Breaking News

Nigeria’s oil industry tendering process goes online


In perhaps what may pass as a revolution of sorts the conventional bid tendering processes for jobs within the Nigerian oil and gas industry has formally gone online, leaving behind an analogue era noted for poor transparency, accountability and a lengthy contracting cycle.
The Nigerian Senate has also committed to timely passage of the Petroleum Industry Bill (PIB), while noting the need for an equitable fiscal regime in the oil and gas sector to allay concerns earlier raised by international oil and gas exploration and production companies in the country.
To further allay concerns raised by the international oil companies, Sweet crude gathered that Dr. Goodluck Jonathan, the Acting President has issued a directive urging Dr. Emmanuel Ebogah, Presidential Adviser on Energy to take a second look at the PIB.

Changes in oil & gas bid tendering system:
In an analysis gleaned from, it was gathered that changes to the oil and gas industry bids tendering processes actually changed on the 1st January 2010 when the pre-qualification stage was modified to require pre-registration in a re-worked online system for all suppliers prior to bid submission.
The online tendering site is expected to simplify supplier selection, as well as the contract approval process and the procurement process between multinational oil and gas exploration and production companies and the Nigerian National Petroleum Corporation (NNPC).
It would be recalled that the changes in the oil and gas bid tendering processes was initiated by the NNPC which created an online electronic center in 2005 to stream-line the contracting process in Nigeria.
The electronic centre metamorphosed into the Nigerian Petroleum Exchange (NipeX), a virtual community that links buyers and suppliers. The NipeX has increasingly played a role in the tender process  and has become a hub of tendering in the oil and gas industry.
Last year, the NNPC issued a directive urging industry to take note that from the beginning of 2010, all tenders within the National Petroleum Investment and Management Services (NAPIMS) must be processed through the NipeX portal.
Since then, all manual submissions of contracting documents for approval have not been entertained leaving very little room for under hand dealings.
At the moment, all contracting documents go through the NipeX portal, an indication that all suppliers of goods and services in the Nigerian oil and gas industry must register to be eligible to participate in new opportunities.
Checks revealed that the introduction of NipeX has updated the pre-qualification stage of the three-step tendering process with the online registration, application, and processing system; leaving the rest of the bidding process intact.
Only registered and pre-qualified companies can submit rigs or services for a job after paying a registration fee of $200, and a filling out a brief application.
There is also a Joint Qualification System (JQS) in place which identifies pre-qualified suppliers in NipeX based on certain criteria.

To qualify:
To qualify, the NipeX Joint Qualification System (NJQS) team must first audit the company, in part to ensure Nigerian content. A prequalification audit conducted by NAPIMS and Achilles (NipeX) includes a mandatory visit to the supplier’s site or facility.
If the audit is successful, the company is qualified for up to two years. Suppliers cannot register and become qualified after the tender starts, thus it is important to register early to avoid missing out on future requirements.

Benefits of the Process Change
Qualified buyers are given a User ID to access the NipeX portal to process a tender. User IDs are unique to a specific NAPIMS department and unit. They also determine the NAPIMS approval flow of documents.
Buyers also benefit from a more effective tendering process with lower administrative costs, better collaboration between buyers and suppliers, faster decisions and approvals from NAPIMS, competitive pricing, and improved compliance.
Much like the previous tender process, buyers are still required to publish newspaper advertisement which directs all interested suppliers to the NipeX portal where they are be encouraged to register with NJQS.
Once in the system, buyers and contractors are at liberty to create a shopping cart, submit ITT and evaluation criteria documents for NAPIMS’ approval, publicize approved ITT documents to qualified bidders, and open and evaluate bidder’s tender submissions.
Through NipeX, suppliers can also see lower processing costs and have access to more opportunities.
Similarly, the NNPC can also see a lower processing cost, be able to accelerate first oil, facilitate the Nigerian content program, and benefit from an efficient purchasing process and increased transparency.
It is understood that the new NipeX tendering system has not been widely recognized by oil service contractors.

Service contractors:
Sweet crude gathered that all multinational oil and gas companies have forwarded a list of their incumbent suppliers and technically qualified bidders to NipeX, but th exchange has granted automatic waivers into NJQS to about 50% of these suppliers.
Although many incumbents with contracts in the region have been granted waivers, registration in the system is required to participate in tenders. These companies must complete an application and pay the registration fee. It is understood that some incumbent companies have yet to apply for qualification, which if not completed would preclude them from participation in upcoming tenders.
Industry sources indicate that only a handful of international drilling contractors are currently registered. The oil service and drilling bidding landscape may potentially be slightly less competitive in the short term until everyone registers.
New entrants will still have to establish a local presence before registering and pre-qualifying to bid. Nigerian establishment is required to qualify, and there are several ways to achieve this mandate. Noble and Transocean have established themselves in Nigeria through the creation of local subsidiaries. Noble has even put the ownership of one of their rigs against a local subsidiary.
Another approach is to partner with a local company. Checks revealed that Seadrill has an agreement in place with Petrolog, a Nigerian company. Petrolog is Seadrill’s official representative in Nigeria, and all Nigerian contracts are assigned to Petrolog. In exchange for this service, Petrolog takes a percentage of the day-rate generated by Seadrill’s Nigerian rig contracts.
Meanwhile, service companies qualified under the first batch of audits nearly two years ago were granted automatic waivers even though their certificates are due to expire. Those certificates are considered valid until the next round of NJQS audits begin. At that time, they must seek re-qualification. Suppliers who do not meet the requirements for a specific service can reschedule a new date for a follow-up audit to be conducted.

Drilling Activities:
Drilling contractors with a presence in Nigeria include Transocean, Noble, Seadrill, Stena, Seawolf, and Frontier Drilling. Currently, 10 jack-ups, three deepwater semi-submersibles, and three drill-ships are in Nigeria, and all but one jack-up are contracted. Pride and ENSCO have worked jack-ups in Nigeria in the past, but neither of these US contractors has had a rig deployed there in several years.
Nigerian offshore rig spending totaled nearly $1.7 billion in 2009 and more than $6 billion over the past four years. With offshore rig day-rates rising in most global offshore rig markets from 2004-2008, spending in Nigeria has been on the rise. Like many other markets around the globe, the Nigerian rig market was adversely impacted by the global downturn in 2009. However, over $1.2 billion in offshore rig spending is already booked for 2010, reflecting a 25 per cent decline from 2009 levels if no additional contracts are signed this year.
With the cost of offshore drilling rigs understood to constitute about half the cost of a typical Nigerian drilling program, these figures help provide perspective on the opportunity Nigeria offers both oil service companies and drillers alike. If the 2x rig cost rule of thumb holds, Nigerian drilling programs alone present a 2010 revenue opportunity of over $2.5 billion for oil service and drilling companies.
Even though Nigeria has been a volatile region characterized by unrest in recent years, the country is still one of the largest oil producers in the world. The Nigerian economy is closely tied to the oil sector, and the country’s oil industry officials have encouraged local content inclusion. In 2009, Nigeria was the 8th largest OPEC oil producer, averaging approximately 1.8 MMb/d during the year.
Much of the oil and gas activity in the country is centered on the Niger Delta area where security has been a problem for the oil industry in recent years. General unrest in the country has resulted in its oil output declining almost 35% from peak levels in the 2004/2005 timeframe. At the moment, an amnesty programme put in place by the government appears to have taken care of security concerns.
Although Nigeria has faced its share of challenges, some 36 billion barrels of proven oil reserves in the country are attractive to international oil companies (IOCs), and there is a robust local market for contract drilling and oil services. Some key exploration and development players working on projects in Nigeria include Shell, ExxonMobil, Chevron, ConocoPhillips, Total, ENI/Agip, and Addax Petroleum.
Notable early- to mid-stage offshore field developments in Nigeria include the Greater Ebok-Okwok Complex, Akepo, and Egina. High profile producing projects include Agbami, Usan, and Erha.
Nigerian National Petroleum Corp. (NNPC) was created to provide oversight and regulation for the Nigerian oil industry in 1977. The lion’s share of the projects in the region are structured as joint venture arrangements with NNPC taking a majority stake, and IOCs acting as operators with a minority stake.

Senate commits to passage of PIB
The Nigerian Senate has also assured it is putting finishing touches to the Petroleum Industry Bill (PIB), adding that the legislative process was affected by deliberations on the 2010 appropriation bill. Senator Lee Maeba, the Chairman of the Senate Petroleum Committee (Upstream) made the disclosure while speaking in an exclusive interview with Sweet crude.
“We are coming out with an equitable regime that will ensure adequate government take and adequate incentives for foreign firms.
We are very much aware of the growing competition in the Gulf of Guinea; Angola has opened its doors, Guinea has opened its doors, we are very much aware of this and would not want to come up with a tax regime that would drive investors from the country,” the Senator assured.
Senator Maeba also assured that the PIB would address concerns surrounding tenure of the group managing director of the NNPC to ensure the operations of the corporation is not unduly impacted by politicking.

FG moves to allay concerns
Sweet crude also gathered that following representations from the multinational oil and gas exploration and production companies to the Acting president on their reservations over provisions contained in the PIB, he issued a directive to the Presidential adviser on Energy urging him to address their concerns.
At the time of filing this report, Sweet crude could not ascertain how far Dr. Ebogah has gone with his task, but the expectations are that the multinational oil and gas exploration and production companies may have their way.


Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.