November 11, 2021

Govt support as key driver for growth of oil and gas sector

Govt support as key driver for growth of oil and gas sector

By Femi Isaac

FEW  months ago, Nigeria’s Minister of State for Petroleum Resources, Timipre Sylva, expressed the Federal Government’s readiness to provide support for Senegal by sharing Nigeria’s oil exploration expertise and experiences with the country.

As an African country new into the exploration of crude oil, Senegal would certainly need all the help it can get to harness the power of its oil and gas resources towards driving socio-economic growth and regional energy expansion.

As Nigeria prepares to make good on its promise to fellow West African country, Senegal in the months and years to come, two things significantly stand out from this gesture of support. First, there is need  for greater African economic integration.

This means that, more than ever, it is important for African countries to embrace growth-enhancing policies  and opportunities by providing support for one another, while working together towards the achievement of economic prosperity for the continent.

The second reality, which sits at the heart of progress for energy sectors in Africa, is that local content is a driving force for Africa’s oil and gas sector sustainability. We cannot over-emphasise the fact that the promotion of relevant local content and capacity building initiatives, where resources serve Africans and African economies can help oil producing countries in the continent to become self-sufficient in the long run, if well executed.

For Nigeria, it has been over 60 years, since the country begun oil production and in the last 10 years, local content in the oil and gas sector has risen from a paltry three per cent to about 43 per cent, thanks to government policies and initiatives that actively support the operations and sustenance of local companies in the country.

For example, in June 2021, the Nigerian Content Development and Monitoring Board, NCDMB, set up a $30 million working capital fund to support indigenous oil and gas companies, especially against the adverse effects of COVID-19 pandemic, loss of contracts due to low oil price and the difficulty of companies to retain their personnel in employment.

As target beneficiaries, including members of the Petroleum Technology Association of Nigeria, PETAN, and the Oil and Gas Trainers Association of Nigeria, OGTAN, take advantage of the cover loans to support working capital and capacity building, the effect from the prevailing realities of COVID-19 is better cushioned.

Asides the working loans provided few months ago, the NCDMB also concluded plans to launch a $50 million Research and Development Fund aimed at achieving a target of 70 per cent of Nigeria’s local content involved in the development of the oil and gas sector in Nigeria by 2027.

It is one thing to provide financial support necessary for the sustenance of companies within the oil and gas as well as industrial sector, however, it is a completely different thing to back up this financial support with an enabling environment that supports all round growth and progress for these companies.

These days, we see agencies strongly identifying with local companies that are leveraging local content to thrive. Recently the Nigeria Content Development Management Board, NCDMB, and the Asset Management Corporation of Nigeria, AMCON, displayed this when they not only identified with but strongly applauded the equity investment made by Africa Capitalworks, ACW, into Dorman Long Engineering Limited, DLE.

The commendation and support from AMCON and the NCDMB stems from the realisation that the equity investment will position Dorman Long, who have built a strong reputation  with over 70 years of operations  in Nigeria, to play a major role in the oil and gas sector and further promote in-country content development.

While the investment gives hope to indigenous contractors, it is a strong proof that companies who strive to adopt innovation and resilience, especially in alignment with the local  content policy  obtainable in  the oil and gas sector, will almost always enjoy government support. 

Being a strong beneficiary, Dorman Long,which started off as a structural steel company, has grown to become the company of choice for products such as pressure vessels, splitters, heat exchangers, platforms, jackets and small EPC steel work. The company also carries out fabrication and has the biggest galvanising plant in West Africa, as well as procurement and maintenance of large oil and gas facilities such as FPSOs. 

As Nigeria gets ready to grow its hydrocarbon sector with the launch of more than 100 oil and gas projects over the next five years, including 25 upstream projects, increased government support and an enabling business environment will be required to strongly motivate Nigerian companies in the energy sector, helping them to contribute tremendously towards the development of the economy through value addition, increased job opportunities and superb execution of different oil contracts and undertakings.

With more support provided for the advancement of local companies, we become even more positioned to share Nigeria’s oil exploration expertise and experiences with  other African countries.

Isaac,  a communications consultant and social commentator, wrote from Lagos.