Thread by @Jarushub

Understanding Oil & Gas Industry IV

Regulators (cont'd)

3. Nigerian Content Development Monitoring Board (NCDMB)

Let's first discuss history of indigenous participation in the upstream oil industry in Nigeria.

From inception till early 90s, Nigerian upstream oil &

gas industry was dominated by foreign companies. IBB as president made attempt at indigenous participation in early 1990s by issuing licenses to the moneybags of the era (MKO Abiola, Indimi, Folawiyo, Adenuga - yes Adenuga had been around for long - etc). Abacha also made some

awards of oil blocks. Most of them did not develop the fields (some credit to Adenuga, arguably the oldest indigenous investor in oil exploration in Nigeria). Oil & gas is a highly technical and capital intensive venture, so it remained exclusive preserve of foreign companies

The first coordinated serious attempt at enhancing indigenous participation was when Obasanjo and the NASS of the era came up with Marginal Fields Act (2003). That law required foreign oil companies to sell the fields they have abandoned for at least 10 years (marginal fields)

..to indigenous oil companies through a bidding process coordinated by DPR. Unlike the awards during the military era, this one had more structure, the fields are smaller and foreign companies don belleful (industry was only nearing maturity in 1990 compared to 2003), and there

there had been a generation of Nigerians who had worked in IOCs for decades, understood the industry more (compared to 1990). So, many folks who were not Indimi or Adenuga rich won marginal fields. Some of the winners were even former Nigerian mgt staff of the foreign companies.

That was the real opening of Nigerian upstream oil and gas industry to Nigerians. These independent companies, even if some of them still needed foreign partnerships, raised funds, got technical expertise and did explore (unlike most of the guys that got during military era who

...only got the fields for status reason and never bothered to explore). 24 marginal fields were allocated to 32 oil firms in the 2003 exercise, altho only 13 of the fields are producing oil and gas today, almost 20 yrs later. DPR recently revoked the 11 idle ones and reallocated

To further enhance participation of Nigerians and Nigerian companies in upstream oil and gas industry, the govt, in 2010, passed the Nigerian Oil & Gas Industry Content Development Act. Among other things, that Act mandates that Nigerian companies shall be the first consideration

in contract awards in oil & gas projects & operations, except where such expertise or material is not locally available. Ditto for hire of personnel for junior and intermediate position. And where no such expertise is locally available & you hire foreign expat,

you need approval and there must be a Nigerian understudy. The Act also requires all contractors to pay 1% of contract sum for all upstream oil and gas contracts to NCDMB to be used to fund development. All fabrication & welding activities to be done in Nigeria.

All operators & contractors to maintain bank account(s) in Nigeria and maintain a minimum of
10% of its total revenue accruing from its Nigerian operations in the account. Submission of Nigerian content development plan, technology transfer plan etc by oil companies. Among others

The Act creates a board, Nigerian Content Development Monitoring Board (NCDMB) to enforce these provisions and make sure all the local content requirements, including payment of 1% local content levy on upstream contracts, are strictly adhered to by oil and gas companies.