AFRICA OIL & GAS TODAY

The local content headache
05/29/08, Biodun Omojola

Nigeria, Africa's leading oil producer, risks losing billions of dollars in oil and gas industry expenditure if local content input remains low in its vital petroleum sector. Experts say about $67 billion may be lost as a result of low local content capacity. Nigeria has one of the lowest levels of local content in the global petroleum industry when compared to countries such as Mexico and Brazil, which have largely domesticated their oil industry.

Nigeria was to have achieved 45 percent local content target by 2006, but it missed the mark by a wide margin. This is making the 2010 target of 70 percent looking increasingly unattainable. The low level of local content is said to explain the low level of participation of Nigerians in the oil industry as contractors, suppliers, skilled technicians and entrepreneurs. The low level is also responsible for the industry looking far removed from the rest of the national economy even though it brings huge sums to the national purse form exports of oil and gas.

Oil watchers in Nigeria say the expected loss represents total petroleum industry expenditure for five years between 2008 and 2012. Of this figure, oil expenditure for both onshore and offshore will take $34.4 billion, while spending on natural gas would reach $32.7 billion. In the absence of a vigorous pursuit of a robust local content policy, most of the money would go to foreign firms and individuals, leaving Nigeria with precious little by way of financial, technological and broader economic gains.

Local content in Nigeria's hydrocarbon industry has been a major issue. Due to its insistence of having a considerable percentage of local content in the industry, the state oil company, the NNPC, established a Nigerian Content Division. A top official of the division admits that much remains to be done to attain higher levels of local participation in the industry.

No exact figure is known about the level of local content in Nigeria's oil industry. But one thing is certain, it is very low.