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Nigeria faces zero oil production, revenue risks

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Nigeria faces zero oil production, revenue risks

Nigeria, Africa’s biggest crude exporter, is contending with the risk of suffering zero oil production and a slide in revenue as the country is confronted with major loopholes to 100 per cent execution of its Content Act.

New Telegraph checks revealed that the country began its oil exploration and exploitation with a false start; with absolute no consideration for the development of the local capacity in 1956 when the country first discovered oil in commercial quantity. Nigeria now produces about 2.3 million barrels daily and any attempt to “right this wrong totally” will ground the country’s production to zero.

The Federal Government confirmed these developments through Nigerian Content Development and Monitoring Board (NCDMB) – an agency in charge of content monitoring, through Nigerian Content Development and Monitoring Board (NCDMB) – an agency in charge of content monitoring. It added that a full execution of the Nigerian Content Act will ground the Nigeria’s oil production to zero barrels per day.

In a document sighted by New Telegraph, the government maintained that despite hype on content achievement in Egina project, it actually suffered 10 per cent deficit in achieving the target set for the new Floating Production Storage and Offloading (FPSO). Oil was discovered in Nigeria in 1956 at Oloibiri in the Niger Delta after half a century of exploration.

The discovery was made by Shell-BP, at the time the sole concessionaire. Nigeria joined the ranks of oil producers in 1958 when its first oil field came on stream producing 5,100 bpd. “If we are to implement the Nigerian Content Law 100 per cent, we will have to stop oil production in Nigeria, develop non-existing capacity, then start production again,” the document quoted Executive Secretary of the board, Engr. Simbi Wabote, to have said.

“What this implies is that the country may have to live with this great anomaly and shortchange by multinationals if it is not ready for the loss,” an oil and gas analyst, Adebayo Alamutu, told this newspaper.

Even with the shortfall of about 10 per cent in meeting the set target, the Board, which Wabote said, set out to achieve 60 percent Nigerian Content on the project but realized over 50 percent, still achieved new benchmarks and domiciled new capacities and facilities in-country. The Executive Secretary “clarified that crude oil production, which is the main stay of the Nigerian economy might be shut down if the NCDMB were to enforce full implementation of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act.

He said that some targets set in the Act were aspirational and not attainable at the moment because of limitations in capacity and technology.

He cited an example with Section 53 of the NOGICD Act, which mandates that all fabrication and welding activities must be carried out in Nigeria, yet there are yet no dock yards in-country where the hull of big vessels such as the Egina FPSO can be fabricated from scratch.

Wabote said, “If we are to  implement the Nigerian Content Law 100 percent, we will have to stop oil production in Nigeria, develop non-existing capacity, then start production again. “The Board enforces the law with pragmatism. Ninety-five percent of our construction in the oil industry is steel, yet we do not have a steel mill in Nigeria.

The oil and gas industry depends on sectoral linkages to deliver on some items. Moreso, Local Content is a marathon race and not a sprint.”

On why the Board granted some waivers for the importation of certain equipment used on the Egina project, Wabote explained that some equipment used in the oil and gas industry were proprietary, like the Christmas Tree, while some raw materials were not available in Nigeria.

“In such instances, the operator or contractor would request the Board for permission to import. When we give such waivers, we also mandate the companies to execute Capacity Development Initiatives (CDI) to close the capacity gaps,” he said.

He explained that before a vendor would receive a waiver to procure items from abroad, it must show evidence that  it is fully established in-country, employs Nigerians, and has made investments. He admitted that a number of contractors contravened the Nigerian Content Act during the execution of the Egina project, noting that the Board sanctioned such vendors.

The NCDMB boss also canvassed for the amendment of Section 68 of Nigerian Content the Act, which provides that contractors that violate the Act could only be punished after conviction in the law court.

He also sought the support of the National Assembly to compel the government-owned oil and gas companies to patronise facilities that have established capacities in-country.

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