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Springfield Board Chair makes case for indigenization in petroleum sector.

George Etom

 

Springfield Group’s Board Chairman, Mr. George Etomi, has made a strong case for indigenization as the most important process in managing oil and gas resources in Africa in order to ensure that the benefits are sustainable and far-reaching across the continent’s economies.

This, he argues, could be done through harmonization of policy, law and regulations.

“Independent producers and operators across the Gulf of Guinea should also form a region-wide association so they present a united front for negotiations with regulators”. He advised.

Mr. Etomi offered the advice at the 4th Annual Upstream West Africa Summit in June, 2018 in Dakar, Senegal where he made a presentation on indigenization of Upstream E&P: Focus on Deepwater Assets.

“Regional oil and gas resources are increasingly deep water. However, with the right partnerships that strike a balance between local and foreign participation, funding and government backing through appropriate frameworks and incentives, indigenous companies can take up this challenge”. Mr. Etomi stressed.

In his view, indigenization is measured by the extent to which the output of a particular sector generates further benefits to the economy through links to other sectors beyond its direct contributions.

Flowing from the above, he said, it was important that stakeholders in the oil and gas sector used indigenous participation to produce gas for the purposes of generating electricity and solving a regional power problem in West Africa, adding “We can then truly say we have indigenized the oil and gas sector as the ripple development benefits to regional economy will be far reaching beyond the direct collection of rent and profits”.

He cited various government-sponsored initiatives on indigenization that had been taken in Nigeria, Ghana and other African countries such as the Indigenous Operator Program in 1990, Nigerian Oil and Gas Industry Content Development Act, 2010 (the ‘NOGICD Act’) and the Guidelines for Farm-out and Operation of Marginal Fields 2013 (the 2013 Guidelines).

In the case of Ghana,  he mentioned the Substantive legislation on local content is set out in the Petroleum (Local Content and Local Participation) Regulations, 2013 (LI 2204) which gives priority consideration to Ghanaian companies in the award of oil blocks and associated projects in the oil and gas industry.

Under the law, foreign business entities need to have at least five percent (5%) equity participation by indigenous Ghanaian Companies to qualify to enter into a petroleum agreement.

Mr Etomi said that although the petroleum sector and indigenization was relatively new in Ghana, fair progress had been made.

 

 George Etomi

 

“All of the above were geared towards promoting participation of Nigerians in the petroleum sector. Even though some Nigerians held managerial positions in the upstream sectors, very little “Nigerianization” and transfer of technology had taken place”. He added.

The NOGICD Act provides for preferential treatment for Nigerian independent operators and indigenous service companies and gives independent operators first consideration in respect of the award of oil blocks, oil field licenses, oil lifting licenses, and contracts for new projects.

The number of indigenous operators has swelled to about 50 and Independent companies now control 30% of domestic crude oil reserves and 25-30% of the production.

Currently, independents hold about 10.5 Bboe of oil and 45 tcf of natural gas in 76 blocks (659 fields) and 30 marginal fields. He added.

Mr. Etomi said there also has to be fiscal incentives provided by the Government and that they could replicate something similar to Nigeria’s Pioneer Status Incentives regulation which provides for tax holidays for certain players in certain sectors. This, he noted, could be applied for the benefit of indigenous operators in deep water assets.

Mr Etomi later received a Certificate of Excellence on behalf of Springfield as the E&P Newcomer to the Region.