Local content and global standards

Shell Petroleum Development Company

Shell Petroleum Development Company

The oil and gas industry is structured in such a way that procedures are meticulously researched and rehashed before implementation, a highly hazardous industry that is designed to pay what some derisively refer to as armed robbers’ salary!

What is generally referred to as the local content policy is the intention, good as it is, of government to empower Nigerians to participate as much as possible in the industry in order to reduce what is generally referred to as capital flight on the one hand and brain drain on the other. The business is basically denominated in Dollars which happens to be the internationally acceptable currency.

All the multinational companies together with their expatriate members of staff are paid in Dollars with the money repatriated to their various countries. It is therefore understandable why government chose to go the local content way, at least, to trap some of the petro-dollars flying out of the country and reinvigorate the economy.

The Shell Petroleum Development Company of Nigeria )SPDC is unarguably the most meticulous in the application of standards, both in operations and safety for which it committed several millions of Dollars to the training, retraining, research and development of both its men and machine. As the SPDC is winding down in Nigeria, its assets, which are predominantly land-based, have been sold to indigenous petroleum companies in Nigeria. Most of these companies are run and managed by former shell staff. From the managing directors of some to drilling managers to client representatives or companyman, their operations is what will make the SPDC management, particularly their trainers shudder, an operation that is fulcrumed on cost saving rather than safe project delivery for men and machine, an operation that will be referred to as a fiasco by the same SPDC even before commencement, an operation that is returned in most cases by loss of productive time that translates to money, all in the cause of cost saving.

A drilling manager of an indigenous company, proudly trained by SPDC, once told DrillBytes that all his working life, he has never seen a Site based Geologist supervise or carry out oversight functions on mudloggers, measurement while drilling, engineers and electric wireline engineers! They design their well for say, five million Dollars and yet want to spend two million Dollars to show their management that they are cutting cost, to see how they can partake of a bonus in the three million saved but often end up spending more than the approximate financial estimate, AFE! Penny smart, Pound foolish, as they say. Another companyman told Drillbytes that he has successfully landed casing in sand and will always do it again! These are people who will cut the $200 of a contractor to keep their own contractor who charges as much as $1,000 on site, for jobs the company needs the former much more than the latter. Some contracts are being awarded on the basis of what’s in it for me than the company’s overall interest.

When it comes to contractual obligations, it is another tale of frustration, a well conceptualized business of deceit. The contract says to supply air-conditioners to which the contractor, a local content beneficiary, happily signs up only to provide, in most cases, hand fans on location and still gets paid for an air-conditioner in the office! Some head hunters will charge an operator $1,000/day per head of a supplied specialist and pay such an expert a ridiculous N25,000.00/head per day. Some multinational companies are only multinationals by name as indigenization policy has made sure the board of such companies is predominantly Nigerian and in most cases, the Nigerians join the board of such companies with their magic wand, some of which have been earlier discussed.

A cementer with one of the indigenized multinational companies, in fact the largest in the world, confided in Drillbytes, “the company charges $1,100/day on my head but I’m paid N12,500.00 per day”, he went on “the scandal in the company was so much at some point that our president and chief executive officer had to fly down to Nigeria for a brief meeting with all categories of staff, a meeting full of revelations in a congenial atmosphere at the end of which was the genesis of the mass sack of almost the entire management staff”. He concluded by saying, “I prefer to be ‘enslaved’ by an Oyinbo man than a Nigerian.” Oil wells are being drilled like water wells, the local content way, a development a number of stakeholders are managing to get the best out of, a horror that will soon crescendo into an orgasmic fiasco if the local content policy is left on auto-pilot!

This, precisely, is the reason for the column. We need to save ourselves from ourselves by taking another look at the local content policy to see how all these weak points can be turned around for the benefit of Nigerians and Nigeria. Yes, it is time for the logic of the local content policy to be stood on its legs and not its head. The concerned ministers, the National Assembly and the Nigerian Local Content Development Commission have all got a hell of a job to do. It is time to bridge the gap between local content and global standards!

. Kayode Adeoye is energy analyst in Lagos.

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1 Comment
  • Aristotle

    Nice write up. Indeed the oil industry is neck deep in corruption and corner cuttings. As a local servicing company, having a signed contract document is no guarantee of job call outs like my company got to find out. The producers still go ahead and give out jobs to companies who sometimes never put in a bid because those companies are owned by them and their cronies. In most cases such companies are merely “portfolio” establishments with nothing on ground. They then sublet the jobs to those who actually have the capacity to do them! Govt through NAPIMS really needs to step up on monitoring these activities otherwise it will remain business as usual