Sweet Crude

May 5, 2014

Nigerian companies now exporting capabilities – PETAN

Nigerian companies now exporting  capabilities – PETAN

Each year scores of Nigerian companies and participant throng the Offshore Technology Conference, OTC, in Houston Texas, USA. However, the Chairman, Petroleum Technology Association of Nigeria, PETAN, Mr. Emeka Ene, tells Clara Nwachukwu, that it is far from the jamboree many suspect the conference to be, saying that Nigerian companies have broken new grounds in technology and exporting their capabilities and the OTC offers the best platform to showcase these. Excerpts:

How would you describe technology deployment by indigenous companies in Nigeria’s oil and gas industry?

I think that technology in itself and various technologies grow in phases.Technology is not one word; it derives from the application of knowledge to get things done.

What has happened in the industry is that its being done in multiple phases. We had the phase of creating opportunities for Nigerians to provide service, now that it has started maturing with the Nigerian Content Act, to the phase of actually manufacturing.Now that is driving the phase of Research and Development, R&D.We have had a few instances of Professors in universities collaborating with private companies to create solutions including services, in fabrication; in process engineering etc, we have seen a lot of that already beginning to happen.

So I see that there has been almost like a steep change between the last 10 years preceeding 2010 and the last four years post the Local Content Act. There has been a steep change and therefore, you’ve seen a lot of progress even on the indigenous technology side.

So how would you then describe individual company’s response to these changes?

Emeka Ene

Emeka Ene

There has been a mixed bag. One thing is that the crop of entrepreneurs who kicked off what I would call the revolution in the oil and gas industry in Nigeria, were seasoned technocrats, people who had already paid their dues working in different parts of the world at different ends of the technology spectrum and who by virtue of their entrepreneurial prowess as individuals to invest in starting their own companies in Nigeria.

We went through what I would call the dark ages where the opportunities were just not there even though the competence was there to a period today where the field is wide open for Nigerians to demonstrate proof of concept to do work. So its a mixed bag because there are also people who have not gone through that process who have also jumped into the local content bandwagon.

For those who have gone through two or three phases in their companies, it’s a natural extension of the fact that for them to maintain a competitive advantage, there need to be home grown technology as it were.Although technology in itself is not local or indigenous, technology in itself is you get the best of what ever it is and put it together to solve your own problem.So in this sense, indeed on an individual basis we have seen a lot of progress.

I’ll give you a few examples in the companies who actually do engineering process design locally, there are Nigerian companies involved in deepwater who have actually derived unique solutions to solve trying problems. Right now, the world’s longest fibre security vision project is being done by a Nigerian company. It’s the longest installation of such a solution; its a Nigerian company that is doing it; not a multinational, not a foreign company. So Nigerians indeed have the capacity to think through issues.What is happening is that most of the research and development costs are usually funded from activitiesthat will follow and that is already happening.

But can you really say that so far, that we are doing enough?

Certainly we cannot say that we are doing enough but that is another wide question. It’s never enough because you have to look at what the drivers of the business are. We went from a rent collection driver and we are now evolving into an actual resource application driver.

Now what we are saying is, if we go to an innovation driver which is when we are driven by technology – this thing is derived from a guy called Joseph Schumpeter, he was the father of innovation as a driver for entrepreneurial growth, what you find is that it’s a natural extension that to maintain your competitive edge you have to go into innovation.

We are not there yet where we are driven primarily by technology, however, we already have examples of companies that by natural extension and in order to compete, they have to and they are doing that in the fabrication area,and in the manufacturing area.

Things are already being manufactured in Nigeria, and what I mean by manufactured I mean they are being designed, they are being conceptualised, and they are being made in Nigeria, and exported to other countries. So you can never do enough, but our industry is not yet driven by innovation for obvious reasons.We just started this process but it’s inevitable that as long as there is a level playing ground and the industry keeps growing that innovation would inevitably become the driver in doing our business.

Compared to your peers in other climes how would you compare Nigeria, not those in the developed world but those in Africa, but those in other developing countries in Asia and the rest of the world?

I would like to compare Nigeria to another oil province say the Middle East. I am not even selecting a country; I am going to look at the whole of the Middle East from Algeria all the way to Yemen, all the way to Iran, and all the way to Saudi Arabia, Oman, Kuwait all that stuff. Now what you’ll see even to South East Asia, if you like to Malaysia, Indonesia, Dubai, what you’ll find is that Nigeria and Nigerians in the oil and gas industry are unique. They are unique in the sense that we’ve had the fastest growth in terms of hands on ability to deliver service.

Now there are local content models across the Middle East, but these models are simply an agency type model,so once you set up an agency you can do business. However, in our own situation we have Nigerians who have made and are prepared to make investments to grow technical service companies from ground up.

That is a significant difference because what you now see is that some Nigerian companies are already able to export these capabilities outside Nigeria. There is a Nigerian company in Houston providing computer services to clients there; it’s a Nigerian company that started from here and evolved over there.

You have Nigerian companies who are working in Mauritania offshore FPSOs; you have Nigerians who are drilling in Congo; we have Nigerian who are offering services offshore Angola; we have Nigerians who are doing business in Yemen, in Saudi Arabia, in Oman. These are service companies that started in Nigeria and exported their businesses, so in that respect Nigeria is unique.

In all of Africa, it is difficult to find the kind of momentum of Nigerian entrepreneurs, or technocratsthat we have in the oil and gas industry. This is partly because we have the population, partly because we have the drive. Also partly because by unique combination of historical facts, we have had a large population of diaspora Nigerians who have the experience both internal and external, and are ready to take the risk involved in setting up their businesses.

So in that regard, Nigerians are pretty much ahead and I think the industry recognises that. There are problems obviously, it’s not tidy, it’s not neat, there are still capacity issues but the drive and the passion is not lacking, therefore invariably Nigerians are head and shoulders ahead of their peers from the rest of Africa.

I asked this question because of the recurrent issue of sidelining by the IOCs in Nigeria; so if we have made so much progress both within and outside the country why are they still afraid to take on your members?

I need to answer that question carefully; you see it is a process that is still evolving. Any business, IOC or not, wants to conduct its business at the most efficient point and at the best cost value point. Therefore, the initial interpretation of the Local Content Act was that this was a rent collection, a toll gate that was going to drive up all their costs and introduce less quality in the services and delivery of solutions to run their businesses.

This is a fact. Now what happened was that all the E & P companies adopted a collaborative approach, which is a development pact and the focus and emphasis was on local content development not on monitoring. The idea was to collaborate,and put heads together to find ways through which we can create real capacity in the industry and give opportunities for Nigerians to progress. Now bear in mind that the oil and gas cycle is a 10-year cycle, so from the day you discover oil in a particular field to the day when you are actually producing the field is 10 years typically.

So if you put that in perspective, you will understand that major projects are planned many many years ahead of time.So it’s been a process and I can tell you that there are IOCs like Shell for example that have embraced the process and have worked closely with the industry to build real capacity through capacity development initiatives.

This process will strengthen both the Nigerian companies and strengthen the pathway, for which Nigerian companies can do business, grow real global capacity. So the way I see it is that it’s trending in the right direction; we are not there yet, but its trending in the right direction. The initial barier that came up were bariers of fear, mistrust. All these bariers are now coming down gradually as more and more Nigerian companies are able to show that indeed we are adding value that you will not get from outside the shores of Nigeria.

This is not to say that somethings are not being done the way they are supposed to be done transparently, but ultimately we are trending in the right direction. It is our hope that more IOCs will embrace this concept and come to the table to discuss like we are already doing with a number of them to find ways in which capacity can be grown in a real and measurable manner.

In that case how can Government help further apart from enacting theLocal Content law, and secondly, the IOCs how can they also help to expand and build this further?

Great,I will take the government’s side first. A law in itself does not implement itself. This sometimes is the mistake that people make both people in the industry and out, thinking that just passing the law is sufficient, it is not. Prior to the law, for the previous nine or 10 years, we had some 24 guidelines, and even during that period the IOCs kept saying you don’t have a law so we are not obliged really to respect these guidelines.

They said that when you do have a law then we are obliged to work with you to realisethese objectives. Now the same way the law provides what I would call a policy guideline, the actual regulations are for implementation via the regulator backed up by government.

I will that in the first phase there was leadership provided by the honourable Minister of Petroleum Resources to support the process of local content and creating guidelines to ensure that the law is implemented not only in a realistic manner, butalso in a way that strengthens Nigerian companies in a measurable manner and that has yielded the results that we can look up to today.

However, the capacity development initiatives by collaborating with the IOCs to bring long term large scale capacity, and I say this because you can’t for example open up a fabrication yard only just for Shell; it has to be for the industry.Therefore, across the industry there needs to be an understanding, an appreciation that these initiatives will indeed serve the industry, that for example; in terms of standards you cannot have a multiplicity of standards – US standard; European standard; UK standard, all in the same Nigerian industry.