1LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

PART A:

INTRODUCTION

The Nigerian Oil and Gas Industry Content Development Act which has just been signed into law is the cumulative result of decades of attempts by the government and stakeholders in the petroleum industry to ensure that the industry provides local value and maximized benefits to Nigerians. Since the discovery of oil in commercial quantities in Oloibiri, Rivers State by Shell Corporation in 1957, the Nigerian oil and gas industry has grown to become a major player in the international oil and gas market. Today, 53 years later, Nigeria is the largest oil producer in Africa and the eleventh largest in the world, averaging 2.5 million barrels per day, with proven reserves of over 35 billion barrels and is currently the 5th largest exporter of crude oil to the United States of America with oil revenue making up over 90% of Nigeria's foreign currency receipts. Furthermore, according to the Organization of Petroleum Exporting Countries (OPEC), the oil sector provides 20 percent of the country's gross domestic product (GDP) and around 65 percent of budget revenues. Crude oil exports from Nigeria are currently estimated to be around 2,098 barrels per day, while natural gas exports total 20.55 billion cubic metres. Despite this impressive profile however, the Nigerian oil and gas sector's contribution to national GDP, i.e. Gross Domestic Product1, has been minimal. According to energy reports in 2008, the sector accounted for less than 38% of national GDP. This has been a direct consequence of the noticeable absence of indigenous participants in the industry given that over 80% of the goods and services needed for projects were being imported from foreign countries. A good factual example to illustrate how indigenous participation in an industry can contribute to the countrys economy or GDP is a furniture project executed by Mobil Oil Nigeria Limited (although this project had nothing to do with the production of oil and gas)2. They were owners of Mobil House in Lagos (which in the opinion of G. Aret Adams, is the most imposing and fitfor-purpose office building in Nigeria today) and they wanted to duplicate in their offices the same type and quality of furniture that the company had in its headquarters office in the U.S.A. Mobil gave the directive to its local Management as well as to a committed expert, who surveyed all the local furniture factories and textile mills throughout Nigeria. Mobil then selected a few of the best factories and negotiated with the owners, and then awarded the
1

Gross domestic product means the total value of all goods and services produced within a country in a year, minus net income from investments in other countries, Encarta Dictionaries. http://www.nigcontent.com/index.php?option=com_content&task=view&id=12&Itemid=50 2 G. Aret Adams, Nigerian Oil and Gas Industry Local Content Objectives and Guidelines. A Petan Perspective.

2LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

contracts to produce all the furniture in the Mobil house. This tremendously improved the capacity of those local factories to improve their production capabilities and to compete effectively in the international market. Furthermore, for the greater part of the last four decades, the Nigerian oil and gas industry has been dominated by major international oil companies with large numbers of expatriate workers being deployed to carry out projects in various onshore and offshore locations in the country. This preponderance of expatriate workers has resulted in a paucity of jobs, skills development, capacity building and utilization for the indigenous workforce and in the long run, a lack of sustained national economic development. In recognition of this deficiency, the Federal Government of Nigeria has in the past, made efforts to domesticate a significant portion of economic derivatives from the oil and gas industry by encouraging the development and deliberate utilization of Nigerian human and material resources in the Nigerian oil and gas sector. Such efforts led to the formulation of a number of local content friendly policies in the oil and gas industry; the establishment of the Nigerian Content Division (NCD) of the Nigerian National Petroleum Corporation (NNPC) to monitor and give effect to the Nigerian Content Policy (NCP); and the formation of the Nigerian Association of Indigenous Petroleum Exploration Companies to mention a few. With inception from early 2000, the Nigerian Content Policy envisioned by the Nigerian National Petroleum Corporation served as the basis for measuring and ensuring local participation and job creation for Nigerians in the oil and gas industry3. Regulation 26 of the Petroleum (Drilling & Production) Regulations made pursuant to Section 9 of the Petroleum Act Chapter P10 Laws of the Federation of Nigeria 2004, is a precursor to the Nigerian Content Policy, as it prescribes that a licensee of an oil prospecting license and a lessee of an oil mining lease must submit an employment plan for Nigerian employees within 12 months of the grant of a license or the grant of a lease, respectively. Consequently, these objectives have been incorporated into the drafting of oil and gas agreements, such as the joint operating agreements (JOAs), and production sharing contracts (PSCs), and rehashed in the Nigerian Content Directives (NCD), issued by the Nigerian National Petroleum Corporation. The aim of the Nigerian Content Directives (NCD) issued by the Nigerian National Petroleum Corporation (NNPC) is to oversee the implementation of the Nigerian Content Policy 4. The NCD sought to transform the oil and gas industry into the economic engine for job creation and national growth by developing in-country capacity and indigenous capabilities. It was designed to ensure that a
3

http://www.nigcontent.com/index.php? option=com_content&task=view&id=29&Itemid=56 4 Section 41

3LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

greater proportion of the work was done in Nigeria, with active participation of all sectors of the economy. In addition, an ultimate aim is that Nigeria is positioned as the hub for service delivery within the West African sub-region and beyond. Although the NCD did not have the force of law, it had far-reaching effects with NNPC as senior partner in most oil and gas projects, and aimed to increase local content value in the provision of materials, services and equipment to the local oil and gas industry to 70 per cent by 2010. It therefore required compliance by tenderers seeking to execute contracts with NNPC participation. While these efforts made by the Federal Government resulted in some improvements in the industry, local content development in the Nigerian oil and gas sector still remained unsatisfactorily low and continued to inhibit the growth potential of the industry. However in 2010, the administration of (then Acting) President Goodluck Jonathan brought about renewed efforts towards the promotion of local content in the oil and gas sector. A major stride in this regard was the passage into law of the Nigerian Oil and Gas Industry Content Development Bill (The Local Content Act) by President Jonathan on the 22nd of April 2010. The Local Content Act which takes precedence over all existing content laws and regulations was enacted with the aim of providing for the development of indigenous content in the Nigerian Oil and Gas Industry by ensuring that henceforth, priority would be given to indigenous services companies. Under the Act, the utilization of Nigerian human and material resources for the provision of goods and services to the petroleum industry within acceptable quality, health, safety and environment standards are made obligatory in order to stimulate the development of indigenous capabilities.

PART B.

WHAT IS LOCAL CONTENT?

Local Content in the oil and gas industry has increasingly been utilized as a tool for ensuring sustainable development in oil and gas producing countries. Local Content basically means the development of local skills, technology transfer, use of local manpower and local manufacturing. Local Content also essentially means the promotion of the growth of local businesses and services in such countries by mandating the optimal utilization of local goods and services in the execution of projects in the country. The phrase Local Content is quite the same as the phrase Nigerian Content and the two are most at times used interchangeably. Nigerian Content has been given a meaning in the Nigerian Content Development Act, 2010 in the interpretation section5 to mean;
5

4LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

the quantum of composite value added to or created in the Nigerian economy by a systematic development of capacity and capabilities through the deliberate utilization of Nigerian human and material resources and services in the Nigerian Petroleum Industry. The plain or literal construction of the above definition given by the Nigerian Content Development Act is that Local/Nigerian Content signifies the quantity or amount of a composition of useful or purposeful principles that are being introduced into the economic life of Nigeria by a regular or methodically planned development of capacity and potentials through the use of Nigerian human and material resources and services, which involves the supply of services and products and; the employment of Nationals, in the Nigerian Petroleum/Oil and Gas Industry. The stated intention of the law is to increase indigenous participation (otherwise known as local content) in the Nigerian Oil & Gas sector. Nigerian local content is also defined by the Nigerian Content Development policy as the quantum of composite value added or created in the Nigerian economy through the utilization of Nigerias human and material resources for the provisions of goods and services to the petroleum industry in acceptable quality, health, safety and environmental standards in order to stimulate the development of indigenous capabilities6. This definition is so because its aim is to build indigenous capacity that will participate in the petroleum sector, as well as improve the sectors links with the domestic economy. Babarisa remarked or opined that the Nigerian Content does not mean indigenization ( as indigenization plainly means the act or process of causing something to originate from a particular region or environment), but a deliberate making use of/utilization of Nigerian goods and services, achieved through the engagement of local manufacturers and service providers.7 Furthermore, Local content should be determined in terms of value addition or input in Nigeria (by local/National staff, local materials, local services and facilities) rather than by the ownership of the company performing the value added activities.8 In other words, the using of
6

Hindle Christopher & Woldemichael, A Push For Local Content (2009) 29:1, Oil and Gas Investor, P. N-10. [Information extracted from 7 Babarisa A, NNPC: 30 Active Years, 1970-2007 (Octopus Communication Company, Lagos, 2007) p. 61. [Information extracted from 8 Per Heum et al, Enhancement of Local Content in the Upstream Oil and Gas Industry in Nigeria, (2003) p.46. [Information extracted from

5LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

local inputs and developing capacity and potentials and competences in Nigeria can be effectively done by a local subsidiary of a multinational, just as in the same capacity as a Nigerian-owned company or a company in which a majority of the shares belong to Nigerians. This is so as even the Nigerian Content Development Act in Section 24 permits for a joint venture or partnership between a Multinational company and an Indigenous company. Therefore, the Nigerian Content is more about indigenous/domestic service providers and not foreign-owned. It is also noteworthy that the Nigerian/Local Content is not about contracts or job creation, but a grand strategy by the government to open up the petroleum industry for technical and effective participation.9

PART C.

THE LOCAL CONTENT IN GOVERNMENT POLICIES.

HISTORY OF THE LOCAL CONTENT POLICY

In over fifty years since the discovery of oil in Nigeria, the petroleum industry has functioned as an enclave economy, with very little linkages and contribution to the wider Nigerian economy.10 Previous efforts to give effect to the local content policy include establishment of various research, development, training, education and support funds; provisions in the Petroleum Act11 on mandatory employment and training of Nigerians by petroleum operators, provisions on technology transfer, local content utilization, recruitment and training of Nigerian personnel contained in various contractual arrangements with International Oil Companies (IOCs), and the establishment of a Nigerian Content Division (NCD) of the NNPC to monitor and give effect to Nigerian governments content policy. The NCD sought majorly, as mentioned supra, to transform the oil and gas industry into the economic engine for job creation and national growth by developing in-country capacity and indigenous capabilities. It was designed to ensure that a greater proportion of the work was done in Nigeria, with active

A Presentation to the Department of Petroleum Resources (DPR) by Oil and Gas Service Providers Association of Nigeria (OGSPAN) 2009, p.18. [Information extracted from 10 According to NNPCs Nigerian Content Policy Implementation Division (NCD), over 80% of work value in the industry is executed outside the nations shores. See also Local Content Growth: The Role of NIPEX, A presentation delivered at the Nigerian Content Summit in Oil and Gas/Exhibition, December 10, 2007. 11 Sections 26-29, Petroleum (Drilling and Production) Regulations CAP 10, LFN 2004

6LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

participation of all sectors of the economy. In order to achieve these, it formed and implemented policies and directives, some of which include; (1) Under the JOAs, i.e. Joint Operating Agreements, the operator is required to give preference to a contractor that is organized under the laws of Nigeria to the maximum extent possible as long as there is no significant difference in price or quality between such contractor and others. (2) Under the 2005 Model PSC, i.e. Production Sharing Contract, it was provided that NNPC and the contractor shall aspire to maximize local content in all areas of petroleum operations under the PSC. It also provided that there should be at least 80% and 85% of the total number of persons employed in managerial, professional and supervisory grades by the 15th and 20th year respectively. Some of the goals of the NCD include;
(1) To achieve 45% local content in oil and gas spent by 2006.

(2) To achieve 70% local content value in the provision of materials, services and equipment to the local oil and gas industry by 2010.
(3) To create an economic engine for growth, driving employment, wealth creation and

improved linkage between the Oil and Gas industry and other sectors of the Nigerian economy.
(4) To enable a transformed Oil and Gas industry with welldeveloped incountry capacity

and local capabilities, a competitive supply and services sector and ultimately, the hub for energy service delivery in Africa.

NIGERIAN CONTENT DIVISION POLICY/DIRECTIVES

In order for the NCD to effectively achieve or accomplish its policies and goals, it issued directives to all operators, some of which are as follows;
(1) Detailed engineering design for all projects is to be domiciled in Nigeria.

(2) Project Management Teams and Procurement Centres for all projects in the Nigerian Oil and Gas industry must be located in Nigeria.

7LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

(3) Henceforth, all operators and project promoters must forecast procurement items required for projects and operational activities and forward the materials list to the NCD on or before 31st January of every year. Also, a Master Procurement Plan (MPP) for ongoing and approved projects should be submitted to the Nigerian Content Division (NCD) of NNPC on or before 31st January of every year. (4) Fabrication and integration of all fixed (offshore and onshore) platforms weighing up to 10,000 tons are to be carried out in Nigeria. For the fixed platforms (offshore and onshore) greater than 10,000 tons, all items in directive 5, pressure vessels and integration of the topside modules are to be carried out in Nigeria. (5) Fabrication of all piles, decks, anchors, buoys, jackets, pipe racks, bridges, flare booms and storage tanks including all galvanizing works for LNG and process plants are to be done in Nigeria.
(6) All flowlines and risers must be fixed and must be fabricated in Nigeria except for

special cases to be demonstrated and approved by NCD.

(7) Assembling, testing and commissioning of all Subsea valves, Christmas trees12,

wellheads and system integration tests are to be carried out in Nigeria. (8) All FPSO contract packages are to be bid on the basis of carrying out topside integration in Nigeria. A minimum of 50% of the total tonnage of FPSO topside modules must be fabricated in Nigeria. (9) All third party services relating to fabrication and construction including but not limited to NDT, mechanical tests, PWHT as well as certification of welding procedures and welders must be carried out in Nigeria. Nigerian Institute of Welding must certify all such tests in collaboration with international accreditation bodies.
(10)

All operators and project promoters must ensure that recommendations for

contract awards in respect of all major projects being forwarded to NNPC/constituted boards of such oil and gas companies for approval must include evidence of binding agreement by the main contractor with Nigerian Content Subcontractor(s). Such agreements shall indicate the cost and detailed scope including total manhours for

12

An oil-well control device consisting of an assembly of fittings placed at the top of the well. [Definition extracted from Merriam-Websters Dictionary and Thesaurus, Encyclopaedia Britannica Ultimate Reference Suite].

8LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

engineering, tonnage and man-hours of fabrication and relevant defining parameters for materials to be procured locally as well as other services.
(11)

All low voltage Earthling cables of 450/750 V grade and Control, Power,

Lighting Cables of 600/1000 V grade must be purchased from Nigerian cable manufacturers.
(12)

Henceforth, all Linepipes, sacrificial anodes, Electrical switchgear paints, ropes,

pigs, heat exchangers and any other locally manufactured material and equipment must be sourced from incountry manufacturers. (13) (14) All carbon steel pressure vessels shall be fabricated in Nigeria. All seismic data acquisition projects, all seismic data processing projects, all

reservoir management studies and all data management and storage services are to be carried out in Nigeria.
(15)

All waste management, onshore and swamp integrated completions, onshore and

swamp well simulations, onshore fluid and mud solids control, onshore measurement while drilling (MWD), logging while drilling (LWD) and directional drilling (DD) activities are to be performed by indigenous companies having genuine alliances with multinational companies.
(16)

Coating of all Linepipes and threading of all oil country tubular goods (OCTG)

are to be carried out in Nigeria.

(17)

All concrete barges and concrete floating platforms are to be fabricated in the

country. (18) Operation and maintenance of offshore production units, FPSO and FSO in

particular, are to be performed by Nigerian companies. (19) All international codes and standards used in the industry are to be harmonized

to support utilization of locally manufactured products such as paints, cables, steel pipes, rods, sections, ropes etc and to improve capacity utilization in local industries. Clauses that create impediments for/exclude participation of local companies should not be included in any ITT.

9LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

(20)

Operators and project promoters must ensure that recommendations for contract

award for all drilling contracts shall include a binding agreement at Technical Evaluation stage for the sourcing of Barite and Bentonite from local manufacturers. (21) All projects and operations in the Oil and Gas industry must demonstrate strict

compliance with provisions in the Insurance Act 2003 and submit a certificate of compliance issued by NAICOM to NCD as part of technical evaluation requirements for insurance or reinsurance Contracts. In this respect, NAICOM verified Gross underwriting capacity of Nigerian Registered Insurance companies must be fully utilized to maximize Nigerian Content before ceding risk offshore. (22) All projects and operations in the Oil and Gas industry must demonstrate strict

compliance with provisions of the Cabotage Act. (23) All operators and service providers must make provisions for targeted training

and understudy programs to maximize utilization of Nigerian personnel in all areas of their operations. All operators must therefore submit detailed training plans for each project and their operations.

PART D:

THE LOCAL CONTENT IN SUBSTANTIVE LAW.

The local content concept may be entrenched in a countrys national policy on the oil and gas industry, contained in specific laws on local content or may be expressly set out as contractual obligations in an agreement such as a production sharing contract. Policies which have no legal backing lack justiciability or the force of law. So, in order for operators to be held legally responsible for breach of any Local/Nigerian Content rule or principle, it is imperative for these rules or principles to be enacted into laws. This is essential as breach of a Local Content law in most cases attracts stiff penalties of the law which a mere policy would not have achieved. The Local Content has survived through a line of laws, right from the Petroleum Act of 1969, the Petroleum (Drilling and Production) Regulations and down to the Nigerian Content Development Act of 2010. Also, some principles of the Local Content has found its way into the Production Industry Bill which has not yet been enacted into law but, the discussion of the Local Content would pervade the four aforementioned instruments.

10LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

PETROLEUM ACT, 1969

The Petroleum Act is among, if not the first, to contain quite a number or few stipulations/provisions on Local Content. The Act stated in Section 2(2) that a licence or lease under this section may be granted only to a company incorporated in Nigeria under the Companies and Allied Matters Act or any corresponding law. It is important to note that while primacy is given to incorporated companies in Nigeria; it did not exclude the granting of licences to multinational companies, as the Minister has the discretion to do so. This is buttressed by the use of the word may in the section. Also, in cases of assignments of an oil prospecting licence from the licensee/assignor to the assignee, the Act provided that the minister shall not give his consent to an assignment unless he is satisfied that; (a) the proposed assignee is of good reputation, or is a member of a group of companies of good reputation, or is owned by a company or companies of good reputation; (b) there is likely to be available to the proposed assignee (from his own resources or through other companies in the group of which he is a member, or otherwise) sufficient technical knowledge and experience and sufficient financial resources to enable him effectually carry out a programme satisfactory to the minister in respect of operations under the licence or lease which is to be assigned; and (c) the proposed assignee is in all other respects acceptable to the federal government.13 This could be a justification for not granting such an assignment from a Domestic company to a foreign one, where the latter is not acceptable to the federal government in a case of reputation or in any other respect. The Act further states that the Minister may revoke any oil prospecting licence or oil mining lease if the licensee or lessee becomes controlled directly or indirectly by a citizen of, or subject of, or a company incorporated in any country which is (a) a country other than the licensees or lessees country of origin; and (b) a country the laws of which do not permit citizens of Nigeria or Nigerian companies to acquire, hold and operate petroleum concessions on conditions which in the opinion of the Minister are reasonably comparable with the conditions upon which such concessions are granted to subjects of that country. And in paragraph (2), Nigerian company means a company incorporated in Nigeria or a company controlled directly or indirectly by

13

First Schedule, Item 16.

11LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

citizens of Nigeria.14 This is basically to protect the interests of the Nigerian or safeguarding the Local Content. Finally, Item 37 in the First Schedule of the Act provides that the holder of an oil mining lease shall ensure that; (a) within ten years from the grant of his lease; (i) the number of citizens of Nigeria employed by him in connection with the lease in managerial, professional and supervisory grades (or any corresponding grades designated by him in a manner approved by the minister) shall reach at least 75 per cent of the total number of persons employed by him in those grades, and (ii) the number of citizens of Nigeria in anyone such grade shall not be less than 60 per cent of the total, and (b) all skilled, semi-skilled and unskilled workers are citizens of Nigeria. This is ultimately to ensure that services are provided more by Nigerians, thereby enabling a substantial participation in the Oil and Gas Industry. This is also to provide for more employment opportunities for Nigerians especially as the number of people undergoing/capable of undergoing skilled, semi-skilled and unskilled labours are numerous in contrast to those who undergo/are capable of undergoing white collar jobs.

PETROLEUM (DRILLING AND PRODUCTION) REGULATIONS

The Petroleum (Drilling and Production) Regulations which was made pursuant to Section 9 of the Petroleum Act also has provisions regulating the granting, assigning, revoking and renewing of licences which have stipulations implementing and safeguarding the Nigerian/Local Content. Regulation 1(2) (h) provides that every application for an oil exploration licence, oil prospecting licence or oil mining lease, shall be accompanied by details of a specific scheme for the recruitment and training of Nigerians. This ensures that even when the companys employees lack the required skills in any field, they would not be laid-off but would be compulsorily trained and educated in the required field. Also, this ensures that more Nigerians 15 rather than expatriates are employed for if the scheme does not contain the required quota for employing Nationals/citizens, the application for the licence would not be granted. In addition, an application for the assignment of an oil prospecting licence or oil mining lease (or of an interest in the same) shall be made to the Minister in writing and accompanied by the
14 15

First Schedule, Item 23(1). The word Nigerian in Regulation 61(1) was defined to mean a citizen of Nigeria and Non-Nigerian and Nigerianisation should be construed accordingly.

12LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

prescribed fee; and the applicant shall furnish in respect of the assignee all such information as is required to be furnished in the case of an applicant for new licence or lease.16 Also an application for assignment or takeover of an oil prospecting licence or oil mining lease (or of an interest in same) shall be made to the Minister in writing and accompanied by the prescribed fee at the discretion of the Minister; and the applicant shall furnish in respect of the assignment, or take over all such information as is required to be furnished in the case of an applicant for a new licence or lease.17 This implies that the same requirement of submission to the Minister of a specific scheme for training and recruitment which applies in the case of applying for a new licence is also applicable in the case of assignment or takeover of an already existing licence. Moreover, Regulation 26(1) provides that the licensee of an oil prospecting licence shall within twelve months of the grant of his licence, and the lessee of an oil mining lease shall on the grant of his lease, submit for the ministers approval, a detailed programme for the recruitment and training of Nigerians. It also stipulated that the programme shall provide for the training of Nigerians in all phases of petroleum operations whether the phases are handled directly by the lessee or through agents and contractors.18

NIGERIAN OIL AND GAS INDUSTRY CONTENT DEVELOPMENT ACT, 2010

This Act takes precedence/primacy over all other existing laws in relation to all matters pertaining to Nigerian/Local content in respect of all operations and transactions in the Oil and Gas Industry.19 This in essence means that where there are situations of conflict or inconsistencies between the Nigerian Content Development Act and any other law on Nigerian Content, the former would have an overriding effect on the latter. Though, it would be subjected to the Constitution of the Federal Republic of Nigeria. It also takes primacy and prevalence over the functions of the NCD (Nigerian Content Division). Also, all other Nigerian content regulatory bodies shall be taken over by the Nigerian Content Monitoring Board (the Board) to be established under the Act.20 Section 2 of the Act gives a directive to all participants in the Oil and Gas Industry that the Nigerian Content should be considered as an essential
16 17 18 19 20

Regulation 4(a). Regulation 4(b). Regulation 26(2) Section 1 of the Act. Section 69.

13LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

element/feature in the overall project development and management philosophy for the execution of projects.21 This is fundamental because the award of licences, permits and any other interest in bidding for oil exploration, production and development including all other activities in the sector is a major criterion when the provisions of the Act have been complied with. Operators22 are required to submit a Nigerian Content Plan as part of the conditions for bidding for a licence, permit or other oil and gas interest and; such submission are also required to be done before project execution to the Nigerian Content Monitoring Board.23 Section 12 provides that the plan shall show how the operator and their contractors will give first consideration to Nigerian goods and services. Also, the specific examples on how the first consideration is considered and assessed by the operator in the evaluation of bids for goods and services are required for the project. This is a remarkable provision in that, the local industry where there is the availability of raw materials or services must first be utilized, then in a situation where such utilization is factually impossible, resort could be had to foreign goods and services. However, the strict application of the Nigerian Content would not be enforced or implemented where Nigerian goods or services are of low quality. In other words, high quality would not be sacrificed on the altar of Nigerian Content. Therefore, locally manufactured goods must meet with or conform to industry specifications.24 Section 14 provides that where bids are within one per cent (1%) of each other at commercial stage, the bid with the highest level of Nigerian content shall be selected, so long as Nigerian content therein is at least five per cent (5%) higher than its closest competition. But where a Nigerian indigenous company has the capacity to execute a project, it shall not be disqualified on the basis that it is not the lowest bidder, provided the value does not exceed the lowest bid price by ten per cent (10%). 25 Therefore, the award of contract shall not be based solely or principally on the principle of the lowest bidder. Also, the operator is mandated to submit to and secure the Boards approval for advertisements, prequalification criteria, technical bid documents, technical evaluation criteria and the proposed bidders lists for all projects, contracts and purchase order in excess of US $1,000,000.26
21 22

Section 2. Companies in this category include NNPC, its subsidiaries and joint venture partners and any Nigerian or foreign or international oil and gas company operating in the Nigeria oil and gas industry under any petroleum arrangement. See Section 109 of the Act. 23 Section 4. 24 Section 13 25 Section 16 26 Section 17

14LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

Moreover, for the purpose of checking that the operators comply with the requirements for Nigerian content, the operators are required/mandated by the Board to submit a variety of documents to the Board for vetting at various stages, such as submission of documents during the prequalification stage27 and submission of a bidders list which shall include a description of corporate ownership main shareholders by percentage bidders.28 In addition, in the provision/availability of employment and training for Nigerians, Sections 25, 26 and 27 require the operator or any other body submitting a plan, and before carrying out any work or activity in Nigeria, to establish a project office in the catchment area where the project is located.29 Further, by virtue of sections 28 and 29, first consideration for employment and training in any project executed in the oil and gas industry shall be given to qualified Nigerians. Therefore, any project plan submitted must specify or indicate an Employment and Training plan. The operator is expected to file a quarterly report to the Board disclosing their Employment and Training activities.30 In the event/circumstance that there are no qualified Nigerians to be engaged, the Employment and Training plan shall disclose efforts to supply such training locally or elsewhere.31 This to a tremendous extent serves as a catalyst to the increase of local input (provision of services through human resources) in the economy as a result of participation in the industry mainly by Nigerians. This is also concurrent with the fact that there is job availability even though most applicants for the job lack the required skill. But the qualification to this is that there must not be available qualified or skilled Nigerians for the project before there is a need to train the unskilled ones. To further illustrate this, Section 31(1), which is quite similar to Section 317(1) of the Petroleum Industry Bill, infra, provides for a succession plan and Nigerianisation of positions, and it states that the operator shall submit to the Board, for each of its operations, a succession plan for any position not held by Nigerians, and the plan shall provide for Nigerians to understudy each incumbent expatriate for a maximum period of four years and at the end of the four-year period, the position shall become Nigerianised. This does not mean however, that the oil and gas industry would be totally indigenized or completely expunged of expatriates, for Section 32 provides that for each of its operations, an operator or project promoter may retain a maximum of five per cent (5%) of management positions as may be approved by the Board as expatriate positions to take care of
27 28 29 30 31

Section Section Section Section Section

20 21 25 29(c) 30

15LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

investor interests. In order to ensure that the operators comply with above requirements, the Act in Section 33(1) provides that the operators shall make an application to, and receive the approval of, the Board before making any application for expatriate quota to the Ministry of Internal Affairs or any other agency or ministry of the Federal Government. It goes on in subsection (2) to state that the application shall be detailed and shall include; job titles, description of responsibilities, the duration of the proposed employment in Nigeria and; any other information required by the Board for purposes of implementing the provisions of the Act.

Section 34 provides that in relation to any project with budget excess of US $100,000,000, such project shall contain a Labour Clause mandating minimum percentage of Nigerian labour that must be used in specific cadres as may be stipulated by the Board. Further, the Act provides that in the junior and intermediate cadre or any corresponding grade as designated by operators and companies in the oil and gas industry in Nigeria, employment shall reserved for Nigerians. The Act in Sections 36 through to 39 provided that there shall be a Research and Development Plan which shall be submitted to the Board every six months and the plan shall outline a revolving three to five-year plan for oil and gas related research and development initiatives which shall be undertaken in Nigeria. It also provided that there shall be public calls for proposals for research and development initiatives associated with the operators activities. This is principally to promote the growth and development of research, science and technology in Nigeria. This also spurs local input in these researches and encourages education in such research and developments. Apart from the training of Nigerians, the Act also in Section 40(1) provides that the Minister shall make regulations establishing the minimum standards, facilities, personnel and technology for training in the oil and gas industry. This is essential because the setting of standards discourages its abuse by the operators. The Act also requires the operator to give full and effective support to technology transfer by encouraging and facilitating the formation of joint ventures, partnering and the development of licensing agreements between Nigerian and foreign contractors and service or supplier companies.32 Therefore, every operator is expected to have a plan on technology transfer, which must be submitted to the Board, and such a plan are to be in accord with the countrys own plans and priorities. This is a good innovation as it helps a nation, such as a developing one, to develop technologically.
32

Section 45

16LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

Furthermore, the Minister is empowered to make regulations requiring any operator to set up a facility, factory or such other operations within the country. This is in order to make them engage in production, manufacturing or provision of any services otherwise imported in Nigeria.33 This ultimately ensures that the Nigerian/Local content is safeguarded, in the sense that, raw materials for the construction of these factories or facilities would be gotten from the local market and; the manpower or human resources for the actual construction would be Nigerians. To appreciate the efforts of foreign and indigenous companies that establish facilities, factories and production units in Nigeria to execute production, manufacturing or any other services otherwise imported, the Minister has been directed, in consultation with relevant arms of government to arrive at an appropriate framework and tax incentives for them.34 In addition, the Act has wide provisions on services such as Insurance, Legal and Financial services and; all operators, alliance partners and indigenous firms in Nigerias oil and gas industry shall insure all related insurable risks on its operations and contracts with, and through an insurance broker or brokerage firm or an insurer registered in Nigeria under the provisions of the Insurance Act.35 This has a similar provision in Section 29 of the Petroleum Industry Bill, infra. Therefore, no operator shall engage in offshore insurance without the written approval of the National Insurance Commission.36 Such approval is possible only where the Nigerian local capacity has been fully exhausted. This has the effect of boosting the countrys capital market. Moreover, Section 51 of the Act provides that all operators and other entities engaged in any operation, business or transaction in the Nigerian oil and gas industry requiring legal services shall retain only the services of a Nigerian legal practitioner or a firm of Nigerian legal practitioners whose office is located in any part of Nigeria.37 In Section 51(2) every operator shall submit to the board, every six months, its Legal services plan. Besides, a similar requirement exists in Section 52 which deals with financial services and it states that operators are required to retain only the services of Nigerian financial institutions or organizations, except where, to the satisfaction of the Board, it is not practicable. Financial institutions include banks and the depositing of huge quantum of money in Nigerian banks helps in economic growth. This is so, as there would be availability of cash for investments either by the banks or by the customers who take loans.
33 34 35 36 37

Section Section Section Section Section

47 48 49 50 51(1)

17LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

The Act prohibits the importation of welded products in Section 53. This helps the local economy as the supply of welded products would have to be done by the domestic industry. Also, by virtue of Section 55, the Joint Qualification System is to be established and going by the provision of Section 57, it is an industry data bank and it will be used, inter alia, to disclose upcoming projects and local capabilities. Finally, the operator is required, by virtue of Section 60, to submit to the Board within 60 days of each year, their annual Nigerian content performance report, covering all its projects and activities for the year under review. Section 65 also imposes a duty on the operator to see that its partners, contractors and sub-contractors are contractually bound to report Nigerian content information to the operator, and directly to the Board, should the Board so demand. They are also to allow the Board or its agents access to their records for purposes of assessing and verifying their information. Similarly, the Board, by virtue of Section 62, is empowered to embark on regular assessment and verification of the Nigerian content performance report filed by all operators. The filing of reports only aids the Board to monitor and check the extent to which the Nigerian/Local content is being executed or implemented by operators.

PETROLEUM INDUSTRY BILL

In spite of the fact that the Petroleum Industry Bill has not been enacted and therefore has no force of law to be legally binding and enforceable as against any person who breaches its provisions, it would not be irrelevant to highlight the important provisions in the Bill contiguous with the Local Content. Besides it would be of legal significance just as the Nigerian Content Development Act, when it finally becomes an Act. Firstly, Section 3(1) of the Bill states that the management and allocation of petroleum resources and their derivatives in Nigeria shall be conducted strictly in accordance with the principles of good governance, transparency and sustainable development of Nigeria and to maximize the economic value and benefits to the Nigerian people. The Bill in Section 8(1) states that the Federal Government shall at all times promote the involvement of indigenous companies and manpower and the use of locally produced goods and services in all areas of the petroleum industry in accordance with existing laws and policies. Assuming this was already an enforceable law, this section imposes a duty on the Federal Government and where the Government does otherwise, which is not in accordance with

18LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

existing laws and policies, then such action could be challenged in the court of law. The same Section also provides that where any contract for work or services is considered to be within the capabilities of Nigerian Companies, in accordance with any law relating to Nigerian content, the tender list shall be restricted to Nigerian Companies.38 Section 8(3) states that all companies involved in any area of the upstream, midstream or downstream petroleum industry shall, as a condition of their licence, lease, technical licence, commercial licence, contract or permit, as the case may be, comply with the terms and conditions of any law relating to the Nigerian content law in force at the time. In addition, Section 8(4) also stipulates that failure to comply with the terms of any local content law as determined by the Inspectorate shall be a ground for revocation of a licence, lease, contract or permit that may have been previously granted to the company that failed to comply with the said terms. It was also provided for that in order to accelerate the expansion of the Nigerian insurance and capital market, the Directorate shall support policies that would make it mandatory for operators in the petroleum industry in Nigeria to first utilize the Nigerian insurance and capital markets before resorting to the international market, for the purpose of insuring their assets and raising capital. This has the overall effect of spurring or stimulating economic growth as Nigerian capital markets and Insurance would first be resorted to for insuring the assets of operators and for providing capital to aid or promote investments within Nigeria.39 The Nigerian Petroleum Research Centre, which is to be established by virtue of Section 90(1) of the Bill, has the function or power to organise training courses, workshops, seminars and conferences for the purpose of promoting the functions of the Centre, capacity building, increasing Nigerian content and sensitising the government and people of Nigeria on issues relating to the petroleum industry and; to advise the government on policy formulation on all issues that are relevant to increase Nigerian Content levels in the Nigerian petroleum industry.40 The Bill in Section 121 made provisions for the establishment of the Petroleum Technology Development Fund. The purpose of the Development Fund shall be for the purposes of training Nigerians to qualify as graduates, professionals, technicians and craftsmen in the fields of engineering, geology, science and management and other related fields in the petroleum industry in Nigeria or abroad; and in particular, and without prejudice to the generality of the foregoing, the funds shall be utilised to: (a) enhance and develop world-class infrastructure and
38 39 40

Section 8(2). Section 29. Section 91 (g) & (m).

19LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

facilities in tertiary institutions that provide courses of study relevant to the oil and gas industry; (b) provide scholarships and bursaries, wholly or partially in universities, institutions, and in petroleum undertakings in Nigeria or abroad;( c) maintain, supplement, or subsidise such training or education as specified in this subsection; (f) coordinate with research centres in Nigeria and abroad on the adaptation of technology and innovations appropriate for the needs of the Nigerian petroleum industry; (g) use existing human resources development facilities in Nigeria for an expanded manpower development programme in the petroleum industry; (h) where applicable, support skill acquisition programmes aimed at enhancing employment in the petroleum industry in Nigeria; (l) promote in-country fabrication and manufacturing of equipment used in the Nigerian petroleum industry; and m) generally facilitate the attainment of 100 percent Nigerian content in the petroleum industry.41 The Bill in Section 171(1) provides that there shall be the following licences or leases: (a) a licence, to be known as petroleum exploration licence, to carry out prospecting on a nonexclusive basis; (b) a licence, to be known as a petroleum prospecting licence, to carry out petroleum exploration operations; and (c) a lease, to be known as a petroleum mining lease, to search for, win, work, carry away and dispose of crude oil and natural gas. The Minister may, subject to the provisions of the Act (Bill), and on the recommendations of the Inspectorate, grant a petroleum prospecting license or petroleum mining lease and where the Minister decides to grant such licence or lease: (a) it shall be to the winning bidder pursuant to the bid process prescribed in Section 189 of the Act, provided the winning bidder has complied with all requirements in the bid invitation; or (b) directly to the National Oil Company, where the National Oil Company with the approval of the Inspectorate, has completed an open and transparent bid process, pursuant to Section 189 of this Act, for potential contractors for contracts with the National Oil Company pursuant to Section 172 of this Act, on the basis of a model contract approved by the Directorate. Further, Section 171(5) provides that only companies incorporated under the Companies and Allied Matters Act that comply with the conditions prescribed by the Inspectorate shall be entitled to be licensees, lessees or contractor parties under the terms of Part III of the Act. Moreover, the conditions prescribed in Section 171(5) shall include the requirement to be a company that qualifies pursuant to the qualification criteria determined in the bid invitation. Such criteria shall be different for operators and nonoperators in the following respects: (a) the criteria for operator shall establish that the operator shall have the financial means and the technical qualifications to carry out the upstream
41

Section 124(1).

20LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

petroleum operations in a safe manner and in accordance with the highest international standards; and (b) the criteria for non-operator shall establish that the non-operator shall have the financial means to adequately finance his obligations.42 The Bill in Section 192 which deals with assignment, mergers and acquisitions provides that, subject to Subsection (6) of the Section, the Minister shall consent to an assignment if the proposed assignee is able to show to the satisfaction of the Minister that: (a) the proposed assignee is a company incorporated in Nigeria; (b) the proposed assignee is of good reputation; (c) the proposed assignee has sufficient technical knowledge, experience and financial resources to enable it to effectively carry out the responsibilities under the license or lease which is to be assigned; and; (d) the proposed assignee if it functions as operator, such assignee shall have proven operating experience with respect to operations to be carried out under the license or lease which is to be assigned. It is worthy of note that Section 192(4) provides that where a licensee, lessee, or contractor party proposes to transfer its stake to another company, or merges, either by acquisition or exchange of shares, including change of control of parent companies outside Nigeria, it shall be treated as an assignment in Nigeria and shall be subject to the terms and conditions of this Act and any regulations made under it. This has the implication of subjecting the assignee company of the licensee incorporated in Nigeria to the jurisdiction of Nigeria. Section 193(1) is quite similar to Item 23(1) in the First Schedule of the Petroleum Act, and it states that the Minister may revoke a license or lease if the licensee or lessee: (a) is controlled directly or indirectly by a person who is a citizen of, or subject of any country which is a country the laws of which do not permit citizens of Nigeria or Nigerian companies to acquire, hold and operate petroleum concessions or contracts on conditions which the Directorate finds to be reasonably comparable to the conditions upon which such concessions or contracts are granted to subjects of the country; (b) in the opinion of the Inspectorate, is not conducting operations continuously and in a vigorous and businesslike manner and in accordance with good oil field practice; (c) is not fulfilling his or her obligations under the special conditions of his or her licence or lease; (g) has not complied with such other specific requirements for which revocation is a consequence under this Act. Section 205(1) provides that any new project or modification or expansion of an existing project with respect to midstream petroleum operations shall require prior to any construction or
42

Section 171(6)

21LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

operation a project approval certificate (project approval certificate) issued by the Agency. But the project approval certificate of the Agency shall, inter alia, consist of an approval of the Nigerian Content Plan for the project pursuant to Part VI-B of the Act.43 Besides, any new project or modification or expansion of an existing project with respect to downstream petroleum operations shall require, prior to any construction or operation a project approval certificate issued by the Authority44 and such project approval certificate shall consist of an approval of the Nigerian Content Plan for the project. 45 Furthermore, in subsection 3, a project approval certificate pursuant to subsections (1) and (2) of this section shall only be granted to a company that has been incorporated under the Companies and Allied Matters Act, and that has complied with all the conditions prescribed by the Authority. It is noteworthy that a Nigerian content plan shall not be required for independent pipelines and independent depots as contemplated by section 274.46 Also, a Nigerian content plan shall not be required for projects requiring an investment below the level established in subsection (1) of section 313 of this Act.47 Section 264(a) provides that every holder of a commercial licence to carry out refining operations shall supply to the downstream domestic market refined petroleum products at fair market value. This is so, just to avoid hiking of prices of commodities. Section 297 stipulates that no licensee or any other person having the ability to influence the terms and conditions on which licensed activities are performed and the price at which petroleum products are supplied shall: (a) make it a condition for the provision or supply of a product or service that any person acquiring such a product or service shall be required to acquire or not to acquire any other product or service either from the licensee or from any other licensee, person or entity; (b) enter into any contract, arrangement collaboration or understanding, whether legally enforceable or not, which provides for or permits the fixing of tariffs, prices or charges for the purpose of, or in such a manner as to, manipulate market prices or the price of any product or service; (c) engage in or conduct its activities, directly or indirectly, for the purpose of market sharing; (d) permit, allow, influence the direct or indirect exclusion of, or the imposition of any embargoes or boycotts on another licensee, operator or supplier of equipment or apparatus; or (e) engage in any other conduct that the Authority deems anti-competitive. This in a nutshell, prevents and
43 44 45 46 47

Section Section Section Section Section

205(2)(e) 206(1) 206(2)(e) 206(4) 206(5)

22LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

discourages contracts in restriction of trade and tries to promote healthy competition between licensees selling the same product. It is remarkable that Section 311(1) provides that participation by the Federal Government in accordance with the provisions of this Act or any law in force shall not be applicable to petroleum operations carried out by indigenous oil companies whose aggregate production from petroleum operations is not more than ten thousand barrels per day of crude oil or its natural gas equivalent. This is remarkable because unlike the Joint Venture Arrangements (JVA) where the government participates actively in petroleum operations, participation is denied to the government when it comes to petroleum operations involving the indigenous companies. Section 312(1) also provides that the Minister in consultation with the Inspectorate, shall issue regulations prescribing clearly defined targets and programmes for continuous increase of the level of indigenous participation in the Nigerian petroleum industry and to generally give effect to the provisions of this Act which regulations shall include: (a) targets for indigenous oil and gas reserves; and (b) production personnel content and measurable parameters for determining the level of indigenous participation. Section 313(1) states that a development plan pursuant to section 178 of the Act or a project approval certificate pursuant to sections 205 and 206 of the Act, shall not be approved without an approved Nigerian content plan, where such plan relates to a proposed project involving an investment of US $ 10 million or higher based on the assessment of the Inspectorate, Agency or Authority as the case may be. It is noteworthy, in depicting the safeguarding of the Nigerian/Local Content that, Section 313(2) provides that the Nigerian content plan pursuant to subsection (1) of section 313 shall contain commitments as defined in sections 315 through 319 of this Act with respect to: (a) purchase of Nigerian goods and services; (b) employment of Nigerian citizens; (c) training and education; (d) research and development. This ensures employment opportunities and local input in terms of supply of services, in cases where an operator wants to execute a large project. In addition, Section 315(1) states that with respect to paragraph (a) of subsection (2) of section 313 of the Act, the Nigerian content plan shall contain with respect to the proposed project description of the classes of capital and operating costs and the percentage of Nigerian content pursuant to applicable legislation and regulations. Section 315(2) provides that the Nigerian content plan shall describe the measures the proponent has undertaken to maximize the purchase of Nigerian goods and services and the future measures that the proponent intends to apply in order to increase purchase of Nigerian

23LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

goods and services, including the submissions of the Legal Services Plan and the Financial Services48 Plan. In relation to employment and personnel, Section 316 (1) states that the proponent shall submit with his Nigerian content plan an Employment and Training Plan. Subsection (2) provides that the proponent of an employment plan shall commit to cross-posting of Nigerian citizens to its foreign operations, where expatriates are used to fill positions in Nigeria. Subsection (3) in addition states that projects in excess of US $ 100 million shall include a Labour Clause. Subsection (4) emphasizes that a licensee, lessee and commercial licensee shall at all times comply with the employment provisions of applicable legislation and regulations. Moreover, Section 317 (1) states that the Employment and Training Plan pursuant to section 316 of the Act, shall include provisions that the proponent at its own expense provide a reasonable number of personnel of the Institutions and the Service with on-the-job training , including on-the-job training in its main office or in other international locations and on the job training shall involve the trainees working with experienced expatriate professionals or managers of operator in order to gain hands-on knowledge and experience in the handling of actual situations as they occur in a particular specialty, as well as to gain a better understanding of management styles and the needs and constraints of such petroleum company. Finally, in relation to penalties, Section 321(1) states that any proponent, lessee, licensee, commercial licensee or their contractors and subcontractors that do not implement all or part of the approved Nigerian content plan or section 320 of the Act, shall be fined US $ 100,000 per day adjusted with the adjustment factor pursuant to section 331 of the Act. Also, Section 321(2) provides that where the non-compliance (by a lessee pursuant to Part III of the Act or licensee pursuant to Part IV of the Act, or contractor or subcontractor of the lessee or licensee) with the Nigerian content plan continues beyond a period of six (6) months, the respective lease or license may be revoked pursuant to the provisions under this Act.

PART E:

CONCLUSION

48

Financial services include deposit taking, checking accounts, loans, or various investment services.

24LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

For Nigerian operating companies, the Nigerian Oil and Gas Industry Content Development Act offers a great opportunity for growth and expansion. A Nigerian company is defined under the Act as a company registered under the Companies and Allied Matters Act and having not less that 51% Nigerian shareholding. Such a company is to be given first consideration in the award of oil blocks, oil field licences, oil lifting licences and in all project awards in the Nigerian oil and gas industry.49 These provisions should ensure a steady growth in Nigerian participation in the industry as well as increase local capacity and industry knowledge and expertise. In addition, Indigenous service companies stand to benefit tremendously from the provisions of the Act. This is because they are one of the key targets of the Nigerian content policy. Skills development and capacity building in core competencies such as Petroleum Engineering and Engineering Support Services, Engineering Designs, Fabrication, Manufacturing and Installation, Seismic Data Processing, Drilling and Exploration Services, Maintenance Services, Health, Safety and Environment etc., will ensure increased employment opportunities, minimal deployment of foreign expertise in project execution, and overall economic development. By virtue of section 3(2) of the Act, exclusive consideration is to be given to Nigerian indigenous service companies which demonstrate ownership of equipment, Nigerian personnel and capacity to execute the required work to bid on land and swamp operating areas of the Nigerian oil and gas industry for contracts and services as contained in the schedule to the Act. The more compliant they are in relation to Nigerian content i.e. their management, shareholding, personnel, etc, the better their chances are at being awarded bids.50 This is so even when they are not the lowest financial bidder provided, the company in question has the capacity to execute the job.51 The same goes for Nigerian indigenous contractors and companies in the supply of goods to the industry. Aside from these special considerations in project awards, regulations and an enabling framework is being put in place to ensure utilization and steady growth of Nigerian companies in the industrys service sector. These include: a. The establishment of an oil and gas e-marketplace which shall facilitate the effective implementation of the Nigerian content policy.52

49 50 51 52

Section Section Section Section

3(1) of the Nigeria Content Act 14 of the Nigeria Content Act 16 of the Nigeria Content Act 54 of the Nigeria Content Act

25LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

b. The establishment of a Joint Qualification System which shall constitute an industry data bank.53 c. The establishment of the Nigeria Content Consultative Forum to provide a platform for information sharing and collaboration in the industry.54 d. Establishment of the Nigerian Content development Fund to fund the implementation of the Nigerian Content policy.55 This would involve training and empowerment programmes for local service providers as well as deployment of funds for the various government initiatives directed at increasing Nigerian content in the industry. These are areas where the NNPC has also developed several key initiatives such as the launch of the Nigeria Content Support Fund and the introduction of the Nigerian Petroleum Exchange. In addition to these, prospective investors can take advantage of the special consideration given to Nigerian companies especially in the award of bids to form strategic alliances and partnerships which will be beneficial to all parties concerned. Moreover, apart from the fact that the Nigerian/Local content, in general, contributes to the GDP through the increase of goods and services produced, creates the availability of job opportunities for Nigerians, instigates healthy local competition in the market where these goods and services are being supplied, spurs investments and boosts the capital market, it also, through the availability and realization of income, helps in accrual of revenue to the government either directly through the proceeds of petroleum resources or, through the taxing of the income of the oil and gas companies and the personal income of its employees. To put it in a few words, the Nigerian/Local Content through the equal participation of Nigerians in the oil and gas industry, not only helps to develop the oil and gas sector, but other sectors of the economy. Of course, the feasibilibility of these depends to a large extent on good administrative or executive implementation.

CONTRIBUTORS
53 54 55

Section 55 of the Nigeria Content Act Section 57 of the Nigeria Content Act Section 107 of the Nigeria Content Act

26LOCAL CONTENT DEVELOPMENT LAW AND POLICY IN THE OIL AND GAS SECTOR.

ERINLE OLUWFEMI. O ANJORIN ABDUL-GHANIY ADEKOLA JUMOKE ADEGOKE OLUWAFUNMIBI OHAKANU JUSTUS SHODEINDE SEYE ONWUKEME OYEKACHI SANNI JIDE AWORETAN SEUN

SUPERVISOR/LECTURER DR. YEMI OKE FACULTY OF LAW, UNIVERSITY OF LAGOS.