12-02-2018
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BUSINESS A.M. FEBRUARY, MONDAY <strong>12</strong> - SUNDAY 18, <strong>2018</strong><br />
ENERGY, POWER & RENEWABLE<br />
25<br />
Conference report: WAPIEC <strong>2018</strong><br />
Regional local content seen to drive growth<br />
in West African, but integration is key<br />
Bukola Odufade<br />
AFTER NIGERIA IM-<br />
PLEMENTED its local<br />
content act in 2010,<br />
other African oil producing<br />
countries have<br />
followed suit and some, like Ghana<br />
and Uganda, even modeled their<br />
local content act, using Nigeria’s<br />
loacl content act as a framework.<br />
However, there is little to no<br />
regional local content integration<br />
across the West African region.<br />
This was one of the concerns<br />
raised at the second annual West<br />
African International Petroleum<br />
Exhibition and Conference<br />
(WAIPEC) held for two days last<br />
week in Lagos, Nigeria.<br />
“With so much focus given<br />
to national local content, we are<br />
gradually realising that as West African<br />
countries, we can’t go on this<br />
journey on our own,” said Juliette<br />
Twumasi-Anokye, managing partner,<br />
Anojul Afriyie & Company.<br />
Although many at the conference<br />
generally agreed that regional<br />
integration of local content is the<br />
next step to take, in reality, they<br />
said, this continues to be farfetched.<br />
Olusoga Odusela, general manager,<br />
Nigerian Content Development,<br />
Chevron Nigeria asked:<br />
“What is the business structure<br />
of Nigerian contractor? Are we<br />
focused on Nigeria alone or are<br />
we regionally ready? Are our work<br />
processes and ethnics globally<br />
competitive and can they be audited<br />
to global standards? Because<br />
if you want to go beyond the shores<br />
of Nigeria, that means you’re now<br />
going international.”<br />
Odesela said the price structure<br />
of local companies makes<br />
them uncompetitive outside of<br />
the country, asking pointedly, “Is<br />
our price structure competitive?”<br />
He noted that in some cases, “our<br />
pricing makes it challenging for<br />
us to compete in the West African<br />
region.”<br />
The reluctance of Nigerian contractors<br />
to willingly develop local<br />
community contractors, he said<br />
represents another challenge, adding<br />
that in order to reduce the cost<br />
of doing business, developing local<br />
capabilities will go a long way.<br />
According to him, the Nigerian<br />
business environment is mature<br />
enough to compete favourably<br />
in the West African region, but<br />
that local companies need to<br />
build themselves up to be able<br />
to overcome the barriers. “There<br />
is nothing to be done in terms of<br />
exploration and development in<br />
oil and gas industries in Ghana<br />
or Togo that has not been done in<br />
Nigeria,” he said.<br />
Austin Uzoka, Nigerian content<br />
manager at Shell Petroleum<br />
Development Company (SPDC)<br />
cited three barriers for the non-integration<br />
and non-standardization<br />
of local content in the region, one<br />
being cultural barrier.<br />
“Nigeria being surrounded by<br />
Francophone countries means<br />
there is a big cultural gulf that we<br />
West Africans need to overcome<br />
particular in terms of collaboration,”<br />
he said.<br />
Regional integration is still<br />
non-existent because of the cultural<br />
diversity that the region has,<br />
Uzoka said. He drew example from,<br />
“Nigerians preferring to fly to Accra<br />
to do trainings, which is an<br />
Anglophone country but further,<br />
rather than Lomé, where French<br />
is the primary language but closer.”<br />
With so much focus<br />
given to national<br />
local content, we are<br />
gradually realising<br />
that as West African<br />
countries, we can’t<br />
go on this journey<br />
on our own<br />
Another fact hindering integration<br />
is what he called the ‘reality<br />
phenomenon’, which is the fact that<br />
West African countries don’t have<br />
bilateral and multilateral treaties<br />
that can sustain cross-integration<br />
or intra-country integration across<br />
the West African terrain.<br />
However, this is a deliberate<br />
act on the part of government of<br />
the various countries who haven’t<br />
encouraged the transfer of knowledge,<br />
technology and skills across<br />
the region, he explained.<br />
He also noted that the ease of<br />
doing business is higher in other<br />
West African countries than in Nigeria,<br />
because certain restrictions<br />
are not faced in those countries<br />
and incentives have been put in<br />
place for them, he said.<br />
For instance, Uzoka spoke<br />
about drilling pipes that are imported<br />
into Nigeria but the company<br />
had no use for them, so it was<br />
decided that the pipes should be<br />
sold to Ghana. According to him,<br />
when calculations were done, it<br />
turned out that it would have been<br />
cheaper to import through Ghana<br />
rather than Nigeria.<br />
He said aspiration will drive reality<br />
as aspirations are impeded by<br />
the cost of business. “As the cost of<br />
business in Nigeria remains high,<br />
it begins to challenge our competitiveness<br />
with our West African<br />
counterparts, Uzoka also said.<br />
Opportunities are present, he<br />
said, but noted that in order to harness<br />
the opportunities and drive<br />
change, we have to be deliberate,<br />
focused and target-oriented.<br />
Oduselu also advised Nigerian<br />
entrepreneurs to make their business<br />
focus beyond the shores of<br />
Nigeria, noting that the country<br />
should be the hub in supporting<br />
other West African countries.<br />
Sylvester Iduseri, capacity development<br />
manager, Total Nigeria<br />
also noted that, “local content is<br />
survival for the sustainability of<br />
any country,” citing Egina FPSO as<br />
an example.<br />
The representative from the<br />
Ghana Petroleum Commission<br />
advised that the focus should be<br />
on creating synergies within the<br />
region rather than duplicating<br />
capabilities as West African countries<br />
keep working separately with<br />
no integration or standardization<br />
approach.<br />
The governments of West African<br />
countries were also advised to<br />
offer incentives and tax waivers to<br />
stimulate the growth of the economies<br />
and regional local content.<br />
The regional economic organisation,<br />
Economic Community of<br />
West African States should be used<br />
as a platform for harmonizing<br />
standards to facilitate the integration<br />
growth, it was also suggested.<br />
The example was cited of the<br />
West African gas pipeline, which<br />
runs from Nigeria to Benin, then<br />
Togo and finally Ghana, where the<br />
governments of these nations let<br />
go certain restrictions to make it<br />
happen, because benefits were to<br />
be gained.<br />
PETAN and its other West African<br />
counterparts were also advised<br />
to start a dialogue on creating a<br />
path for the free movement of<br />
technical and engineering skills<br />
and not just leaving it to the government<br />
alone.<br />
US oil flood markets worldwide, taking share from OPEC nations in Asia, Europe<br />
In the two years since Washington<br />
lifted a 40-year ban<br />
on oil exports, tankers filled<br />
with US crude have landed<br />
in more than 30 countries,<br />
ranging from massive economies<br />
like China and India to tiny Togo.<br />
The repeal has unleashed a flood<br />
of US shale oil, undercutting global<br />
crude prices, eroding the clout of<br />
the Organisation of Petroleum Exporting<br />
Countries (Opec) and seizing<br />
market share from many of its<br />
member countries.<br />
In 2005, before the shale revolution,<br />
the United States had net imports<br />
of <strong>12</strong>.5 million barrels per day<br />
(bpd) of crude and fuels — compared<br />
to just 4 million bpd today.<br />
US producers are making new<br />
customers out of some of the world’s<br />
biggest oil-importing nations in Asia<br />
and Europe, posing a serious competitive<br />
threat to the only other countries<br />
that produce as much crude:<br />
Saudi Arabia and Russia. At home,<br />
the export boom has filled pipelines<br />
and sparked a surge of investment in<br />
new shipping infrastructure on the<br />
Gulf Coast.<br />
US producers now export between<br />
1.5 million and 2 million<br />
barrels of crude a day, which could<br />
rise to about 4 million by 2<strong>02</strong>2. The<br />
nation’s output is expected to account<br />
for more than 80 per cent of<br />
global supply growth in the next<br />
decade, according to Paris-based<br />
International Energy Agency.<br />
Much of the increased flow will go<br />
to China, the world’s top importer and,<br />
since November, the largest buyer of<br />
US crude other than Canada.<br />
Chen Bo, president of Unipec —<br />
China’s largest buyer of US crude —<br />
told Reuters that the firm expects<br />
to double US imports this year to<br />
300,000 bpd as it seeks to expand<br />
sales in Asia and find new customers<br />
for US exports in other regions,<br />
including Europe.<br />
Unipec — the trading arm of<br />
Asia’s largest refiner, state-owned<br />
Sinopec — is also considering<br />
long-term crude supply deals with<br />
US pipeline and terminal operators.<br />
The firm may also partner with<br />
such firms to expand and improve<br />
US export infrastructure, Chen said<br />
in an interview.<br />
“US crude flowing to Asia is a<br />
major trend in global oil trading,”<br />
Chen told Reuters.