The Maritime Reporters Association of Nigeria ( MARAN) on Tuesday held a sensitization seminar on Local Content Development in Nigeria. At the event, the Nigerian Maritime Administration and Safety Agency, (NIMASA) delivered a paper entitled, “THE ROLE OF SHIPPING IN OIL AND GAS LOGISTICS: NEED FOR SYNERGY IN THE IMPLEMENTATION OF THE NIGERIAN COASTAL AND INLAND SHIPPING (CABOTAGE) ACT 2003 AND THE NIGERIAN OIL AND GAS INDUSTRY CONTENT DEVELOPMENT ACT 2010”.
Platform Reporters was there, and now brings you full text of the NIMASA Paper Presentation as delivered by Mrs Anna Akpan, Assistant Director, Shipping Development on behalf of NIMASA DG, Dr Dakuku Peterside.
It is my pleasure and honour to be invited here today. I thank the organizers of this program for their thoughtfulness in recognizing the fact that there is need for cooperation between the shipping industry and the oil and gas industry in Nigeria if the local content development initiatives of the government in both sectors are to be achieved.
As the apex Maritime Regulatory Authority in Nigeria and the Agency responsible for implementing the Cabotage Act 2003, which is a maritime specific local content policy, I have decided to dwell on the synergy that is required between the Local Content Act of the oil and gas industry and the Cabotage Act of the maritime industry in driving the local content development in the oil and gas shipping logistics in Nigeria.
Relationship between shipping and the oil and gas industry
Shipping has always been of strategic importance to the oil and gas industry. Not only is over 70% of all crude oil production transported by ships, more and more oil production activities are now being carried out offshore. This shows that the oil industry relies heavily on the maritime industry for its smooth operations.
In Nigeria, the Maritime Industry shares not only common business interests with the oil and gas sector but also common challenges.
The most pronounced of these challenges is foreign domination. It is a known fact today, that despite the huge activities and revenue generated by these two industries their impact in terms of employment and generation of economic growth has been so low.
For example, the oil and gas sector of the Nigerian economy accounts for almost 90% of the foreign exchange earnings for the country but less than 20% contribution to GDP and 5% of total employment which is a misnomer.
The situation in the maritime industry is not different. Nigeria which is ranked the 7th largest oil producer in the world is the only oil producing country that does not carry a drop of its crude.
Industry statistics shows that the country generates an estimated annual cargo throughput of 150 million metric tons with freight earnings in excess of $5billion in her international trade transactions. 95% of this income is earned by foreigners, with the job deprivation to the country that goes with it.
The same dominance by foreigners is also extended to the domestic shipping market, where the estimated $3billion annual marine related spending in the oil and gas production activities are virtually earned by foreigners.
This situation of so much activity and so much money, but little impact on the lives of Nigerians, accounts for the high level of frustration and restiveness in the country especially in the Niger Delta region. With this in mind, the Federal Government of Nigeria came up with the Cabotage law in the maritime industry and the Local Content policy in the oil and gas sector to tackle this challenge.
THE CABOTAGE LAW
The government realized that the area that can easily be taken over by Nigerians in the short run, in its quest for increased local content in the oil and gas sector is the logistics and shipping sub-sector. Faced with this reality and the knowledge that the Maritime industry has its own peculiar laws and conventions, the government then promulgated a maritime specific local content policy which was enacted in 2003 and came into effect on April 2004. This policy was known as the Coastal and Inland Shipping (Cabotage) Act 2003.
The Nigerian Cabotage law is primarily an economic interventionist policy by the government. The law was designed to be a catalyst to drive the development of the indigenous maritime industry as a whole. With this in mind, the law was structured along four major target areas which are now referred to as the four pillars of the Cabotage Act 2003.
These four pillars are that all Cabotage trade vessels in Nigeria must be owned by Nigerians, built in Nigeria, manned by Nigerians and registered in Nigeria. This in essence means that the objective of the Cabotage law is to achieve self-sufficiency in the area of domestic tonnage capacity, building capacity, manning capacity and registration.
These requirements of the law were meant to be in absolute terms. The policy direction was that if the indigenous capacities in these areas were to be optimum at the inception of the law, there would have been no room for any foreigner to participate in the Cabotage trade in Nigeria after April 2004 when this law came into effect. However, due to the fact that the indigenous capacities were not adequate , the concept of waivers was introduced to allow for a gradual build- up of indigenous capacities and also to avoid destabilizing the smooth running of the Nigerian oil and gas sector which is the target market of the Cabotage law.
Balancing the act of implementing the Cabotage law and not destabilizing the smooth running of the oil and gas sector has not been easy, but with the enactment of the Local Content policy in the oil and gas industry, NIMASA was presented with a
veritable tool to leverage on to effectively implement the Cabotage law in order to boost the indigenous maritime capacity.
Nigerian Oil and Gas Content Development Act 2010
In order to create a platform for the country to maximize the opportunities available in the oil and gas industry, the Federal Government in 2005 enunciated the Nigerian Content Development Policy. The policy spelt out activities in the oil and gas industry that must be carried out in Nigeria. It was assumed that when this policy is carried out, it would rapidly develop Nigerian skill-set in the industry and also build the required capacity in the country.
The aim was to achieve at least 70% local content target in areas such as engineering design, fabrication, well drilling, operations and maintenance, manufacturing, insurance and most importantly for Nigeria, offshore oil and gas shipping logistics . In 2010, the Federal Government signed into law the Nigerian Oil and Gas Industry Content Development Act. This Act provides a roadmap for the achievement of these goals by laying out guidelines for Nigerian content plan, supervision, coordination, monitoring and implementation of Nigerian content.
Maximizing the opportunities provided by the Nigerian Oil and Gas Content Development Act for indigenous capacity development in oil and gas shipping logistics operations
The Nigerian oil and Gas Content Development Act 2010 covers the broad spectrum of the production activities of the oil and gas industry in Nigeria, which includes shipping logistic related activities. The Cabotage Act 2003 on the otherhand, deals specifically with all coastal shipping trade which also includes all oil and gas shipping logistic operations in Nigeria. These two Acts were not meant to be in conflict with each other, but to achieve the same purpose.
It is therefore important that the two implementing Agencies of these two laws must identify areas of common interest and design a strategy for an effective implementation for the benefit of the country which NIMASA has been doing over the years.
In order to leverage on the local content policy to boost indigenous maritime growth in Nigeria, NIMASA has examined the provisions of the Local Content Act as it relates to maritime activities and has come up with how best these provisions can be effectively implemented within the ambit of the Cabotage law.
The provisions of the Act which are of much interest to the Agency as it relates to the NIMASA Act 2007 and the implementation of the Cabotage law are:
• Section 2- “Nigerian Content as Management philosophy for project execution in the oil and gas industry;
• Section 3- First consideration to be given to Nigerian operators;
• Section 7–Submission of Nigerian Contents plan for all projects;
• Section 10 – Contents of the plan;
• Section 12 – First consideration for Nigerian Goods and services;
• Section 28 – First consideration to be given to Nigerians for employment and training;
• Section 29 – Submission of employment and training plans;
• Section 30 – Training of Nigerians;
• Section 31 – Requirement for the succession plan;
• Section 34 – Requirement for labour clause;
• Section 41- Regulations for the further growth of indigenous capacity;
• Section 54 – Petroleum e-marketplace;
• Section 55 – Establishment of the joint Qualification System;
• Section 56 – Functions of the joint Qualification System;
• Section 58 – Composition of Nigerian Content Consultative forum;
• Section 105 – Enforcement of compliance with Cabotage Act 2003.
All these provisions could be subsumed under the following headings- (1) Awards of Contracts (2) Employment and Training.
In order to maximize the provisions of the Act to boost the maritime industry in Nigeria, NIMASA has been collaborating with the Nigerian Content Development and Management Board (NCDMB) in these two areas and have been advocating for the following:
AWARD OF CONTRACTS:
1. That in the award of contracts in the maritime services subsector of the oil and gas industry, cognizance should be taken of the provisions of the Cabotage Act 2003 and the NIMASA Act, 2007 especially Sections 36 and 37 of the latter as it relates to the exclusive rights of National Carriers to lift government cargo. Relevant provisions of the Merchant Shipping Act 2007 with respect to construction of vessels should also be taken into consideration in so far as they relate to local content;
2. That Nigerian Operators and vessel owners should be given first consideration in the award of marine service contracts;
3. That the NCDMB should notify the Agency of all marine service proposed projects and contracts;
4. That the Labour Clause relating to local content for projects and contracts whose total budget exceeds $100 Million should also include the marine services subsector of the oil and gas industry.
5. That the NCDMB should try to encourage the indigenous maritime operators by mandating oil and gas companies to be giving provisional contract approvals to indigenous shipping companies so that they can use it to access funds from the banks to acquire the vessels needed for the execution of their contracts, especially when these contracts are not urgent in nature.
EMPLOYMENT AND TRAINING
• That the Nigerian content plans to be submitted during the bidding processes should articulate the aspect of seafarers and cadet training as well as employment requirements. Where waivers are to be granted due to lack of capacity, it must contain a provision that Nigerians be trained within a specific period to take over the posts (succession plan);
• That as part of the general capacity building responsibility of operators, the Agency’s surveyors should be considered for training.
It is our belief that with an effective synergy between NIMASA and NNPC in the implementation of the Local Content Policy and the Cabotage law, the Maritime industry in Nigeria would be better for it. These two Acts have presented a clear opportunity for Nigerian entrepreneurs to gradually build their capacities and take over the marine logistics business of the oil and gas industry in Nigeria. The opportunities are there, the opportunities are real, only those who take advantage of them today would reap in the future.