you have done everything for. Interpreting the law to the multinationals, giving them the opportunities and privileges but today, they have it and they want to circumvent the law. That’s where we find ourselves. But it is natural because if we if we say we didn’t expect it then we are liars. We did expect such cutting of corners, trying to maximize benefits and profit for themselves. We see that but the multinationals cannot complain because ultimately local content is cheaper for them at the long run.
I will give you an example, if you hire an expert and you bring the expert into this country, it costs you a lot. His salary, his security and stuff like that. That same amount of money you pay an expert, you can use to hire 10 or 11 Nigerians. But imagine that you take one Nigerian, how much money you are saving as a local as an international company? The other example I’ll give you again is security of supply. Take for instance when the COVID struck. The predictions by WHO on how people will be dying on the streets, falling everywhere in Africa because of our challenged Healthcare System and the rest of it, a lot of the experts left. They ran to places where they felt that they had better health care system, but who were the people dying? During that period, we never stopped production because of the capacity we have built in country. Nigerian businesses were running the fields; throughout the COVID period where the whole world was shut down, we never stopped production as a country for one day.
You can imagine if we had not pushed Local Content to where it is today, we would have all shut in our wells and be waiting for them to come back. That’s the benefit with regards to security of Supply. Ultimately it is cheaper for them in terms of local content development and they know this.
“Nigerian companies don’t spend enough money on Research, Right or Wrong?” It’s a big concern for me and people who are saying that are very, correct. With all theseclimate change headwind on fossil fuel, there will come a time when most of the countries where you have all these tools being manufactured will tell companies like Baker Hughes and Schlumberger and Halliburton to stop manufacturing such tools for hydrocarbon.
Some companies, choosing not to be quoted, say NCDMB sometimes insists that the job goes to an inexperienced company and the Multinational should help train such a company in order to build capacity. They say that such issue frustrates them.
I don’t feel it and I don’t see them complaining in that regard because the truth is that, how do you build capacity? You don’t build capacity by sleeping and waking up and that capacity suddenly exists. You have to invest and support the process to build it. What the law says is that if you want to undertake a project and the capacity does not exist on that project, you must build that capacity before you start the project. That is contextually what the law says. But how can we wait for you to build capacity before you start the project, and so we say, okay, go ahead with the project so that production will come out and Nigeria will earn her revenue. But meanwhile, while the project is going ahead, can you build the capacity of those people for future opportunity? That’s what we say and that’s where the Human Capacity Development Programme comes in, which we call the HCD: put an investment to train these people. If you go by the law, it says you must train them to execute that job but you and I know that if you say it, it isn’t going to happen. So we say go ahead with the project, set aside a budget with which you would build capacity for future opportunity. The implementation of the law has always been very pragmatic at least from when I came in here.
There’s another example about our pragmatism: If you read the law, it says: all steel products must be procured in country. That’s what the law says 100%. So now if I want to implement the law like a Bible, I’ll probably ask all of them to go and build a steel plant first before you start producing hydrocarbon. But we know that’s not possible. We say, okay, what else can you do for us? You get on with your project but there are other activities you can do that are not as gigantic as building a steel plant. Is there is there any other way to do it?
Are you concerned that Nigerian companies don’t spend enough money on Research to bring out new tools?
It’s a big concern for me and people who are saying that are very, correct. That’s why we as NCDMB decided to develop a 10 year Research and Development strategy because like I said, with all these climate change headwind on fossil fuel, there will come a time when most of the countries where you have all these tools being manufactured will tell companies like Baker Hughes and Schlumberger and Halliburton to stop manufacturing such tools for hydrocarbon and focus on renewable energy in order to get Research Grants. And then what happens? A typical example is your coal. We discovered a lot of coal deposit in Nigeria, and then the world said coal was the dirtiest fuel you can ever imagine and they stopped production of tools that would help us to mine coal, we stopped producing coal. But countries that were able to research-produce those tools are still producing coal till today and using coal for their power generation. Almost 60% of China’s power generation is coal fired. In Australia, almost 50% of Australia’s power generation is coal fired because they have the capacity to manufacture the tools that will help them extract coal and use it for their energy. The same will probably happen to us regarding extraction of oil and gas. We’re making all this noise about opposing the demonization of fossil fuel. If those guys wake up one day and tell all these companies to stop producing tools for hydrocarbon, my brother we are toast as a nation. That’s why we must encourage research and development to produce those tools with which we will exploit our hydrocarbon. NCDMB created the funding mechanism for research and development, set aside $50Million for research and development. That in itself is a paltry sum from the context of research and of movement, but this is just a very small agency that could do this. Today, if you Google how much GDP is spent on research and development; on that list, the only African country you will see is South Africa, which sets aside 0.02% of its GDP for research and development. Every other African country is not there. When you look at it, you look at China, United States, almost about two point something percent of their GDP is set aside for R&D and even Israel. And you ask yourself why are those country developed?
You just came back from the Ghana Petroleum Commission’s Local Content Conference and you’ve seen what Senegal does; you actually once hosted all of Africa at the NCDMB headquarters. Do you see African leaders walking the talk in terms of industrializing the continent or do you see people just flying here and there and staying in fancy hotels and then talking about “Africa will be great” without real progress in terms of domestic integration of hydrocarbon into the local economies?
I see a lot of talk shops. I see a lot of people come to seminars only to promote what is not there. I see it a lot. I said it at the Ghana event that discussions around local content is not about whose car is the best. It is more about who built the car! What I see when I go around is that some African countries go on to the podium and tell you so many things that are being done in their country and then you come out and then you see nothing. Then you begin to ask yourself what is going on? I really get worried because I don’t know if that is the way it’s been set up for them to just market themselves when there is nothing actually to Market. I get worried that people are not really walking in the talk. It’s more about talking as opposed to doing.
What is the one thing that you’ve done in these last years that you’re so proud of that you will list as key achievement of your tenure? Finishing the mammoth headquarters’ building? Any of the NOGAPS? Funding Ibigwe?
I would choose the headquarters building, the reason being that it’s the tallest building in the Nigerian South-South and South East geopolitical zone; it is the tallest completed building. There’s a prevailing narrative about difficulty in construction in the Niger Delta terrain. That building was to prove that this is doable in the Niger Delta. I tell people that my background is engineering and one of the first philosophies you learn in engineering is that there is no problem or challenge without an engineering solution., I’m not talking about philosophical problems. I’m talking about challenging nature and wanting to do things as an engineering solution to it. For me, it was a remarkable achievement that that building was completed on time and also the building does exist in Bayelsa where I come from. Today it is the icon of Bayelsa of a completed project and to crown it all, I was able to build a gas fired power plant to power the building in itself. It’s a remarkable achievement. When they talk about grid collapse and the rest of it, I know nothing about grid collapse, when we’re in Yenagua within the headquarters building because we have our own gas fired power plant supplying us power, we are not dependent on diesel in order to survive. In most establishments in this country, “NEPA” is the standby while diesel is the regular source of supply. But today for us in Bayelsa, generators are standby while we have constant electricity 24/7. It’s my greatest happiness, it is what I can turn around and look back on amongst every other things that you have actually listed here.
What is the strategy deployed in ensuring the actualization of the R&D Project that the NCDMB has earmarked $50Million for and is this related to the Africa Energy Fund (AEF)?
No that is different; the R&D Fund is different from the AEF and it is tied to our R&D development roadmap. The AEF is more of us trying to create our own energy fund as Africa given all these headwinds of funders taking money off the table to fond hydrocarbon projects. That will soon happen. There are two separate things. This one is localized, it’s what we use to support our research and development strategy.
The strategy is that we have a Research and Development Council which is made up of most of the institutes in the country that are responsible for research and development. Also OPTS (Oil Producers Trade Section of the Lagos Chamber of Commerce & Industry) and PCTS (Petroleum Contractors Trade Section) are members of the Development Council. We also have a research and development technical committee that interface with external partners on particular research because like, you know research is not something you do in isolation. You have to do it in conjunction with others. It’s a well-structured set up to encourage research for commercialization.
Most of the institutions we have, the kind of research they do is research for promotion and most of their researches in the country are on the shelf. But what we encourage is research that will produce something that we can commercialize for the industry and beyond; that’s what we support.
What kind of research; is it the type in which a Nigerian University is requested to work on understanding flow assurance in a fluid system or one that says: We need some type of valve for field optimisation? One is knowledge, the other is physical equipment.?.
It’s all in the basket and like you mentioned, some of those names we work with. We have a partnership with Schlumberger where we collaborate on Research support for institution and individual researchers. We also have with Halliburton. Recently with SPE, we signed an MoU where we support research around this gamut of things you have mentioned. You have it in various phases in terms of what we do in research and development. It’s research for commercialization and also some bit of thematic research requirements that people come out with solutions to some of these problems that are encountered by the industry. But we also go beyond the industry because in Nigeria, you need a lot of research in various things as it were but the industry in itself acts as a catalyst to most of these things. We’re very much in that space. It’s a paltry sum that we have to support it. We wish that all the agencies associated with supporting research would pull resources together to build it formidable research and development structure in the country. That is my dream and desire.
Thank you very much. ES, thank you.
Thank you.
specifically the oil and gas producers.
The current blip on the radar screen could well be caused by the reprieve that oil companies and hence their service companies are getting from higher oil prices that started with the Ukraine conflict. Deepwater is the fastest growing upstream oil and gas resource, according to Woodmac’s interpretation. Production in that terrain is expected to hit 10.4MillionBOEPD in 2022 and will reach 17MillionBOEPD by the end of the decade. Even if oil production is on a long term decline the deepwater exploration and development will continue to be the heartbeat driving the industry.
Can the deepwater drillers expect better times in 2023? The terrain, according to WoodMackenzie, is the fastest growing upstream oil and gas venue: production is expected to hit 10.4Million Barrels of oil equivalent per day (BOEPD) in 2022 and will reach 17MillionBOEPD by the end of the decade.
