Oil & Gas Sector To Save N214bn Annually, As FG Expands Infrastructure

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Nigeria’s oil and gas industry is set to save a whooping N213.5 billion ($700 million) annually with increased local content input through the establishment of oil pipe mills in the country.
The said amount of money would have gone out as capital flight, but the federal government is now more determined to domesticate a greater percentage of oil and gas jobs by expanding industry infrastructure to realise its intention.
Accordingly to our findings that government is making huge investment in local pipe mills establishment which is a critical aspect of oil and gas development.
The projected annual industry demand of line pipe in Nigeria is put at over 800,000 tons, arising from the demands from Gas Master Plan, replacement of aged pipes and new fields development projects against the current supply opportunity of 100,000 MT (HSAW) per annum.
The development of a local pipe mill industry is one of the seven cardinal targets of the Nigerian Content Development and Monitoring Board, (NCDMB), primarily because steel line pipes are some of the critical inputs in the oil and gas industry.
It has high potential for employment generation, local value addition, retention of industry spend and linkage opportunities to other sectors of the economy.
Speaking exclusively  on the new policy drive and ongoing investment in the pipe mill segment of the industry, executive secretary of the Board, Simbi Wabote, explained that the establishment of pipe being driven by the board is hinged on about 2.33 million metric tons of steel pipes that will be needed for exploration and production activities in the industry, Gas, Water and Infrastructural projects.
Wabote disclosed that the NCDMB was directly promoting the establishment of a pipe mill in Nigeria, adding that the initiative involved a pilot scheme where the board is directly involved in project development activities such as land acquisition and market intelligence.
“In this regard, land has already been prepared at Polaku in Bayelsa State to support the establishment of a 250 metric tonnes per annum seamless pipe mill.  The site for the establishment was carefully located with facilities such as nearness to Shell gas plant facility for accessibility to gas, proximity to the Gbaran Ubie National Integrated Power Plant (NIPP) and closeness to River Nun for easy transportation of raw materials and finished goods, among others”, Wabote said that
But due to its huge capital requirement, the Board is also encouraging third party investments in establishment of pipe mill in Nigeria, just as two pipe mills have been commissioned and are working to serve the oil and gas sector.
The first is SCC pipes, Abuja, which recently expanded its capacity to produce HSAW steel pipes of 270,000 metric tonnes per annum (Mt/annum).
Yulong Steel Pipes was commissioned in December 2016 and added 250,000mt per annum HSAW steel pipes and is targeting industry need in Nigeria and other West Africa Countries. Other pipe mills are equally being developed by third party and are at various stage of completion
Wabote said presently, there are about 520,000 MT per annum of Steel pipe produced in Nigeria by SCC Pipes and Yulong Steel Pipes, Lekki Lagos and that at the completion of all the pipe mills in Nigeria, the country would have retained an estimate of about $700million.
He said it will further help the country to become an exporter of steel pipes to other West African countries and when completed, over 10,000 direct and indirect jobs will be created.
To further demonstrate governments readiness to enforce its local content law in the industry, the executive secretary undertook a visitation tour of operating and service companies around the country to engage stakeholders and to explain strategies adopted by the Board to foster projects and ensure domicilisation of work scopes and maximization of in-country capacities.
One of these strategies is the categorisation of service companies by their capacities, which he said will now be used in the contracting process.
Wabote stressed that all new projects must comply with the provisions of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act 2010, even as he charged the operating companies to ensure that their contractors and sub-contractors remit one per cent of their contract value to the Nigerian Content Development Fund (NCDF) as required by law.
The executive secretary expressed delight with the establishment of pipe coating facilities and steel pipe mills in-country and directed operators to patronise the facilities.
He also warned that the board would sanction operators who award contracts without approved Nigerian Content Compliance Certificates (NCCC).
He also informed the companies that the board was developing a 5-year Road Map for Nigerian Content development and that the final document would be shared with stakeholders for their inputs and identification of roles they will play in the actualisation.
Wabote canvassed for the participation of operating companies in the Nigerian Content Opportunities Fair planned for March 29 and 30 at Uyo, Akwa Ibom State.
The goal, he said, is to showcase opportunities in upstream, midstream and downstream sectors and provide multinationals the opportunity to link up and utilize in-country capabilities.
“Most Nigeria companies do not know when projects will come through so they do not prepare themselves adequately. The fair will provide a platform where we can share information that is not confidential”, he added.
NEITI Hopeful Of Economic Recovery, As Crude Oil Production, Price Stabilises
Meanwhile, the Nigeria Extractive Industries Transparency Initiative (NEITI) has expressed optimism that, with the gradual increase in oil production, coupled with the rise in oil prices from $30.70 per barrel in 2016 to $54.58 per barrel in January 2017, the prospect of the nation’s economic recovery was high.
This is contained in the latest NEITI quarterly review titled, ‘FAAC Disbursements in 2016: Review and Projections’, released on Monday.
“If this rising trend continues, Government revenue will likely increase further. This will improve the ability of both the federal and state governments to fund their budgets”, the NEITI document stated.
It further revealed that the Federation Accounts Allocation Committee (FAAC) disbursed N5.12 trillion to the three tiers of government in 2016 as against the N6.01 trillion shared in 2015.
It said the figure represents 15 per cent shortfall of disbursements in 2015 and over 40 per cent less when compared to  the aggregated disbursements to the three tiers of government in Nigeria between 2013 and 2016.
The review which is the third in the series, focused on disbursements from the federation account to the federal, states and local governments. It also appraised the internally generated revenues of the states in 2016 and capacity to fund budgets.
The report noted that payments to the three tiers of government have continued to decline by over 40 per cent since 2013.
“The Federal Government received N3.711 trillion in 2013 and this fell by 43.9 per cent to N2.08 trillion in 2016. Similarly, disbursements to State Governments totaled N3.095 trillion in 2013. In 2016, States received N1.642 trillion, which represented a 46.9 per cent decline on the 2013 figures…Local Governments received N1.011 trillion in 2016, representing over 40 per cent lower than the figure of N1.708 trillion received in 2013”, NEITI noted.
On disbursements to the federal government in 2016, the NEITI report revealed that the total FAAC allocations stood at N2.08trillion as against the N6.06 trillion that the federal government budgeted for the year. This represents a drop of 20 per cent when compared to the 2015 figure of N2.6trillion.
The payment covered just about 34 per cent of the budget and was not even enough to meet the recurrent expenditure needs of N2.6 trillion of the federal government during the period.
The implication according to the NEITI publication was that “the Federal Government would  resorted  to even higher debts to fund the budget…..debt service payments, which accounted for 24.3 per cent of the 2016 budget, increased”.
NEITI further revealed that revenues accruing to the state governments fell short of their budgets projections; some as much as 30 per cent. These disbursements comprise of gross statutory allocation, 13 per cent share of derivation, Value Added Tax, distribution of exchange gain, NLNG dividend, distribution of excess bank charges recovered and distribution of solid minerals revenue.
The report cited some states like Lagos which had a budget of N662.60bn, against the  total revenue of  N410.5bn  that accrued to the state leaving a shortfall of about N252 billion.
On the other hand, Adamawa State had revenue of N41.05 billion against a budget of N130.10 billion while Nasarawa had revenue of N32.5 billion to fund a budget of N77.30 billion.
It further asserted that some states such as Cross River, Sokoto, Borno, Jigawa, Osun and Plateau had revenues below 30 per cent of their budgets in 2016.
Akwa Ibom state received the highest allocation of N116.6 billion from the federation account in 2016 and was closely followed by Lagos and Rivers States with N109.3 billion and 103.98 billion respectively.
The NEITI Quarterly Review also showed that Kwara and Ebonyi States received the least allocations of N30.08 billion and 30.09 billion respectively from the federation account.
The disparities in the total disbursements to state and local governments were also highlighted in the Report. For instance, while three states received disbursements above N100 billion each, 30 states received allocations less than half of that figure (N50bn) in 2016.
On disbursements to the 774 local governments in Nigeria, Lagos State topped the table with a total of N69.29 billion to its 20 local governments, followed by Kano state’s 44 local governments that received a total of N56.16 billion. Bayelsa State received the lowest disbursement of N11.56billion for its 8 Local Governments.
The NEITI Quarterly Review identified allocations to the local governments to include  gross statutory allocation, exchange gain difference, value added tax and excess revenue from various sources. Others were NLNG dividend, recovery of excess bank charges, excess PPT and solid minerals revenue.
On internally generated revenue by the federation, the NEITI expressed the need for state governments to lessen their dependence on federal allocations through creative means of increasing opportunities for internally generated revenues. It noted that “IGR is very low in most states and it is only in two states of Lagos and Ogun that the IGR is higher than FAAC allocations”.
NEITI also noted with concern that the debt profile of the State governments were on the increase, consisting of domestic and external debts as at December 2015 and June

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