November 28, 2022

Revenue: Why companies should pay tax to fight oil theft – Ikpea

Dr. Leemon Ikpea is the Chairman/CEO of LEE Engineering Group Limited, an indigenous player in Nigeria’s oil and gas industry. Having spent over 40 years in the industry, he spoke of his experience and aspirations for the petroleum industry in the country and what can be done to boost oil production. He spoke with OBAS ESIEDESA. Excerpt

How would you describe the contribution of Nigerians and Nigerian companies to the growth of the oil and gas industry?

First, I want to say this: Nigerians are talented and hardworking people. In the petroleum industry even before Nigerian companies began to operate, Nigerians were doing most of the work. The foreign workers only supervise. Foreign companies brought in equipment and machineries but the real job is being done by Nigerians.

All the welding works, all the erections and big structures you see in oil fields and refineries were done by Nigerians. Seeing them work and my years of experience in the industry led me to set up my own company.

The Nigerian content law was enacted to create opportunities for local firms, how has this affected indigenous players?

We discovered that the multinationals are very good technically. But their feelings about us is that – ‘they are Africans, let us take control of their space, let us dominate them so that their young ones cannot grow’. So we were just subcontractors and they took us as supporters to them. The advocacy for local content started from my office in Warri. I and one engineer, Emookha, the chairman of KAKASA, started this advocacy for Nigerians to also participate. They gave everything to French companies, to German companies. They will now give us what they want – peanuts. Remember what I said earlier that we were the people doing the work. So why can’t I bring my own equipment?

If you go to my yard today, if you tell them it is a Nigerian company they won’t believe. But it is local content. We fought and fought until we took it to the House of Representatives. One of our friends, the former Deputy Speaker of the House of Representatives, Chibundu Nwuche, was with us. We all passed the road to ensure that local content came to stay. We give thanks to God first and we give thanks to the Nigerian government. We want to tell you today that local content law is beneficial because Nigerians are building capacity on a daily basis.

Let me take it a step further, most of these things we are installing such as the interchanger, column, high pressure vessels, etc, we import them. Why can’t we have a fabrication workshop? It is because they cannot transfer technology to you. If they do, they are killing their economy. So, I had that initiative and I started the process.

The Nigerian Content Act has tremendously boosted in-country capacity. The local content law is very vital and has also helped in supporting indigenous players.

Our factory in Warri was to be inaugurated this month to celebrate our 31st anniversary, but we have some technical issues that we are resolving. As soon as these issues are resolved, by the grace of God, next year, in the first quarter, we will inaugurate the factory. The facility is to produce heat exchanger for oil and gas, especially for the gas; high pressure vessels, scrubbers and several other items. By the grace of God it will be inaugurated by the President next year.

It is going to save foreign exchange for the country and you know the difficulties in getting foreign exchange. Besides this, other countries will come to buy these products from us because we are producing it here. We are building a jetty close to our factory for export. The Minister of State for Petroleum Resources once visited to inspect it. The Minister of Trade and Industry has come to inspect it. The former President, Chief Olusegun Obasano when he came he was shocked at the facilities he saw.

I want to make an appeal to the government that they should sustain this Nigerian Content Development and Management Board because the current people managing the board now are so experienced and so committed to the growth of Nigerian technology. We need to encourage local content. The government needs to encourage local content. We need to ensure that there are competent people like the ones they have there now. We also need to do things that will encourage indigenous industries. If I tell you how much I have spent on diesel you will be surprised. Staff salary every month is more than N300 million. They (staff) are 2,000 people. Are you not going to pay them? I ensure that at the end of every month my workers get their salaries. Go and find out.

This is because in those days when I was working with the multinationals, they said salary is a priority, because the workers have families that depend on them. Are you going to say you are not going to pay them? By the time you pay salaries, contractors’ salaries can come later. That has helped the company, so we need encouragement. We need to be also patronised to sustain our facilities. What I do right now feeds more than 5,000. If we have no work, it means unemployment for thousands of people. Is that what you want? So we need to be encouraged. The local content board needs to be encouraged. That is my take in this message.

The factory in Warri, what exactly is it about and how will it impact the industry?

The factory is meant to fabricate special equipment in the oil and gas industry. The people that will work in this factory are Nigerians which will increase our capacity, earn forex, create a lot of multiplier effects, including for local suppliers, vendors, etc.

Do you think there is enough support from the government for indigenous operators?

The government is trying its best, but the truth is that indigenous operators need to be encouraged because all the companies take the same or similar routes. The multinationals can agree to help and safeguard the Nigerian contractors. The multinationals or the international oil companies should also patronise indigenous companies. If I tell you how much I have invested as an indigenous operator in providing some basic amenities, you’ll marvel. I have invested my time; I have invested my money in providing some of these things. Ordinarily, these are what the government is supposed to provide because in developed countries, the government comes out to empower operators through the provision of some basic amenities such as roads, security, etc. But if you come to my company you will see what I am talking about. It is all done by me. I am the one handling everything. I think somebody should come out to ask what exactly do you need to improve this facility. But nobody has come to me.

At a production level of 1.2m barrels daily, Nigeria is struggling to meet its OPEC quota at a time oil is selling for almost $100. What can the government do to check oil theft?

The problem is that they are vandalising the pipelines. How will production come and how will revenue come in? How will production be increased when they are breaking pipelines?

By the time you pump crude oil, it will be stolen along the way? So it is this insecurity we need to tackle immediately. The effort they’re putting in now, the military, NNPC, everybody is supporting the government to fight this evil. If this problem is tackled squarely, I am very sure that with what we have in place now, in two or three months, you’ll see the difference.

What can the operators and the government do to curb oil theft?

The major issue is the security challenge. The security situation needs attention. However, you also know that security is a big issue. It is not what we should leave for the government alone. So it is also to encourage big organisations to support the government to improve on security. If possible, we can have a security fund that can be in the pool in a certain bank. If there is any flashy area, they can go to that fund. If you can tax the multinationals and other bigger companies, that in their balance sheet every year, whatever profit they achieve in a given year, they pay some percentage into the fund. That will help. From that fund too, they can even do some roads. So the security situation is not to be left for the government alone. It should be our collective efforts, in terms of funding, in terms of information, because information is important too. If proper information is not passed, what will the government do? That is for security.

In the oil and gas sector you can see what the government is doing now. Oil production is improving because the government is paying attention to security. So if everybody in the oil and gas sector now says let us put funding in that sector and tackle the insecurity, the production will go up. We should pay attention to security because it is in a peaceful environment that investment can thrive.

I didn’t even know that there were people stealing the oil at that magnitude until the recent discovery. Left for me, everybody should praise the management of the NNPC for the recent discovery. You may have even taken note recently that the production has started climbing.

So kudos goes to the current Group Executive Officer, Mallam Mele Kyari, because something that belongs to the country, some few individuals are conniving with some other people we don’t know to steal it. It’s very sad. I’m sure with this discovery and if the lines are fixed, the product will definitely increase and with the marginal field production going on right now, soon production could go to three million barrels and this will increase our revenue.