Nigeria oil industry: Indigenous companies come to the fore

Ministerial backing
Speaking at The Economist World in 2014 Summit in New York, Nigeria’s Minister of Petroleum Resources, Diezani Alison-Madueke, said: “I’m very pleased that we have continued to see progressively larger volumes of Nigerians coming into the downstream sector of the Nigerian oil and gas industry.

“Nigerians across the entire spectrum of the downstream have come into areas of fabrication of small-scale service parts, fabrication plants, pipe mills, and of course various service projects and jobs that protect in a very critical way operations of the majors in the oil and gas sector. This had hitherto been the presence of subcontractors to the majors, who were mostly foreign. Now Nigerians get first consideration in most areas of the oil and gas sector.”

The government is also keen for Nigerian companies to become more active in other strands of the oil and gas sector. While a string of foreign firms have announced plans for new oil refineries in the country over the past 15 years, none have been built and most proposals have disappeared without trace.

However, Nigeria’s own Dangote Group has unveiled its plan to construct a massive oil refinery with production capacity of 445,000 b/d, plus associated petrochemical and fertiliser plants, at a cost of $9bn.

While the four existing NNPC refineries have failed to satisfy domestic demand, to operate commercially and indeed very often to operate at all, the Nigerian private sector is seeking to prosper where parastatals and foreign companies have failed to tread. Talks have begun over constructing the refinery at the new Lekki Free Trade Zone (LFTZ), which the developers hope will attract other Nigerian oil industry businesses.

The president and founder of Dangote Group, Alhaji Aliko Dangote, said: “I can assure you that this is going to be the biggest free trade zone  in Africa. I know that the people will begin to show their appreciation soon. There is no way we can put down over $9bn of our money here without making sure that the zone is going to work.”

Doyin Okupe, the senior special assistant to Nigerian President Goodluck Jonathan, says that the project will “change the economic and industrial landscape of Nigeria”.

However, the big obstacle to the development of the refinery will be continued state regulation of fuel prices. Although they keep prices down for consumers, subsidies distort the market and make it difficult for producers to make a profit.

On the other hand, if Dangote Group and the government find a away to make it work, Okupe would be right in his estimation of the scheme’s great impact. It would undoubtedly be the biggest industrial project in Nigerian history and the biggest single investment by any Nigerian company anywhere in the world.

Alison-Madueke said: “In terms of the upstream, again we have given a lot of support to Nigerians to up the ante, to actually come in and take a stake in the upstream sector. Now it’s a major preserve of the multinationals, or has been so far, but we begin to see Nigerian indigenous operators and owners coming into the upstream, taking up acreage and blocks, getting transfers for knowledge, of ability, of know-how and skills, and actually running with these blocks. It will take some time. We are seeing – supported by government – a much higher incidence of indigenous operators coming into the upstream sector.”