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Oil & Energy

Another Look At The Nigerian Content Act

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The Nigerian Content Development Act was signed into law in
2010 to achieve the domestication of significant portion of derivatives of the
oil and gas industry by ensuring the development and deliberate use of
indigenous human and material resources in the industry in Nigeria. It is
targeted at the adding value to the nation’s economy through the systematic
development capacity and  capabilities by
using Nigerian human and material resources, and services in the industry.

The Act says Nigerian Independent Operators shall be given
first consideration in the award of oil blocks, oil licenses, oil lifting
licenses and all projects that have to do with oil blocks and oil licenses
particularly.

The intention of the Act therefore, is to build the Nigerian
Content by making it mandatory that some jobs in the industry are done in
country by Nigerians using Nigerian materials.

No doubt, the enactment of this Act ushered in a new era in
the oil and gas as prior to the Act, equipment used in the industry were
usually designed, fabricated and assembled abroad thus leading to capital
flight and export of jobs. There was a preponderance of expatriate workers
resulting to scarcity of jobs, paucity of skills  and capacity building and utilization of
Nigerian workforce, culminating to economic under-development in the country.

Agreed, the law gave local entrepreneurs like Niger Dock,
Ladol, Daewoo, Saipem, LoneStar, Adamac among others the confidence to venture
into areas that hitherto were the exclusive preserve of multinational
companies.

According to the Executive Secretary of the Nigerian Content
Development and Monitoring Board (NCDMB), Engr. Ernest Nwapa represented by
Wole Akinyosoye the Act has to say the least opened a floodgate of acativities
in the industry which has resulted to a surge in indigenous capacity in the
industry.

Be that as it may, there still exist some gray areas that
need to be given some consideration. In terms of giving priority to indigenous
operators which the Act talked about, it is not explicit on the process which
the preferential treatment should be done.

For instance, on the list of 2012 to 2013 Crude Oil Contract
Holders, most of the companies have links with foreign owners while in some
cases an holder will be replicated but with different names.

There is also institutional problem as Nigerian National
Petroleum Corporation (NNPC) dominates contract allotment. So how and where
does the NCDMB come in, in terms of giving contracts.

Another gray area in the Act is the downstream Sector which
is the major concern of his piece. The downstream sector is not covered. Dr.
Eddie Wikina, while presenting a paper on “Promoting the Nigerian Content
through Deregulation of the Downstream Sector” at the just concluded Port
Harcourt International Oil and Gas Conference in Port Harcourt, noted that the
Act was restrictive as it does not cover the downstream sector of the
industry   Dr. Wikina who is the managing
director of Treasure Energy Resource limited, a Rivers State Government oil and
gas firm, argued that in terms of Upstream business in the industry as touching
expatriate quota and using Nigerian materials, the Act has faired well but
nothing in the downstream.

The scope of the Act which is restricted to the upstream
sector, according to the oil and gas guru include services from within Nigeria,
goods manufactured in Nigeria, training and employment of Nigerians, location
of project office in catchment area or community, tax incentives for local
manufacturing, all fabrication and welding activities, insurance, legal and
financial activities.

He explained that
anybody who wants to build a downstream plant that is capable of employing up
to 5000 people in the country can do it with 100 per cent foreign labour,
foreign materials, foreign services and nobody will raise an eyebrow because
there is no law that says they must use Nigerian materials and services.

He pointed out that the downstream which has to do with
among others processing that convert oil nad gas into useful products including
distillation, cracking, reforming, blending,
storage, mixing and shipping has some regulatory control issues.

Some of the regulatory control issues, the TERL boss pointed
out were monopoly, closed market, price manipulation, lack of innovation,
investment block, value erosion, inefficient operations, foreign import
dependent, smuggling inter alia.

He therefore, recommended the review of the Act to
explicitly cover the downstream sector as this will open more opportunities for
participation of local indigenous operators and service providers thus leading
to growth of the Nigerian Content Development.

For instance, the coordinator of the 6th Nigerian Dredging
Summit, Exhibition and Award, Mr. Edmund Chilaka quoted NCDMB as saying that
$20billion oil and gas projects in the country were owned by foreigners and
noted that out of this whooping sum, only a paltry sum of less than $4 billion
was retained in Nigeria.

His words: “An estimate of over 150 times more jobs are
created in other countries than in Nigeria when Nigerian projects are being
executed.

“Ownership profile of marine assets supporting industry
activities has a current ratio of about 230 foreign owned vessels to a pitiable
20 Nigerian owned.”

Scenarios like the one painted above could be changed by
making the Act to cover the downstream as advocated by Dr. Wikina.

The TERL MD also recommended a full deregulation of the
downstream which would see government releasing the control on product prices.
He said it will open the market for more investors to come into the sector and
the emergence of more production facilities. Countries like Peru, Argentina,
Pakistan, Chile, Philippines, Thailand, Mexico, Canada, Venezuela, Japan,
United States of America (USA) among others have undergone complete
deregulation leading to a turn around of their economies. Government’s roles in
these countries have been drastically reduced thus giving greater freedom for
operators in the industry to operate and thrive which create room for healthy
competition and naturally drive down costs.

He enjoined government to completely end control on the
sector to allow independent operators to come in and money saved from subsidy
could be reinvested in local industries or used to support those ready to build
independent processing plants. And to a great extent add the much desired value
to the nation’s economy.

Federal Governments, he suggested should make funds
affordable by making investors in the industry have access to low interest rate
loans as this would serve as encouragement for them to venture into the
industry.

Commenting on the
difficulty of accessing funds by indigenous players in the industry, the
managing director of Harrybeath International Services Limited, Engr Agha Abani
said “You see the Nigerian government has good intentions to build capacity but
the problem most Nigerian companies have is in funding; we still have problems
of getting the required funding from the Banks. In the Western world, it is
much easier for them to finance this kind of projects but here in Nigeria it is
very difficult to get funding from the banks. So this is an area that has to be
looked at.”

 

Vivian-Peace Nwinaene

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Oil & Energy

TotalEnergies, Conoil Sign Deal To Boost Oil Production

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TotalEnergies has signed agreements with Conoil Producing Limited under which to acquire from Conoil a 50 per cent interest in Oil Processing Licence (OPL) 257, a deep-water offshore oil block in Nigeria.
The deal entails Conoil also acquiring a 40 per cent participating interest held by TotalEnergies in Oil Minining Lease (OML) 136, both located offshore Nigeria.
Upon completion of this transaction, TotalEnergies’ interest in OPL257 would be increased from 40 per cent to 90 per cent, while Conoil will retain a 10% interest in this block.
Covering an area of around 370 square kilometres, OPL 257 is located 150 kilometers offshore from the coast of Nigeria. “This block is adjacent to PPL 261, where TotalEnergies (24%) and its partners discovered in 2005 the Egina South field, which extends into OPL257.
Senior Vice-President Africa, Exploration & Production at TotalEnergies, Mike Sangster, said “An appraisal well of Egina South is planned to be drilled in 2026 on OPL257 side, and the field is expected to be developed as a tie-back to the Egina FPSO, located approximately 30 km away.
“This transaction, built on our longstanding partnership with Conoil, will enable TotalEnergies to proceed with the appraisal of the Egina South discovery, an attractive tie-back opportunity for Egina FPSO.
“This fits perfectly with our strategy to leverage existing production facilities to profitably develop additional resources and to focus on our operated gas and offshore oil assets in Nigeria”.
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Oil & Energy

“COP30: FG, Brazil Partner On Carbon Emissions Reduction

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The Federal Government and Brazil have deepened collaboration on climate action, focusing on sustainable agriculture, renewable energy, and the reduction of black carbon emissions.
The partnership is anchored in South-South cooperation through the Brazil-Nigeria Strategic Dialogue Mechanism, which facilitates the exchange of ideas, technology, and policy alignment within the global climate framework, particularly the Paris Agreement.
The Executive Secretary, Amazon Interstates Consortium, Marcello Brito, made the disclosure during an interview with newsmen, in Abuja, on the sidelines of the 2025 COP30 United Nations Climate Change Conference, held in Belem, Brazil.
Brito emphasized that both nations are committed to global efforts aimed at curbing black carbon emissions, a critical component of climate mitigation strategies.
“Nigeria and Brazil are collaborating on climate change remedies primarily through the Green Imperative Project (GIP) for sustainable agriculture, and by working together on renewable energy transition and climate finance mobilisation,” Brito said.
“These efforts are part of a broader strategic partnership aimed at fostering sustainable development and inclusive growth between the two Global South nations,” Brito added.
TheTide gathered that President Bola Ahmed Tinubu announced an ambitious plan to mobilize up to $3 billion annually in climate finance, through its National Carbon Market Framework and Climate Change Fund, positioning itself as a leader in nature-positive investment across the Global South.
Represented by the Vice President, Senator Kashim Shettima, Tinubu made the announcement during a high-level thematic session of the conference titled ‘Climate and Nature: Forests and Oceans’
Tinubu stressed that Nigeria’s climate strategy is rooted in restoring balance between nature, development, and economic resilience.
Hosted in the heart of the Amazon, on November 10—21, the 30th COP30 conference brought together the international community to discuss key climate issues, focusing on implementing the Paris Agreement, reviewing nationally determined contributions (NDCs), and advancing goals for energy transition, climate finance, forest conservation, and adaptation.
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Oil & Energy

DisCo Debts, Major Barrier To New Grid Projects In Nigeria ……. Stakeholders 

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Energy industry leaders and lenders have raised concerns that the high-risk legacy debts of Distribution Companies (DisCos) and unclear regulatory frameworks are significant barriers to the financing and development of new grid-connected power projects in Nigeria.
The consensus among financiers and power sector executives is that addressing legacy DisCo debt, improving contractual transparency, and streamlining regulatory frameworks are critical to unlocking private investment in Nigeria’s power infrastructure.
Speaking in the context of new grid-connected power plants, during panel sessions at the just concluded Lagos Chamber of Commerce and Industry (LCCI) Power Conference, Senior Vice President at Stanbic IBTC Infrastructure Fund, Jumoke Ayo-Famisa, explained the cautious approach lenders take when evaluating embedded or grid-scale power projects.
Ayo-Famisa who emphasized the critical importance of clarity around off-takers and contract structures said “If someone approaches us today with an embedded power project, the first question is always: Who is the off-taker? Who are you signing the contract with?” . “In Lagos State, for example, there is Eko Electricity and Excel Distribution Company Limited. Knowing this is important,” she said.
She highlighted the nuances in contract types, whether the developer is responsible just for generation or for the full chain, including distribution and collection.
“Collection is very important because you would be wondering, ‘is the cash going to be commingled with whatever is happening at the major DISCO level, is it ring-fenced, what is the cash flow waterfall,” she stated.
Ayo-Famisa pointed out that the major stumbling block remains the “high leverage in the books of the legacy DisCos.” Incoming project financiers want to be confident that their cash flows won’t be exposed to the financial risks of these indebted entities. This makes clarity on contractual relationships and cash flow mechanisms a top priority.
Noting that tariff clarity also remains a challenge, Ayo-Famisa said “Some states have come out to clearly say that there is no subsidy; some are saying they are exploring solutions for the lower income segments. So, the clarity would be on who is responsible for the tariff, is this sponsored?, Can they change tariffs?, In terms of if their cost rises, they can pass it on, or they have to wait for the regulator.
“Unlike, what you find in the willing seller-willing buyer, where they negotiate and agree on their prices. Now they are going into grid, there is Band A, Band B, if my power goes into, say, Ikeja Electric, or I have a contract with them, “am I commingled with whatever is happening across their multiple bands?”
Also speaking, Group Managing Director and CEO of West Power & Gas Limited, Wola Joseph Condotti, stressed the dual-edged nature of decentralization in the power sector.
“Of course, decentralization brings us closer to the people as the jurisdiction is now clear. You also know that your tariff would be reflective of the type of people living in that environment. You cannot take the Lagos tariff to Zamfara, and this is what has been happening before now in the power sector. So, decentralization brings about a more customized solution to issues you find on the ground.
“Some of the issues I see are those that bother on capacity. It was a centrally run system that had 11 DISCOs. Of the 11 DISCOs, I think there are 3 or 4 of us today that are surviving or alive, if I may put it that way. If you go to electricity generation companies, they are doing much better,” she said.
Condotti highlighted regulatory overlaps as another complication, especially when power generation or distribution crosses state lines.
She said, “Investors would definitely have a problem. Say if you have a plant in Ogun State supplying power to another state, say Lagos State; you are automatically regulated by NERC. But the truth is that the state regulator of Ogun State and Lagos State wants you to comply with certain regulatory standards.”
With the growing demand for reliable electricity and an urgent need for infrastructure expansion, the ability to navigate these complex financial and regulatory landscapes would determine the pace at which new grid-connected power projects can be developed.
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