Nestoil Drills to Reckoning
The Centre for Petroleum Information, CPI, industry luncheon talk series for the petroleum industry has in the past 13 years focused on key issues within the industry, as well as company experiences regarding doing business in Nigeria which is seen as turbulent. The first talk series in 2001 had the theme: “Building Local Capacity: The Brazilian Experience” hosted by Petrobras, 2002: Hosted by Schlumberger :”Changing Face of Oil Services – The Schlumberger Experience”, 2003 :Elf Petroleum: “Successful Unitisation of Oil Field- The Amenan Kpono Experience, 2004 Niger Dock: “Creating Local Value Added: The Niger Dock Experience”, 2005: South Atlantic Petroleum, “Strengthening Industry/Multinational Alliance: The Akpo Case Study, 2006: ExxonMobil: “Achieving Timely Deep Water Production: The Erha Experience”, 2007:Total Upstream: “The Enablers of Gas Development to Support the Nation’s Growth Agenda’, 2008: Addax Petroleum “Growing Mid-Sized Hydrocarbon Assets – Lessons from Addax OML 123” 2009: Total Upstream: “Akpo Deepwater Field – The Challenges and Journey to Production”, 2010: Afren Energy Resources: “Contributions of Independents to Nigeria’s Oil and Gas: The Last 50 Years”, 2011: Seplat Petroleum: “Growth Prospects for Nigerian Independent Petroleum Producers”, 2012: Mobil Producing Nigeria Unlimited ExxonMobil Affiliates in Nigeria: “Sustaining Nigeria’s Position as African Leading Hydrocarbon Exporter.”
The 2013 edition which is the 13th talk series had the theme: “Contributing to Nigerian Content: The Nestoil Style”. In this comprehensive report, our Correspondent THERESA IGATA, captures how Nestoil has kept the Nigerian flag flying gloriously in the technology-driven, capital-intensive oil and gas sector
Local content is one issue that Nigeria and Nigerian companies seem not to have come to terms with. For many, it is a mission impossible, considering the level of technological know-how; but for any nation that must advance economically, localising businesses and indigenous participation is key. With the Local Content Law in place, how has this helped Nigerians and Nigerian companies, especially the oil companies? How are Nigerian companies encouraging indigenous participation?
According to the CEO Nestoil, Ernest Azudialu, ‘Nigerian content’ has been defined by the Nigerian Content Development Act as “the quantum of composite value added to or created in the Nigerian economy by a systematic development of capacity and capabilities through the deliberate utilization of Nigerian human and material resources and services in the Nigerian oil and gas industry.
Section 2 of the Act provides that all regulatory authorities, operators, contractors, subcontractors, alliance partners, and other entities involved in any project, operation, activity or transaction in the Nigerian Oil and Gas industry shall consider Nigerian content as an important element of their overall project development and management philosophy for project execution”.
Local Content Law and Oil Companies
He reiterated further that Local Content Law has helped Nigerian companies compete with their counterparts overseas who are on the same level. “Inasmuch as we still understand that we cannot do the whole work or understand the whole technology in one day, Nigerian companies have developed the capacity to do some of these projects associated with the production of oil along the lines of certain levels of technology (pipe laying ) etc”, which he said will make the oil servicing companies move to a different level so that Nigerians can take care of this area. “The Local Content Law has supported companies like ours to develop, but we can’t do it overnight.” The Nestoil boss expressed his displeasure at the fact that Nigerians in the past never participated in any of the works being carried out in the oil companies. “You can only get jobs of laying blocks for primary schools as the case may be or to supply sand to the local communities”. The actual money in oil-production is within the production itself where you do the major facilities, drilling and construction of the pipeline etc. “And Nigerians don’t participate there”. This means that the whole money meant for oil production will leave the country thereby creating a lot of unemployment.
A lot of controversies have trailed the long awaited Petroleum Industry Bill which has passed its second reading at the National Assembly. The bill, a lot of people have said will be distorted through lobbying and sharp corrupt practices. Will the delay in passing the bill pay off? For Azudialu, though the bill is supposed to create the legal framework for the whole oil and gas industry in Nigeria, the bill has been politicised so much. “There is the problem between those who want the bill killed and those who want it passed”.
The major problem, he added, is that everybody wants to make sure that his or her own interest is represented there which according to him is impossible because” there’s no way you’ll have a law that will represent everybody’s interest”.
The multinationals, he added, “want to make sure that most of the things that are supposed to be in that bill will take care of them and their investments in Nigeria. The bill is a good one because without that legal framework in Nigeria it will be difficult for Nigeria to attract major oil investments. The politics of the PIB is one that is played at a very high level and I can’t tell you what the position will be soonest because that bill is still there being tossed up and down and as a local company we constitute ourselves into small units trying to meet to discuss some of the issues within that bill using our own contacts to make sure that the local companies, marginal field operators, those of us trying to produce our own oil at a lower level, that we all very good tax regimes that will favour us”.
The Nestoil Example
For a company incorporated in 1991, spanning over two decades, Azudialu cites his company as a case-in-point in the propagation of indigenous participation. In his words, “not much was known about local content or indigenous participation in the oil and gas industry, the way we all know it today. The Nigerian Content Act definitely wasn’t in existence then. However, our thinking then was very similar to the issues that informed the enactment of the Act.
“The issue was simple: Oil was, and still is, a major foreign exchange earner for the country. A lot of expenses go into the oil exploration and production process. How can we, as an indigenous service company, participate and add value to this process not just to earn
income but also to build and develop capacity? This was indeed a tall order for us, as we practically had little or no experience, having primarily engaged only in commodities trading before venturing into oil and gas.
“In retrospect it was a difficult move considering the numerous constraints we had to face including lack of finance, scarcity of local manpower, lack of experience, to name just a few. Despite these seemingly difficult odds we persisted and steadily developed what is arguably one of the largest diversified oil and gas industry service groups employing over 2000 personnel, 98 per cent of which are indigenous, with the ability to implement highly complex projects in areas such as pipeline construction, fabrication, mechanical and civil works, flow station upgrade, dredging and shoreline protection, oil exploration and production” he said.
STRATEGY AND CHANGES
“When Nestoil commenced operations our initial intention was to engage in the blending and sale of petroleum products. Fierce competition propelled us to change our strategy and refocus and develop as a full services company. To put things in proper perspective, you will recall that this was an era which can be described as the ‘pre local content era’, the notion of local participation in the technically advanced area of oil and gas was not common place. But we persisted against all the odds.
In 1996, we made what can be considered a strategic move by setting up an operational base in Warri. At this time, the Warri environment was not particularly business friendly. The few existing local oil service companies had left town due to the serious security concerns and sheer inability to operate.
But we recognised an opportunity to fill the gap. Our patience, passion and perseverance eventually paid off, when Shell awarded us our first major contract: The Upgrade and Modification of the Edjeba Sewage Treatment Plant. It was a triumph of persistence and a major cause for celebration as it was followed quickly by the Opokushi Flow station Upgrade Works and the Otumara/Batan Flow station Debottlenecking Works. All projects were located in the SPDC Western division”.
OTHER MAJOR CONSTRUCTION PROJECTS
The company’s ability to deliver on key construction projects actually made a positive impact, leading to the venturing into more projects.
a) EPIC Developemnt of the Outstation Permanent Accommodation Project in Nembe
b) The 20″ X 38KM Kolo Creek to Rumuekpe Trunkline Project (KCTL)
c) 12″ X 24″ X 45KM Nembe Cawthorne Channel Trunkline (NCTL) Replacement Project
d)18″ X 12″ X 16.5KM Ekulama Soku San Barth Pipeline Project
e) 48″ X 63KM Obiafun – Obrikom – Oben Gas Pipeline Project (OB3)
ESSENCE OF THE PROJECTS
“With the execution of these and many other projects, the human resources, financial, quality assurance and logistics capacities of the company expanded significantly. The organic growth of the company had financial implications. To be candid, those early projects were done with virtually no profit, as the focus then, was to prove that a local company with the necessary support could deliver. Despite the technical challenges we faced, the fact that the works in the Edjeba Treatment Plant, Opokushi and Otumara Flowstations, Oguta, Biseni and Adibawa Flow stations are operational till today, is a testimony of the correctness of our early strategies. As we progressed, huge investments were made in equipment, logistics, HSE, human capacity development, project planning/execution, and community interface.
MOST CHALLENGING PROJECT
Nothing good they say comes easy. Even the bravest of all entrepreneurs faces challenges and reservations. For the Nestoil boss, the Nembe Cawthorne Channel Trunkline, NCTL, project was the most challenging of projects but to him it was worth venturing into.
“In this regard, the NCTL deserves particular mention as one of the most challenging. It passed through six major fast flowing rivers, 44 other creeks and rivers, swampy mangrove terrain, five community clusters comprising about 100 communities and subgroups. It gave us opportunity not just for investment in equipment but also development of indigenous manpower and enhanced our community engagement strategy. I am particularly proud to say that the highly complex crossing of Rivers Sego, Tora, Twoni, Santa Barbra and St. Nicholas was executed by a 100 per cent wholly indigenous work force. That team has replicated this feat in other projects for us and other companies. For a local company, owned by Nigerians, managed by Nigerians and financed by Nigerian banks, this, I believe, is a formidable achievement. It is a perfect illustration of what a local company can achieve if given the opportunity. The project was completed and commissioned in September 2010, one month ahead of schedule”.
NESTOIL CSR ACTIVITIES
“We have endeavoured to have a lasting and positive impact in all the local communities where we operate. Nestoil cannot thrive without guaranteeing that the communities in which we operate have significant benefits. We consider our community relationships a vital component of our business operations. Our community development initiatives are reflected in the number of philanthropic commitments channelled through our foundation – the Obijackson Foundation. The Foundation is working quietly to enhance sporting events, academics and providing the necessary socio-economic support for society. We ensure that we positively impact on our communities in tangible ways by undertaking sustainable long term programs. Some of these projects include:
- Construction of schools and roads
- Sinking bore holes and providing electricity to rural
- Regular subcontracts including labour, surveillance, catering,
security, escort, diesel and fuel supply, fumigation,
- Regular subcontracts including labour, surveillance, catering,
- Sinking bore holes and providing electricity to rural
Broadly speaking, the MOU we have with our host communities spans annual scholarship awards, road construction and maintenance, development funds and employment opportunities. The advantage of such local resource utilization is the wider economic effect it has in our communities”.
SEEING BEYOND THE HORIZON
“For over twenty years of our existence, the only constant factor is change. Change in strategy, human resource, financial planning, focus and strategic partnerships. We continuously refocus our existing strategic business units and establish new ones. Currently they are as follows:
a) B&Q Dredging Limited – which with its formidable fleet of 11 dredgers, including the MV ENESTO, one of the most sophisticated dredgers in Nigeria did all the dredging and river crossing works for both the KCTL and NCTL Projects;
b) Hammakopp Consortium Limited: This is our civil construction arm with operational bases in Anambra State and Akwa Ibom State respectively. As part of our strategy in this area, we have invested significantly in Julius Berger Nigeria Plc where we have a seat on the Board of Directors.
c) Energy Works Technology Limited: This business unit engages primarily in process equipment manufacturing and steel structures fabrication. It recently completed the construction of an ultra- modern Pressure Vessel manufacturing facility in Abuloma, Port Harcourt.
d) Gobowen Exploration and Production Limited: As the name suggests, Gobowen is our oil exploration and production arm. It has significant stakes in OML 88 and OPL 917. Till date our most significant impact in oil exploration and production is through our part ownership of Neconde Energy Limited which acquired 45 per cent participating interest in OML 42, in partnership with other local and foreign companies.
e) Shipside Drydock Limited/ Floating Dry – Dock Facility: We are presently building a floating dry dock in our facility in Abuloma, in partnership with Damen Shipyards of the Netherlands.
f) Time Power Global Dynamics Limited and Century Power Generation Limited: These are our strategic power units. They are active in the current privatization drive of the federal government.
Whilst reviewing the history of companies such as ours, one question readily comes to mind: “What are the chances of other Nigerians successfully delving into this industry”? My answer is simple – the prospects are positive and even much better than when we engaged in our pioneering efforts, over two decades ago. With the coming into effect of the Local Content Act, the federal government of Nigeria has established the basic enabling legal frame work to support meaningful local effort at participation in the Nigerian oil and gas industry.
GIANT STRIDES: THE PRICE PAID
“Our strides have come at a great financial cost, but it has also taken us to the level where international companies now seek our services to enable them complete their work scope in major pipeline projects. They consider Nestoil worthy as a local content partner that has the ability to hold its own. These are some of the major advantages of project completion and delivery. This does not by any means suggest that we are resting on our oars. The room for improvement is still large. Strategic business development and staff ability evaluation remains constant if we are to improve ourselves to a position far greater than where we are today. We continuously challenge ourselves to do better and deliver even under strict time constraints.
“Looking back at the last two decades, I can only marvel at the strides we have achieved. The sheer magnitude of our enterprise is sufficient proof that vision, perseverance and opportunity can lead to success.
“The Nigerian content initiative has changed the Nigerian oil and gas landscape because it has given more companies an opportunity to compete on a more level playing field. As an economic policy, it has positive implications on the economy at large. I strongly support implementation of similar measures in other sectors of our economy. For us at Nestoil, supporting Nigerian content will continue to be part and parcel of our policy and operations”.