The Group Managing Director (GMD), Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, has called for a clear separation of roles between industry operators and regulators in the oil and gas sector, saying it will improve competitiveness in the industry.
The NNPC boss also cautioned against the wholesale deployment of local skills in the industry, arguing that from his experience, doing so comes with a high cost.
He said this recently during the virtual Nigerian Content Summit, jointly organised by the two chambers of the National Assembly.
Represented by the General Manager, Planning Division of the National Petroleum Investment Management Services (NAPIMS), Mrs. Oritsemeyiwa Eyesan, Kyari stressed that the lawmakers must thoroughly think through the implications of reviewing the extant laws.
“It’s beautiful that the Content Act is expanding its reach and taking it to the entire spectrum of the Nigerian economy. The lessons learnt in the oil and gas industry have to be incorporated into the revision of this law that we are going into.
“One of the challenges we have encountered in the industry is the cost of Nigerian content . Inasmuch as it is a laudable idea and intent to grow the Nigerian capacity, we must agree upfront what premium we gain by bringing in Nigerian capacity.
“Today, the oil and gas industry, especially the upstream is grappling with the high cost of operating its business. This is making the Nigerian space very uncompetitive for foreign investment,” he explained.
He stressed the importance of foreign investment, saying, “you can’t but rely on foreign investment if you want to grow,” in the oil sector.
“So, the oil in the ground can remain there until you get it out of there and it costs money. To get it out, you need to be competitive. And over the last 10 years, we have seen the cost of Nigerian content really shoot up the cost of doing business in the country” he posited.
He added: “I think we need to agree upfront how much premium we need to put into Nigerian content and see how we can manage this.
“Doing a cost-value analysis across our business to understand the cost might be the starting point. Once we know what the cost levers are, we can set up regulations around them to manage the impact on our business operations”.
The GMD maintained that the thin line between the regulator and operators within the industry had become problematic and leading to decreasing competition within the sector.
“As we go into refining laws, it’s important that we delineate the role of the operator from the regulator. Because, one thing we experienced in the upstream oil and gas sector is the cross-function of the Nigerian content board in operations as well as regulation.
“I think that in itself creates difficulty in doing business in Nigeria. We need to segregate that role. In terms of contracting, we have seen situations where we have to propose contract and obtain approvals on a go-basis with the NCDMB. It shouldn’t be.
“The regulator should set the broad framework while the business should be able to key into that framework. The regulator should monitor compliance. It’s important that this is factored in” he said.
He further lamented the high cost of doing business, saying that the levies charged by the NCDMB as an example, was too high.
“The industry thought it was a little high and if you take the entire spectrum of the Nigeria economy, it’s important that we have size reflective levies depending on business size. It can’t be a one size fits all,” he said.
He also called for more attention to be given to education to reflect what is happening in the industry, saying that the misalignment was also affecting the sector.