October 28, (THEWILL) – Besides boosting Nigeria’s oil and gas production and, ultimately, raising the country’s revenue stream, the recent approval of the $1.28 billion Seplat-ExxonMobil deal by the Nigerian government will impact significantly on the Local Content policy.
Recently, the federal government officially approved Seplat Energy’s purchase of Exxon Mobil’s onshore/downstream assets, valued at $1.28 billion, more than two years after the deal was originally struck. The sale had suffered prolonged regulatory delays since its announcement in February 2022.
On October 21, 2024, Gbenga Komolafe, the chief executive officer of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), confirmed at the NUPRC 3rd Anniversary event in Abuja that the ministerial approval had now been secured.
President Bola Tinubu had indicated on October 1 that the final approval would be granted within days, following clearance from the regulatory body. This was after a prolonged high level behind-the-scene ‘politicking’ that almost dented the image of the Nigerian government and that of Nigerian National Petroleum Company Limited (NNPCL) as many believed that the prolonged delay was suspicious.
Through this deal, Seplat Energy will acquire a 40 per cent stake in four oil mining leases, as well as key infrastructure, including the Qua Iboe export terminal and a 51 per cent stake in the Bonny River natural gas liquids recovery plant, both previously owned by Exxon’s local subsidiary, Mobil Producing Nigeria Unlimited.
Seplat Energy’s strategy to buy the ExxonMobil’s Nigeria shallow water and onshore assets presents massive benefits for Nigeria by way of driving the local content policy being superintended by the Nigerian Content Development Management Board (NCDMB). The acquisition of the ExxonMobil assets means that Nigeria stands to receive multiples of benefits given the scale advantage that Seplat has.
“Seplat is the leading supplier of natural gas to the domestic market and is helping to address a major obstacle facing the Nigerian economy today – access to reliable, affordable power,” said Roger Brown, the company’s CEO in a media interview.
According to the CEO, Seplat Energy spends over $4 billion in supporting local contractors who also pay taxes and fees to the government. It spends $919 million as wages and benefits to its Nigerian staff who also pay taxes to the government apart from supporting the local economy. Industry experts believe that the growth the Seplat-ExxonMobil deal will create will afford Seplat the ability to do even more in terms of local content expansion.
The local content policy initiative was created in 2019 but took effect from 2010 via the Local Content Act. It is a vital instrument that empowers Nigerian companies to contribute tremendously towards the development of the Nigerian economy by encouraging value addition, job opportunities, and furthermore the award of different oil contracts and undertakings.
The Act which established the Nigerian Content Development and Monitoring Board (NCDMB) with the mandate to oversee the implementation of the provisions of the law, is seen as a revolutionary step towards enhancing Nigeria’s launch into the league of technology-driven economies spurred by the huge opportunities in the oil and gas industry.
In practical terms, the Act provides for preferential treatment of local ventures and workforce who should be given the first consideration in the award of oil blocks, oil field licences, oil lifting licences and shipping services. Additionally, all projects for which contracts are to be awarded in the Nigerian oil and gas industry shall be treated with preference for Nigerian indigenous players.
Prior to the Local Content Act, Nigeria was besieged by scavengers from Europe, America and Asia (India precisely) who posed as oil and gas experts.
It was common then for well-placed Nigerians, including military and top government officials, to pose as agents and representatives of overseas manufacturers whose products and services are used in the industry.
The so-called principals sometimes collaborated with corrupt insiders to inflate their prices, to accommodate certain interests and the commissions of the so-called agents who added no value to the system. At the time, only a few Nigerian companies were interested in capacity building and training of their employees to do what the Local Content Policy now advocates.
Technical areas like installation and servicing of the Metering system, construction of Loading Bay, LPG installation, Tank Farm construction, installation of Actuators, Colons, Mechanical Seals, Valves, Steam Trap and other process equipment served as conduit pipes for forex drainage. In some cases, the manufacturers sign agreements with Nigerian agents to supply equipment that were at the verge of being phased out, only to realise shortly that the spare parts had become obsolete.
Process equipment like metering were phased out so frequently that the manufacturers had to send their experts to install, fix and service the new ones at a huge cost. Only a few focused EPICOM (Engineering, Procurement, Installation, Construction, Operation and Maintenance) Nigerian companies played the patriotic role of sending their technical employees abroad for training in the manufacturers’ facilities. Turn Around Maintenance (TAM) of the refineries was a bazaar season.
At a time, persons from all walks of life, cattle rearers, furniture makers, mechanic workshop operators, teachers and traders became agents and representatives of oil and gas equipment manufacturers. All that mattered was the commission money.
Little transfer of technology or skill acquisition was achieved. In one case, the chief executive of a refinery was alleged to have ordered materials in excess of what was required to do the TAM. The excess warehoused equipment and materials remained unused as no TAM was held for years after.
The emergence of the LCDMB has inculcated the desired sanity into the industry.
For instance, Nigeria’s 10-Year Strategic Road Map, anchored by the NCDMB is aimed to completely change the old order and put Nigeria on the proper place to take ownership of the management of the refineries, among others.
The Road Map is targeted at the retention of over $14 billion out of $20 billion estimated industry spends in-country, creation of over 300,000 direct and indirect jobs for Nigerians and growing Nigerian Content from 27 per cent from 2017 to 70 per cent by 2027.
To achieve this, the NCDMB has created series of short-, medium- and long-term plans bordering on research, production and human capital development with well-articulated delivery and evaluation processes that are practically time-bound
Among Seplat’s major gas projects are the Assa North-Ohaji (ANOH) South Gas processing project and Oben Gas Plant and Sapele Gas Plant. Their contribution to national development, GDP growth, employment, technology transfer, local content enrichment and development of host communities is a function of NCDMB’s role in achieving its mandate.
Mele Kyari, the NNPC group managing director, had said in the past that Seplat was a good example of what local oil firms can become. This deal with Exxon-Mobil fits that narrative, according to industry experts.
Former executive secretary of NCDMB, Simbi Wabote, said deals like Seplat and ExxonMobil means a boom to local ownership and participation in the oil industry. It will help to put indigenous oil firms on the top pedestal where they can be expected to move beyond the Nigerian borders to play strong in Africa simply on account of the opportunities they have been allowed to explore at home.
The Seplat Energy deal will enhance job creation in a massive manner as it seeks to revive abandoned assets with huge job creation potentials. It will also enhance technology acquisition and transfer in many ways.
The NCDMB has signaled plans to support new research and development projects as part of its Technology Innovation and Incubation Strategy and the enduring commitment to catalyze innovation in the Nigerian oil and gas industry and linkage sectors.
The new R&D projects will add to the 14 applied research projects NCDMB currently sponsors at various stages of technological readiness, one shining example being the Amal Technology, which manufactures gas leak detection devices and printed circuit boards at Abuja.
The Executive Secretary, NCDMB, Engr. Felix Omatsola Ogbe hinted this in the keynote address he delivered at the 2024 edition of the Triple Helix Nigeria SciBiz Conference in Abuja last week, attended by industry representatives, researchers from knowledge institutions and policymakers, with the theme “Integrating Research, Innovation, and Policy: Triple Helix Pathway to Research Commercialisation.”
In the capital market, Seplat closed its last trading day (Friday, October 25, 2024) at N5,700.00 NGN per share on the Nigerian Exchange (NGX). Seplat Petroleum Development began the year with a share price of 2,310.00 NGN and has since gained 147% on that price valuation, ranking it ninth on the NGX in terms of year-to-date performance.
Shareholders can be optimistic about SEPLAT knowing the stock has accrued 39% over the past four-week period alone—third best on NGX, the NGX said in its weekly report Friday.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
