project analyses the impact of the Nigerian Oil and Gas Industry Content
Development Act (2010) on the country’s petroleum industry.
to the NOGICD Act, the Nigerian petroleum industry was not only dominated by
foreign oil exploration and production companies since the beginning of
petroleum production in 1958, most oil servicing and support contracts were
also awarded to foreign contractors at the expense of indigenous firms. As a result of this, over $380bn was lost to
capital flight; over 10 million direct and indirect jobs were lost; and
indigenous companies lost the opportunity to develop local oil and gas capacity
required for them to get contracts and retain some of the annual oil and gas
industry’s spending in Nigeria.
Nigerian Oil and Gas Industry Content Development Act (2010) is, therefore,
designed to enhance the level of participation of Nigerian companies in the
country's oil and gas industry. With the NOGICD Act, the government has clearly
established its intention to increase indigenous participation in the industry
in terms of human, material and economic resources.
study, therefore, examines the impact of the Act on the industry. The implementation methodology/strategy, the
short-term gains, and the challenges facing the Act were also examined.
implementation and low compliance by IOCs are identified as major challenges
facing the Act and it was recommended that the Nigerian Content Development and
Monitoring Board, the implementation agency for the Act, do more in the area of
monitoring and enforcement of the law.
TABLE OF CONTENTS
of Content vii-x
Background to the study 1
Statement of Research Problem 3
Aims and Objectives of Study 4
Significance of Study 5
Scope and Limitation of Study 6
Synopsis of Chapters 7
Definition of Terms 9
CHAPTER TWO: LITERATURE REVIEW
2.0 Introduction 11
2.1. Historical appraisal of the Nigerian Oil and
Gas Industry 13
2.2. Development of Oil and Gas Law in Nigeria 15
2.3. The petroleum Act 18
2.4. The Petroleum Industry Bill 24
3.1. Evaluation of the NOGICD Act 2010 24
3.2. Losses due to Lack of Local Content Laws 27
3.3. Nigerian Content Development and Monitoring
3.4. Nigerian Content Plan 30
Nigerian Content Compliance Certificate 31
Nigerian Content Development Fund (NCDF) 32
Impact of NOGIGD Act on oil and gas industry 34
In-Country Manufacturing 35
Marine Vessel Ownership 37
Offshore Rig Acquisition 38
Pipemill Scheme 40
Nigerian Oil and Gas Industrial Park Strategy 41
Employment and Training Initiative 42
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION
Challenges facing Nigerian Content Development 47
TABLE OF CASES
Anthony Atubie v.
Shell B.P. Development Co. of Nigeria Ltd (Unreported) 12
Chief Otuku v.
Shell B.P. (1985) 12
Chinda v. Shell BP
Development Co of Nigeria Ltd (Unreported) 1974 12
Limited v. Opere Sillo (1994) 6 N.W.L.R. (Pt. 350) 258 12
Gbemre v. Shell
Petroleum Development Co Nig. Ltd & Ors
51 S.C 12
Nig Unltd v. Udo. NOGC 6 [2007-2008] 12
Sam Ikpede v.
Shell B.P. (Nig) Ltd
Development Company Limited v. Adamkue
(2003) 11 N.W.L.R.
(Part 832) 553 12
Development Company (Nig) Ltd v. Chief Joel Amaro & 12 Ors
NOGC 2 [1996-2000]
360 C.A 12
Shell v. Farah.
(1995) 3 N.W.L.R (Pt. 382) 148 12
Development Company of Nigeria Limited v. H.B. Fishermen
(2002) 1 W.R.N 12
Development Co. of Nig. Ltd v. Isaiah (2001) 11 N.W.L.R (Pt.723)..
Shell Nig. Ltd v. Kwame Ambah (1996-2000) NOGC
2, 271 S.C. 12
S.P.D.C. Nig Ltd
v. Lalibo (2009) 14 N.W.L.R. (Pt. 1162) 12
LIST OF STATUTES
Oil and Gas Industry Content Development Act 2010
v Mineral Oils Ordinance 1914
Act promulgated as Decree No. 51 of 1969 (now Cap. P10 Laws of then Federation
of Nigeria 2004)
(Drilling and Production) Regulation 1969.
Oils Act No. 17 of 1925
Oils Act (Amendment) Ordinance 1959
Profits Tax Ordinance 1959
Petroleum Ordinance of 1889
Regulation (Oil) Ordinance of 1907
v Hydrocarbon Oil Refineries Act (Cap. H5, LFN 2004)
v Petroleum Act (Amendment) Act 1998, (DecreeNo. 22 of
Gas Re-Injection (Continued Flaring of Gas) Regulations 1984
of the Federal Republic of Nigeria (1999) As Amended
Delta Development Commission Act 2000
Minerals and Mining Act 2007
Industry Bill 2011
v Petroleum Production and Distribution
(Anti-Sabotage) Act LFN 2004
Products Price Regulation Act LFN 2013
v Oil in Navigable Waters Act.
v Nigerian Liquefied Natural Gas Act
§ OPEC: Organisation of Petroleum Exporting Countries
Oil and Gas Industry Content Development Act
§ NCDMB: Nigerian Content
Development and Monitoring Board
§ IOCs: International
§ NNPC: Nigerian
National Petroleum Corporation
Nigerian National Oil Corporation i
§ BCF: Billion
§ BCF/d: Billion
Cubic Feet a day
§ Cap: Chapter
§ DPR: Department
of Petroleum Resources
§ Ed.: Edition
§ TCF: Trillion
§ b/d: Barrels
§ IEA International Energy Agency
§ PSC: Production
§ PSA: Production
§ PPTA Petroleum
Profits Tax Act, Cap P13 LFN 2004
§ JQS Joint
§ ECMI Equipment
Component Manufacturing Initiative
1.1 Background to the
oil production in Nigeria began in 1958, the oil and gas industry in the
country was initially the exclusive domain of International Oil Companies such
as Royal Dutch Shell, Chevron, Exxon-Mobil, Agip and Total. For 52 years,
Nigerians were unable to harvest technological, industrial and economic
benefits from the oil and gas activities because the industry was dominated by
IOCs, not just in exploration and production but also in trading.
a result of this, over $380 billion was said to have been lost to capital
flight in the past three decades of oil exploration in the country, and this
was said to have been aggravated by the loss of over 10 million direct and
indirect jobs; loss of investments in development of local fabrication yards
and facilities; and loss of the opportunity to develop local oil and gas
view of this, Nigerians are always complaining that they have not been able to
see the economic benefits of oil companies operating in the country.2
Nigeria lost the opportunity for industrialisation through oil and gas
activities and currently lacks capacity in building drilling rigs, pipelines,
valves, pumps, production platforms, marine vessels, as well as Research &
Development that are very critical to oil and gas operations.
oil and gas sector is the driving force of the nation’s economy and the
development of local capacity in critical areas of the industry will ensure
that Nigerians benefit from the multi-billion dollar investments circulating in
the oil and gas industry and those expected to flow into the country after the
passage into law of the Petroleum Industry Bill.3
April 2010, therefore, the Nigerian Oil and Gas Industry Content Development
Act was signed into law to increase indigenous participation in the oil and gas
industry. The key thrust of the NOGICD Act
is to maximise utilisation of Nigerian made goods, human resources and Nigerian
owned assets in the petroleum industry. It is also expected to link the oil and
gas industry to other sectors of the economy, ensure participation of indigenes
and oil producing communities in all aspects of oil and gas business, and
foster institutional collaboration.As
a basic principle, therefore, the Act gives preferential treatment to all
Nigerian companies operating in the industry. It also requires that the
promotion of the Nigerian content development shall be a major concern in all
projects and operations in the oil industry.
succinctly, the Act provides that Nigerian independent operators shall have
first consideration in the award of oil blocks and lifting licenses, among
others, in all projects for which contracts are to be awarded.
other words, the law applies to all spheres of the industry not only
contracting but job creation, training and domiciliation of capacity,
technology and services; and the development/upgrade of facilities and
the Act aims to increase local asset ownership, supplier and infrastructure
development, manufacturing, training and research and development.
Following the passage into law of the NOGICD Act in
2010, the Federal Government had issued
short term targets to the oil and gas industry
and by 2015, expects that $10 billion
out of the $20 billion average
annual oil and gas industry spend should be retained in Nigeria. Other targets
include the creation of over 30,000 direct employment and training
opportunities; establishment of three to four new pipe mills to service
industry demands; development of one or two dockyards and utilisation of existing
shipyards; transformation of ownership profile of the marine assets supporting
offshore operations; integration of indigenes and businesses residing in the
oil producing areas; and capturing of over 50 – 70 per cent of banking
services, insurance risk placements and legal services in the petroleum sector.
The NOGICD Act, often called the Nigerian Content law, is being implemented by
the Nigerian Content Development and Monitoring Board.
are thus required to give first consideration to local contractors and award
them contracts if their pricing is within 10 per cent of the cheapest rates
available internationally. All else equal, local firms with a proposal of 10
per cent more expensive should still win the contract.
the NCDMB has at various times canvassed strong arguments to justify the local
content initiative of the government, not much study have been done on the
impact of the Act on the oil and gas industry so far, especially as it affects
indigenous operators. It is therefore hoped that this long essay will examine the
impact of the NOGICD Act on the oil and gas industry, give a better
understanding of the dynamics of the act, and thereby results in a better
appreciation of the subject matter.
study is an evaluation of the short-term impact of the Act on the oil and gas
industry and it is expected to be an independent assessment of how much of
indigenous participation has been achieved so far on the country’s oil and gas
1.2 Statement of Research Problem
study analyses the Nigerian Oil and Gas Industry Content Development Act, 2010;
its impacts on the country’s oil and gas industry regarding indigenous
participation and the attendant capacity development benefits expected to
accrue to local oil companies as well as host communities.
challenges facing local content development in the country underscore the
research problem that is the focus here.
1.3 Aims and Objectives of the Study
attempt will be made to evaluate the oil and gas industry prior to the passage
of the NOGICD Act and the post-NOGICD Act milieu in view of how well indigenous
operators have done vis-a-vis contributions to the Nigerian economy by Nigerian
oil and gas concerns.
study will specifically examine the developments so far recorded across
different verticals of the oil and gas industry following the commencement of
the implementation of the NOGICD Act.
the Act has helped in promoting the increased utilisation of indigenous skilled
manpower and encouraged training of Nigerians in meeting the increasingly
complex needs of the oil industry will also be a major focus in this
study will not be complete without looking at the execution strategy of the
Federal Government through the NCDMB, the implementation agency of the local
content law which has been mobilising for the development of indigenous
capacity in the oil and gas industry.
of the greatest problems facing the NOGICD Act is low compliance by IOCs
operating in the country. Recent developments have shown that these
international players deploy certain strategies through which they circumvent
the laws at the expense of indigenous manpower that should directly benefit
from the Nigerian content initiative.As
such, attention will also be paid to the challenges facing the NCDMB in the
implementation of the Act via-a-vis strict compliance to its requirements in
awarding contracts for oil and gas projects in the country.
1.4 Research Methodology
work employs the analytical research methodology, and it relies basically on
primary sources of information such as the NOGICD Act, available reports and
paper presentations by the NCDMB responsible for the implementation of the Act
and monitoring of stakeholders’ compliance with the provisions of the Act.
there are limited studies on the NOGICD Act and its impacts on the oil and gas
industry, but readily available newspaper articles, position papers by law
firms and legal analysts were also relied upon.
on the Nigerian oil and gas law were cited in order to give the study a broader
perspective since the NOGICD Act is one critical aspect of the laws governing
the oil and gas industry in the country.
1.5 Significance of the Study
decision to carry out a critical analysis of the impact of the NOGICD Act, 2010
could not have been made at any better time than this because it is the first
attempt by the Nigerian Government to drive increased indigenous participation
in the oil and gas industry through deliberate policy development embedded in
the passage of the NOGICD Act, the Federal Government had largely relied on
royalty and petroleum tax from IOCs operating oil fields under Joint Venture
and Production Service Contract arrangements with the former through the
Nigerian National Petroleum Corporation. Oil exploration and production support
services in the areas of vessels provisioning, drilling, supplies, analysis,
dredging, technology, communication and fabrication were largely contracted to
foreign firms. The implication of this, however, is that the activities of international
oil giants in Nigeria are being responsible for a very huge capital flight at
the expense of the Nigerian economy.
the oil and gas industry is Nigeria’s biggest revenue earners, the benefits
accruing to indigenous companies have been so inconsequential over the years,
hence, the NOGICD Act (2010).
as a game changer in the country’s oil and gas sector, the need to critically
examine the implications, impacts, gains and the challenges of the NOGICD Act
cannot be over emphasised.
so, the government had set targets for the industry to reduce capital flight,
create more jobs and generally increase the take of indigenous companies in the
oil and gas value chain.
it is very critical for Nigeria to maximise value from oil and gas activities
in order to increase local participation in the industry’s value chain,
throwing more light on how this target is being propelled is very germane and
this exemplifies the purpose of this study.
1.6 Scope and Limitation
of the Study
scope of this study is quite wide and it analyses the impact of the NOGICD Act,
its implementation strategies, the compliance level and the challenges. In other words, it dissects the provision of
the Act as a basis for the regulation of petroleum industry activities as they
relate to indigenous companies.
also focuses on the impact of the Act on the industry as well as verifiable
growth trajectory across various verticals of the oil and gas industry.
Apart from core oil exploration and production,
the study aims at reviewing and revealing the development recorded as a result
of the Act in oil service industry such as drilling and offshore vessel service
provision, engineering, pipeline manufacturing, fabrication, offshore welding
and repairs, safety, Information and Communication solutions, Environmental
Impact Assessment and laboratory analysis, among others.
this is not in isolation as the study also delves into historical perspectives
on the Nigerian oil and gas industry while looking at different laws that have
guided the operations of the industry from the colonial era till the passage of
the NOGICD Act in 2010.
study is not without its limitations. Considering the fact that the NOGICD Act
is just four years old, critical studies on the Act are almost non-existent.
This study, however, attempts to set the tone for future studies of the Act.
1.7. Synopsis of Chapters
study is organised along thematic lines and broken into five chapters
summarised as follows
first chapter gives a brief background to the study emphasising the imbalanced
benefits received by local companies and indigenes of oil producing communities
from oil exploration and production activities in the country compared to the
largess enjoyed by International Oil Companies operating in Nigeria.
also focuses on how the NOGICD Act, 2010 was passed to serve as a game changer
by reversing the trend of huge capital flight through increasing local
participation in the industry.
aims and objectives of the study, research methodology as well as the
justification for the study are clearly highlighted. The study’s scope and limitation precede the
chapters’ synopsis as well as definition of terms.
1.7.2. Chapter Two
second chapter sets the tone for the study appraising the Nigerian oil and gas
industry, and the development of the law governing activities in the sector,
while focusing on the current legal framework for the industry. This dovetails
into the Petroleum Industry Bill, which
will subsume all the current laws guiding the oil and gas industry when passed
The second chapter
evaluates the NOGIGD Act, 2010 and attempts to quantify/ assess the
losses recorded in the oil and gas sector due to lack of local content laws.
The Nigerian Content Development and monitoring Board, the implementing agency
and the driver of the local content initiative is dissected in this chapter
vis-a-vis its structure, medium term targets, and implementation strategies of
the Nigerian content laws.
It also looks at the Nigerian Content Monitoring and
Evaluation Process where attention was paid to intervention, compliance and
performance monitoring processes.
1.7.3 Chapter Three
The chapter three looks into the implementation
methodology under the NOGICD Act in areas such as capacity development, equipment
components manufacturing, marine vessel ownership, offshore acquisition
strategy and pipe mill scheme.
are employment and training as well as other veritable initiatives such as the
Nigerian Content Joint Qualification System, Nigerian Content Development Fund,
Expatriate Quota Management, and the Nigerian Oil and Gas Industrial Park
Chapter four takes an analytical
evaluation of the impacts of the NOGICD Act on the oil and
gas industry, looking at how far indigenous players have gone in offshore
construction, offshore support vessel acquisition, dry-docking and shipbuilding
and in-country manufacturing. The analysis continues by looking at the impacts
of the Act regarding local capacities in logistics and rig maintenance, and
employment and training initiatives.
chapter also looks at the various challenges bedevilling the Nigerian Content
Development initiative as well as the litigations cases, if there are, over
Local Content compliance in the country.
Chapter five rounds the whole exercise
off. IT summarises the discourse while focusing on the challenges facing the
local content development drive of the Federal Government and recommending
viable steps to take in achieving the Nigerian Content target in the country’s
oil and gas industry
Definition of Terms
According to Section 107 of the Act,
NOGICD Act means the Nigerian Oil and Gas Industry Content Development Act,
In Section 106, the “Nigerian Content” is
defined as “the quantum of composite value added to or created in the Nigerian
economy by a systematic development of capacity and capabilities through
deliberate utilisation of Nigerian human, material resources and services in
the Nigerian oil and gas industry.”
A “Nigerian Company” is defined as: “a
company formed and registered in Nigeria in accordance with the provisions of
Companies and Allied Matters Act with not less than 51 per cent equity shares
“Minister” means the Minister of Petroleum
5. NNPC JOINT VENTURES:
“NNPC Joint Ventures” means oil companies
that executed various petroleum agreements with NNPC;
OIL AND GAS:
“Nigerian oil and gas industry” means all activities
connected with the exploration, development, exploitation, transportation and
sale of Nigerian oil and gas resources including upstream and downstream oil
and gas operations.
“Operator” means the Nigeria National
Petroleum Company (NNPC), its subsidiaries and joint venture partners and any
Nigerian, foreign or international oil and gas company operating in the
Nigerian oil and gas industry under any petroleum arrangement;
“Partner” means any foreign company
working on any project in partnership or as major contractor to an operator.
“Plan” means a Nigerian content plan
submitted in compliance with any aspect of the NOGICD Act.
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