Nigeria’s oil and gas sector is being choked by an unusually lengthy contracting cycle which can take as long as 36 months, while competing African nations conclude the same process in a mere three months, worsening Nigeria’s place in the ease of doing business index.
Nigeria’s slow and winding contract processes leave a sour taste in the mouth of would-be Investors interested in the country, causing them to reroute billions of dollars in foreign direct investment to competing nations, to Nigeria’s loss which is today mirrored in the fact that
Nigeria’s attracts the least in investment dollars among her peers.
An industry analysis seen by BusinessDay, which outlined the average contract cycle time of eight oil producing countries, including Australia, Kazakhstan, Indonesia, Venezuela, Argentina, Saudi Arabia, Angola and Nigeria, underscored the deep difference on how the country’s oil resources are managed.
Saudi Arabia, the world’s largest producer and exporter of oil, according to the analysis, has the shortest average contract cycle time, which is three months.
It is followed by Argentina and Kazakhstan, both of which have five months as the latest time for contract approval.
Angola, Africa’s second largest oil producer, outperforms Nigeria,
cycles, to encourage long-term projects and contract financing, as well as simplified tax regime and fiscal structure.
In a bid to fast-track contract processes in the industry, online bid tendering was introduced in 2010 by the NNPC to do away with the analogue era noted for poor transparency, accountability and a lengthy contracting cycle.
The online electronic centre, which was created in 2005 to stream-line the contracting process in Nigeria, metamorphosed into the NAPIMS.
The primary objective of NAPIMS is to provide an electronic contracting platform for the Nigerian National Petroleum Corporation (NNPC) and its
operating partners in the Joint Venture and Production Sharing Contract arrangement with a view to among other things, reducing contracting cycle time from duration of about 18 – 24 months to half or shorter time frame.
NNPC had in February 2011 said it had recorded appreciable reduction in the contract cycle time for oil and gas projects from 24 months to an average of 10 months, adding that the significant improvement in the contracting cycle was as a result of the commitment of the management of the NNPC in ensuring regular meetings of its contract review committee.
Usanga, who doubts it takes that long for contract approval, also noted that the pace of the contract cycle from the time of invitation of tenders to the actual award of contracts depends on the scope of the project for which the contract is intended.
He said there are certain contracts that take undue length of time which may have adverse impact on projects.
“Every year, the operators have a work programme which they present to NNPC joint ventures for approval and after the work programme has been approved, they go through a contract award process, then cash calls are made. So if, for instance, cash call has already been made for a particular project in year one, they cannot wait for year three before they award it.”