LEVERAGING NIGERIAN CONTENT FOR GREATER OPPORTUNITIES Presentation at the PETAN OTC 2012 Panel Session by Engr. E.C.

Nwapa (FNSE), Executive Secretary, NCDMB

May 2012

NATIONAL REVENUE PROFILE Over Dependence on Oil

A Threat to Oil will threaten National Survival
Oil & Gas Industry is repositioning to Promote Utilization of Local goods & Services Building capacity on the back of mega Projects and Operations Other Linkage sectors need to be mobilized

Distribution of Oil and Gas Assets. Foreign Vs Indigenous
Indigenous players positioned to be in the league of High Performance Energy Companies (HPEC)
More fields ready for indigenous players - OML 26,30,34, 40 & 42 Majors allocating oil fields for Full Field Development using local capabilities as part of R&D program

DPR: Oil blocks in Nigeria

Snapshot of reserves: Oil-36.22 billion barrels (2.92% of world reserves) Gas- 178 TCF (2.98% of the world reserves) 1.6 Majors • Addax, Chevron, Eni-Agip, Exxon Mobil, Shell and Total • Control 98% of reserves and production assets 2.Indigenous companies • Over 30 operators (Afren, Oando, Seplat etc) • Over 30 independents and local operators ( Summit, Conoil etc) • Own 2% of reserves

NDPR
1. Combined daily production capacity of 80,000 bpd 2. With aggressive equity participation indigenous players will increase market share 3. NPDC making significant progress , hitting the 100 barrels per day equivalent mark. 4. Full Field Development by indigenous companies being promoted

Changing the Pre – NOGICD Act Footprint Bringing Nigerian Jobs Back Pre-Nigerian Content Implementation Buying rather than selling.2020 Nigerian Content the Implementation Defining Roadmap for Change $78b $14b Bringing Nigerian Jobs Back Hub for oil and gas services Estimated $191 billion could be retained 300.000 new direct job opportunities -(Engineering. Technicians etc) Technical Services $39b $20b Fabrication $20b $39b Engineering $214b $107b Procurement $9b $7b Research & Development Over 95% of industry spend Abroad 30yrs 10yrs Over 65% of industry spend domiciled . Sciences. Exporting Nigerian Jobs Estimated capital flight $380 billion Estimated lost job opportunities 2 million 2006.

President in April 22 2010 Established the Nig Content Devt and Monitoring Board Inaugurated Governing Council for the Board August 2010 NCDMB commenced operations in Yenagoa in June 2010 NCDMB has steered non-disruptive implementation for 2 years .Introduction of the Nigerian Content Act Signed into law by Mr.

engineering etc • Promote indigenous ownership of assets and utilization of indigenous assets in oil and gas operations • Develop indigenous skills pool across oil and gas value chain • Provides mandatory training requirements on the back of projects • Creates JQS to manage and track available skills 1 2 3 Maximize utilization of Nigerian made goods Maximize utilization of Nigerian human resources Link the oil and gas industry with other sectors • Promote establishment of support industries that will sustain oil and gas industry of the Economy operations • Enhance multiplier effect of oil and gas investments in economy Focus on community participation in the supply chain • Develop pool of competitive supply chain rooted in oil bearing communities • Create customized training and sustainable employment opportunities • structured awareness and enlightment campaigns • Institutionalize inter-agency collaboration on local content development • Integrate NCDMB into planning and contracting process to ensure Nigerian Content COUNTS • Dedicated NCDF for capacity building 4 5 Foster institutional collaboration . • Develop local capacity in key areas such as manufacturing fabrication.Thrust of the NOGIC Act 2010 Nigerian Content aspiration derived from the thrust of the NOGIC Act are focused on ensuring that companies benefitting from our natural resources also contribute to economic development of Nigeria .

2010 to 2015 Retain $10 billion out of $20 Billion average annual industry spend Create over 30000 direct employment and training opportunities Establish 3 to 4 pipe mills to service industry demands Develop 1 or 2 dockyards and maximize use of existing shipyards Increase indegenous ownership of marine assets to 60% minimum Integrate indigenes and businesses in the oil producing areas Capture 50 to 70 % of banking.HMPRs Medium Term Targets . insurance and legal services .

NIGERIAN CONTENT ROAD MAP Realizing the Vision – Instrument for the industrialization of Nigeria R&D Steel mills Facility / upgrades Human Capital Dev Rig/vessel owner Dry dock/shipyard Manufacturing/ Assy Manufacturing/assembly A MULTI LANE HIGHWAY TOWARDS INDUSTRIALISATION Various Initiatives in: i) R&D ii) Human Capital development iii) Steel Pipemills and associated industries iv) Manufacturing and Component Assembly v) Marine Vessel and Rig Ownership vi) New facilities and Upgrade of existing infrastructure vii) Dry Docks and Shipyards .

bringing together a broad array of .Stakeholder Collaboration Implementation Model Investment policy Contracts approval Bid rounds NCDF Capacity development NC regulation Interministerial Interface.RMRDC on R&D Nigerian content scope on projects (NCCC) Capacity development 1% remittance to NCDF Government Oil companies Service providers Nigerian Content Consultative Forum (NCCF) Capacity development Nigerian Content Equipment Certificate (NCEC) 1% remittance to NCDF International partners Foreign Direct Investment Benchmark models (learning from others) NCDMB act as facilitator.

deepen capacity and maximise utilisation of Nigerian goods and services .Implementation challenges • Strict compliance without disrupting industry activities – Capacity Gaps • Handling increased cost + schedule • Transparent effective model for NCDF Management • Ensuring Quality of delivery • Absence of manufacturing capability and confidence to use local goods• Extending implementation to Downstream • Growing new organization to meet wide responsibility • Funding the Boards operations from appropriation • Interface • Exposure to frequent litigation Nigerian Content Roadmap developed to manage challenges .

Nigerian Content Measurement Partial NC Real NC Based on proportion of value of contracts awarded to Nigerian Companies Based on proportion of contract sums spent on Nigerian made goods NC VALUE (70% .18%) • • • • There is marked increase in contract award to Nigerian companies Spend proportion in Nigeria has peaked Without manufacturing.85%) NC VALUE (12% . no further NC Growth No employment growth .

Current Performance levels 100 80 60 40 20 0 Engineering Fabrication 90% 50% 7% Manufacturing .

NCDMB adopts 3 pronged approach to promote utilization of locally Manufactured goods • Issued Research and Development guidelines to industry operators & service providers • • Enforcing compliance with provisions and schedule of Act on material utilization on projects and operations • Promoting local manufacture of materials used in the industry .

COST BENCHMARK TEMPLATE FOR LOCAL MANUFACTURING Imported Pipes Value abroad 1 Locally Manufactured Pipes Local input Cost element Raw Material (imported) Raw Material (local) Cost allocation Locai Input Cost allocation In country Value Remarks 2 3 Custom Duties 4 Excise Duties 5 Taxes Inland transport ( port to factory) Inland Transport Factory to site Finance costs (foreign) Finance costs (local) Wages Amortization for equipment Power generation 6 7 8 9 10 11 12 .

DP PSVs. DSVs. Pipe Lay Barges Operators have put in place robust plan to replace foreign owned with indigenous owned vessels.potential for retention of >$1.STRATEGIC INTERVENTIONS Asset Ownership …. Status of Marine Vessels Utilization Pre NOGIC Today • Indigenous players dominate category 1 vessels –retention of $1. 26 .8 billion • Domination of foreign crew men and rig operators • Ownership of vessels and rigs lies with foreigners ~$3 billion in capital flight • Structured intervention for more Nigerian ownership of category 2 vessels.5 billion 2+1yr Contracts Low Cost Highest spend is on category 2 vessels – AHTs/LHTs.

equipmt) <1 million jobs OPERATOR (Opportunities and finance) ~25.000 candidates captured on JQS Platform • Over 1. the capacity of operating companies to employ nationals has been on the decline since 2008 INTERVENTIONS: SERVICE PROVIDERS (Services.000 jobs LINKAGE INDUSTRIES (Manufactrg) >2 million jobs 1.(NOGETTS) Project Based Training and Attachment • Over 6.Institutional Development • Established OGTAN • Establish Engineering Academy with PPP • NIW Welding Technology Complex (NIW/NCDMB/Shell) • Establish Subsea Academy 3.000 jobs Compared to rising prices of oil.STRATEGIC INTERVENTIONS Training & Employment Social Employment PUBLIC SECTOR (Regulator) ~30.Expatriate Quota Management • EQ allocation supported by robust succession planning • Monitor utilisation of EQ slots Productive Employment .500 attached to O & G Projects • Developing geosciences Training • Developing environmental remediation training 2.

TYPICAL PROJECT SPIN-OFFS FPSO topside Integration capability Subsea Equipment Manufacturing Capability Subsea Training & Certifying Academy Heavy Industry Fabrication Yard .$ 250million .

Legacy Programs. EGINA/GAS MP/ BONGASW/ERHA NORTH/BRASS LNG FPSO Topside Integration Facility •TUPNI committed to EGINA topside integration •Integration Facility set by 2014 •Cost of $150m to $200m •Generate 30000 jobs •Training opportunities Pipe Mills •Consolidate existing Mill •3 new Pipe mills •Start Production by 2015 •Cost of $150m each • Generate 15000 Jobs •3000 training opportunities •NLNG. BLNG focus •LNG carrier size Dockyard •Complete by 2015 •Cost of $250m • Generate 55000 Jobs •20 000 training opportunities Dock Yards Subsea Equipment Manufacturing Complex •Erha North/ Egina •Umbilical facility & Tree assy •Start Production by 2015 •Cost of $250m each • Generate 5000 Jobs •2000 training opportunities .

to upload details of vessel fleet unto NOGIC JQS •Organized •Growth of indigenous capacity and sustainability of services •Impact in linkage industries – merchant shipping. Utilization •Mandate vessel providers to carryout maintenance in Nigerian yards Ports development and Category 3 workshop with marine providers to establish opportunity 27 .STRATEGIC INTERVENTIONS Indigenous Marine Vessels Utilization Category 1 Marine Vessels Ownership •Issued guidelines for utilization and Categorization •Obtained commitments for replacement •Retention of Nigerian jobs in marine crew Economic and Technical Benefits •Impact on the economy Category 2 of foreign vessels extracted from operators. •Directed marine providers.

Land Rig Jack up Rigs •Phased increase in indigenous equity to meet Acts requirement of 50%. •Assistt with long term funding and equity Financing Semi subs/ Drillships 28 .STRATEGIC INTERVENTIONS Offshore Rig Acquisition Strategy Indigenous Rig Acquisition •Mandate Use of Nigerian Operating Company for Contracting. •Domicile equipment and technology in the Company.

Equipment .(Jetty) Yulong .STRATEGIC INTERVENTIONS Line Pipe Mill Pilot Scheme PILOT SCHEME DESCRIPTION Site Map 2500km of pipe Replacement of vandalised and aged pipelines Proposed Layout Water distribution projects Partnership roles NCDMB – Buy Land (SPV) Shell + Operators .

parts.STRATEGIC INTERVENTIONS Equipment Components Manufacturing Industry guideline mandates all OEMs to domicile manufacture of equipment components. packages and systems in Nigeria Components and Frames Equipment Parts Equipment Packages Growth 2011 to Year 2017 .

STRATEGIC INTERVENTIONS Nigerian Content Equipment Certificate (NCEC) • The Board is issuing NCECs to companies requirements that have met the • About 52 applications being processed • IOCs are taking initiatives to support OEM presence in Nigeria • Guidelines issued to the industry making NCECs a requirement in tenders .

STRATEGIC INTERVENTIONS Nigeria Oil & Gas Industry Content Joint Qualification System NOGIC JQS • Expatriate Quota Utilization and Succession data • Marine Vessels data • Contract Processing data • Equipment Ownership • Nigerian Content Compliance Certificate Data • Skill Base Tracking • Training and Employment data • Nigerian Content Plans and reports repository 1.Launch Q2 2012 .Categorization of oil and gas service companies 2.Effective information exchange across stakeholders 5.Compliance Monitoring 6.Industry data base for skills verification. 3.Verification of available in-country capacity 4.Test data uploaded 7.

Nigerian Content Development Fund Model (Clause 104 of the Act) Letter on NCDF implementation 30% Direct Intervention Lte NCDF 1% Upstream contract sums 70% Guarantee Ltd Direct Capacity Development intervention by the Board Equity Participation to stimulate Investments in Critical facilities Skills Development & Job Creation interventions Industry Advisory Committee Provide Guarantees for low interest lending Industry Advisory committee & SPV to strengthen Governance Fund Managers (BGL/UBA global) Fund will not be depleted Other Participating Commercial Banks .

COMES COMPLIANCE MONITORING & ENFORCEMENT STRATEGY ( COMES) THIRD PARTY INSPECTION TASK FORCE Legal firm Engineering firm Accounting/ Audit Firm/Forensic Auditor Engineers.Nigerian Content Governance on Monitoring …. Geologists. Subject matter specialist Industry experienced professional NCDMB Personnel 35 .

36 .

INSISTENCE ON COMPLIANCE HAS CREATED FACILITIES BK TUBULARS – OCTG THREADING FACILITY Before Today .

INSISTENCE ON COMPLIANCE HAS CREATED FACILITIES TOTAL PREMIER – OCTG Welding/Threading Facility April 2011 January 2012 .

IT IS WORKING NIGERDOCK – Drydock and Fab Yard BEFORE TODAY .

IT IS WORKING GLOBESTAR – invested in new fabrication capability SAIPEM FAB YARD New NC work scope required over $100 million jumbo yard TODAY BEFORE .

IT IS WORKING ONNE FZ – Offshore Logistics Base BEFORE TODAY Hub for logistics and industry services for Nigeria and GoG LADOL – Offshore Logistics Base BEFORE TODAY Major service .

800 jobs and creation of about 300 new jobs Stimulus for investment in dry dock and shipbuilding facility Rigs ownership and utilization Ownership Manning Maintenance Utilization Retention of about $500 million in the economy Equipment ownership and utilization Minimum of 50% ownership of equipment to execute projects by indigenous company or Nigerian subsidiary Indigenous companies have developed capacity and now have a say as major stakeholders in partnerships with multinationals Retention of over 50% of spend from projects executed in the Nigerian economy . mooring launch vessels.5Bn spend retained in the Nigerian economy Retention of over 3. swamp and land rigs (Oando.PROGRAMS & ACHIEVEMENTS Programs Scope Achievements Benefits Indigenous ownership of Assets Marine Vessels ownership and utilization. Seawolf. Bell Oil and Gas) Indigenous companies with capability and which own equipment used in their operations are now exclusive players in land and swamp Indigenous companies with equipment and subsidiaries of multinationals which own minimum of 50% of equipment used are allowed to bid for offshore work $1. of foreign category 2 vessel with Nigerian owned Established vessel maintenance capability Dry-docking facility at NigerDock ( the largest in West Africa ) Guidelines issued to industry on onshore and offshore rigs ownership and utilization Achieved Indigenous ownership of certain rig types -semi-submersible . shallow draft vessels etc Firm commitment from operators to replace 49 foreign category 2 vessels with Nigerian owned.8Bn out of &3. Cabotage compliance Ownership Manning Maintenance Utilization 85% of category 1 vessels in operation owned by Nigerians these include crew supply vessels.

to submit domiciliation plan for equipment component manufacturing Significant progress with concrete plans for domiciling manufacture of equipment components -52 applications for NCEC within 7 months Operators are developing their own framework to promote and encourage OEMs to set up manufacturing facilities in Nigeria.000Mt HSAW Steer industry to put more work in SCC Monitor project development activities for new pipemills Support direct investments where necessary Local manufacture of Promote utilization of at drilling mud least 60% of barite needs of the industry from Nigerian deposits Structured collaboration with AMAPOB on local manufacture of barites Promoted studies by SGS to validate quality of Nigerian barite deposits as meeting industry standards Steer industry to source barites from Nigeria . Hold stakeholder workshop to elicit consensus on implementation of ECM initiative Scope Achievements Next steps (6 months) Steel pipemill scheme Maximize utilization of existing facility Promote establishment of pipemills Increased utilization of existing HSAW pipemill by industry (over 100km of steel pipe being serviced by SCC Abuja ) Firm commitment received from 2 investors to set up facility –Yulong 250.000Mt LSAW. Vigeo 200. in line with the principles of the ECM Monitor implementation of domiciliation plan.PROGRAMS & ACHIEVEMENTS Programs Manufacturing Equipment Components Manufacturing (ECM) Initiative Domiciliation of Equipment component manufacturing Nigerian Content Equipment Certificate (NCEC) Public notice to industry.

. training and employment opportunities Establishment of a private sector led center for skills development and international certification in the field of engineering Project concept put together for engineering training center of excellence Packaged geosciences training to train critical skill requirement in the industry Completed first set of welders training Direct facilitation of training in critical industry skill requirements In country training facilities for oil and gas type skills Manage capital flight associated with offshore training Knowledge transfer 1000 candidates to be trained on environmental management Retention of at least 30% of environmental remediation budget in community Over 500 candidates trained on the back of oil and gas projects – welding.PROGRAMS & ACHIEVEMENTS Programs Training Scope Achievements Benefits Infrastructure development. engineering design remediation training to address etc. recurring environmental challenges Over 50% trainees have been placed on sustainable employment Industry is already promoting foreign trainers to conduct critical trainings in Nigerian facilities Oversight on project based training opportunities Nigeria Institute of Welding New multimillion dollar facility Will provide certification for welders and modelled after International Institute weld integrity tests on projects of welding with capacity to certify. scaffolding. Packaged environmental pipefitting.

capacity and project opportunities Built NOGIC JQS infrastructure in Yenagoa Manage test phase and Disaster Recovery Center in Abuja Prepare for launch Engaged stakeholders and obtained feedback from end users Go live event held in August 2011 . remittance of 1% ongoing NCDF operating model developed and discussed with CBN Selected 3 service companies for pilot implementation -partial guarantee facility 2 SPVs incorporated to oversee the NCDF on behalf of the Board Obtain approval to launch pilot scheme –partial guarantee facility Nigeria Oil & Gas Industry Content Joint Qualification System NOGIC JQS Data base for industry skills.PROGRAMS & ACHIEVEMENTS Programs Scope Achievements Next steps (6 months) Supplier Development Nigerian Content Development Fund (NCDF) Partial guarantee -70% Direct investment -30% Guidelines on remittance developed.

PROGRAMS & ACHIEVEMENTS Programs Scope Achievements Benefits Some Infrastructure Development & Facility Upgrade Saipem fabrication (Tier 1) Nigerdock fabrication (Tier 1) Fabrication yard upgrade Fabrication yard upgrade Completed yard expansion project (jumbo yard) Capability for high tonnage fabrication and lead-out Retention of existing jobs In-country capability for fabrication. Expected completion Nigeria and West Africa. dry Established and commissioned largest docking.000 jobs to be created. .4 billion from FPSO LNG and telecommunications industry value chain Private sector led training facilities for Oil Hyundai establishing a fabrication and Gas skills training academy Akersolutions to setup subsea acadey Globestar fabrication (Tier 1) Dormanlong Fabrication yard upgrade Fabrication yard upgrade Training facilities Heavy Fabrication and Subsea training facility/Academy .2015 Employment generation Fabricated first subsea tree frames and Capability for high single tonnage subsea modules in Nigeria fabrication and lead-out Retention of existing jobs Self sufficiency in domestic supply Obtained certification for pressure Local facility maintenance capability vessels manufacture Established Nigerian foot prints in West Fabricated pressure vessels for IOCs Africa including Shell Gabon Over 10. repairs and maintenance Major aspiration/project launched for Creating ship repairs industry within deep offshore skill base with FPSO Nigeria to service vessels operating in integration capacity. dry docking facility in West Africa Technology transfer Acquired capability for high single Retention of spend associated with ship tonnage fabrication and lead-out. Installed major galvanizing facility serving Retention of about $5. training and maintenance.