CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
The
need for resource-rich Nigeria to assume control of the exploration,
exploitation and production activities in the oil and gas sector and to harness
the potentials of this most strategic industry in order to generate more
value-added, seems to be receiving much desired attention from all the
stakeholders. This need is equally expressed in Nigeria’s desire to domicile a
substantial amount of the average $18 billion per annum exploration and
production spending and stem the tide of capital flight which, over the years,
has made Nigeria a junior partner in her joint venture arrangements with the
International Oil Companies (IOCs). For a country with over four decades’
experience in oil and gas exploration and production activities and proven
recoverable reserves of about 37 billion barrels, her inability to use the
resource wealth as a means for national development and poverty reduction has
perhaps been the greatest challenge facing successive administrations. These
challenges have their expression in how Nigeria can derive maximum benefits
from oil and gas operations through optimal use of local competences and
resources as practiced in Indonesia, Brazil, Norway and Venezuela, for example.
Although these countries started oil exploration and production activities
after Nigeria they have largely recorded remarkable success in their efforts to
grow the local content in this strategic industry.
The question is: why has
Nigeria been unable to surmount her own challenges?
The
Nigerian Oil and Gas Development Law 2010 defines local content as “the quantum
of composite value added to or created in Nigeria through utilization of
Nigerian resources and services in the petroleum industry resulting in the
development of indigenous capability without compromising quality, health,
safety and environmental standards”. It is framed within the context of growth
of Nigerian entrepreneurship and the domestication of assets to fully realize
Nigeria’s strategic developmental goals. The scheme, which has the potential to
create over 30,000 jobs in the next 5 years, is geared to increasing the
domestic share of the $18 billion annual spending on oil and gas from 45% to
70%, in addition to enhancing the multiplier effects on the economy, through
refining and petrochemicals.
The local content policy action started in 1971
through the establishment of the Nigerian National Oil Corporation, (NOC). NOC
was established as a vehicle for the promotion of Nigeria’s indigenization
policy in the petroleum sector. It later became Nigerian National Petroleum
Corporation (NNPC) in 1977 through NOC’s merger with the petroleum ministry.
NNPC flagged off the actual local content initiative through acquisition of
interests in the operations of the IOCs. These interests grew to about 70%,
with the responsibility of controlling all acreages and other activities.
Although conscious efforts were made in the past through Regulation 26 of the
1969 Petroleum Act, enforcement of local content policy, the springboard for
sustainable economic transformation of Nigeria, was mere paper work. For an
industry that contributes 80% of Nigerian government revenues and 95% of its
foreign exchange this is entirely unacceptable to the Nigerian government hence
the clamor for change.
1.2 Statement
of the Problem
Nigeria’s
rising profile in oil and gas production was rather fast and steady such that
she soon became a formidable force within OPEC. Oil exploration, which started
onshore has tremendously improved the nation’s daily production capacity to
about 2.3 million barrels per day, and raised her proven reserves to about 37
billion barrels. However, despite Nigeria’s ever-growing profile and wealth, the
country remains one of the poorest, and technologically backward, nations in
the world. This is basically because the much-taunted wealth has not translated
into improved welfare. One reason for this is that over 90 percent of the
yearly industry expenditures escape the domestic economy as capital flight.
1.3 Objectives
of the study
There
is no doubt that the ultimate objective of any oil-producing, developing
country is to control and operate all phases of its industry. This explains why
successive governments since the country’s return to democracy have deemed it
an urgent need to positively develop the level of participation of Nigerians in
the oil and gas industry. Indeed, the Federal Government of Nigeria have
initiated several policies and enacted some legislations towards the
statutorization of such golden initiative. This paper critically examines the
various local contents
in the petroleum industry in Nigeria, particularly the key statutory and/or
policy framework regulating same.
1.4 Research
questions
What are local contents in the
petroleum industry in Nigeria?
1.5 Significance of the study
Despite
the ever growing number of local oil service companies the latter’s annual
gross earnings still account for less than 5 percent of the sector’s aggregate
annual contracting budget. Even the local media has been denied the much
desired opportunity to advertise the activities of upstream companies in
Nigeria. Some of these companies, including Nigeria LNG prefer to spend huge
media budgets running into millions of dollars on foreign media like CNN,
upstream journals and magazines. They hardly spend 20 percent of such annual
budget on Nigeria media.
1.6 Scope/Limitations of the study
This
study on immorality in churches will cover all forms of immoral activities that
exist in churches today with a view of finding a lasting solution to the
problem.
Limitations of study
1. Financial constraint- Insufficient fund tends to impede the
efficiency of the researcher in sourcing for the relevant materials, literature
or information and in the process of data collection (internet, questionnaire
and interview).
2. Time constraint- The researcher will simultaneously
engage in this study with other academic work. This consequently will cut down
on the time devoted for the research work.
1.7 Definition
of terms
Local
Content:Is the development of local skills, oil and gas technology transfer,
and use of local manpower and local manufacturing.
For a more practical definition, one could say that local content is
building a workforce that is skilled and building a competitive supplier base
(Oil and Gas, 2010).
Oil
and Gas industry:A company that participates in every aspect of the oil or gas business, which includes the discovering, obtaining, producing,
refining, and distributing oil and gas. An integrated
organization usually organizes its different tasks and operations into the categories
upstream and downstream.
