Understanding Cabotage And Local Content Within The Nigerian Oil & Gas Industry

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Understanding Cabotage And Local Content Within The Nigerian Oil & Gas Industry: From A Maritime Perspective.

The development and international competitiveness of indigenous Nigerian shipping companies stem from: Enactment of Government Policies Availability of basic infrastructures, Development and availability of manpower capacities & capabilities.

To this end: Coastal and Inland Shipping Law (Cabotage Act) 2003, Nigeria Local Content Development Bill 2010

Key players-Government & Regulators, Ship Owners/Lines, Port/Terminal Operators, Financial institution with Maritime Desk, Maritime lawyers & Arbitrators, Maritime logistics Operators, Maritime /Shipping Association, Oil & Gas upstream and downstream operators

Cabotage Defined-The carriage of goods by vessel, or any other mode of transport, from one place in Nigeria or above Nigeria waters to any other place in Nigeria or above Nigeria waters, either directly or via a place outside Nigeria and include a the carriage of goods in relation to the exploration, exploitation or transportation of the mineral or non-living natural resources of Nigeria whether in or under Nigerian waters;

The carriage of passengers by vessel from any place in Nigeria situated on lake of river to the same place, or to any other place in Nigeria, either directly or a place outside Nigeria to the same place without any call at any port outside Nigeria to the same place without any call at any port outside Nigeria or to any other place in Nigeria, other than as an in –transit or emergency call, either directly or via a place outside Nigeria;

The carriage of passengers by vessel from any place in Nigeria to any place above or under Nigerian waters to any place in Nigeria, or from any place above Nigerian waters to the same place or to any other place above or under Nigerian waters where the carriage of the passengers is in relation to the mineral or non -living natural resources in or under Nigerian waters; and

The engaging, by vessel, in any other marine transportation activity of any goods or substances whether or not of commercial value within the waters of Nigeria;

Pillars of Cabotage Act-All vessels that will be engaged in coastal trade must be Owned by Nigerians, Built in Nigeria, Manned by Nigerians, Registered in Nigeria

Benefits-Empowering if indigenous shipping & Marine service businesses to be involved in all trade within Nigerian waters, Development of infrastructure –shipyards, construction, Job creation for Nigerians

Challenges-Assumption of Cabotage Act is flawed due to; Nigerian not being a “Ship building” country. Shortage of adequately skilled manpower –lack of institutions/seafarers, High capital cost associated with owning ships, Unfavorable regulatory environment –high custom duties, Act contravenes WTO treaties specifically GATS, Political interference –use of Ministerial Waivers, Corruption/lack of fair trade

 

Nigerian Local Content- Defined-Nigerian Oil and Gas Industry Content Development Act (NOGICDA) 2010 defines local content as “the quantum of composite value added to or created in Nigeria through utilization of Nigerian resources and services in the petroleum industry resulting in the compromising quality, health, safety, and environmental standards”. Framed within the context of growth of Nigerian entrepreneurship and domestication of assets to fully realize Nigeria’s strategic developmental goals.

Objectives

  • Expansion of the upstream and downstream sectors of the Oil & Gas.
  • The diversification of the sources of investment into the sector such that some funds would begin to come from local sources.
  • Promotion of indigenous participation.
  • Fostering of technological transfer.
  • Employment generation for all categories of Nigerians
  • The integration of the oil and gas industry into the mainstream economy

Challenges

  • Dearth of funds –Nigerian Banks lack the financial base to make meaningful impact on LCD (in the context of energy financing)
  • Thin industrial base, lack of adequate power, water and other to support an expanded manufacturing.
  • Lack of small & medium –sized enterprises and an under –developed capital market.
  • Executive capacity and critical mass with technical and financial wherewithal.
  • Disconnect that exist between policy formulation and policy implementation.

Links between Cabotage & Local Content

  • Promotion of indigenous participation in the Oil & Gas industry/Maritime Sector.
  • Development of indigenous capacity and manpower in the Maritime/Oil & Gas industry
  • Economic empowerment of local industry players
  • Job creation for unskilled, semi –skilled and skilled Nigerian within the Maritime sector

ESL’S STRATEGY GOING FORWARD

  • Develop strategy for securing investment either logical (CCVF, NCDMB) or internationally.
  • Building capacity through acquisition of assets –vessels, tank farms, facilities e.t.c.
  • Identify & establish partnership with foreign companies –Technology and skill transfer
  • Build relationship with government agencies –NCDMB, NIMASA, NAIPMS e.t.c.

Cabotage & NOGICDA both have the potential to be game changers in marine & specifically the Oil & Gas industry.

Critical success factors include: Creation of an enabling environment by government , Development of necessary infrastructure –shipyards, facilities, Availability of funds with internationality competitive interest rates

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