The environmental legacy of Nigeria’s oil industry is under threat due to growing concerns about the financial and technical capacity of local operators to handle oil assets in Africa’s biggest oil-producing country.
Within the last two months, two major environmental incidences have dampened the image of Nigeria’s Content Act of 2010, a law largely responsible for the emergence of a corps of local firms trying to rub shoulders with the ‘big boys’ in Nigeria’s oil and gas sector by replicating tasks carried out by the International Oil Companies (IOCs).
Experts say the latest Escravos explosion has raised doubts about the Nigerian Local Content Act, which requires all operators of oil field licences to submit a Nigerian content plan at the time of their bidding, showing how they will give first consideration to local companies and services as well as a training and employment plan.
“These recent incidents will raise questions and scepticism about the technical know-how of the local operators going forward, a development that is bad for Nigeria’s Local Content Act,” an investor exposed to Nigeria’s oil and gas sector says.
He notes, “Health, Safety, and Environment is one of the most delicate aspects of oil and gas business, which no serious investors will gamble with to satisfy local content.”
Joe Nwakwue, former chairman of, Society of Petroleum Engineers (SPE), states that the regulators must ensure local companies did not compromise on HSE standards in line with international safety requirements.
“No operation in the energy sector must compromise on safety to accommodate local content,” Nwakwue states.
David Banjo, an environment, and energy expert with a major consulting firm in Nigeria note that the recent environmental incidents have exposed concerns that some operators in Nigeria’s oil and gas industry engaged in unwholesome health, safety, and environmental practices resulting in widespread ecological disturbances, including pollution from pipeline leaks.
“The implementation of the regulatory framework for environmental protection in the Nigerian oil and gas sector was still very weak despite the existence of a rich set of regulations contained in the Environmental Guidelines and Standards for the Petroleum Industry in Nigeria EGASPIN,” Banjo says.
For instance, Nigeria recorded one of its worst oil spills in recent years at the Nembe oil spill at the Santa Barbara oil field operated by Aiteo Eastern Exploration and Production Company. The oil spill lasted 32 days and caused extensive environmental damage with more than a hundred thousand barrels of oil spilled into the environment.
Three months later, fire engulfed a floating production, storage, and offloading (FPSO) vessel named ‘Trinity Spirit’ operated by Shebah Exploration and Production Company Limited (SEPCOL), while Houston-based Alliance Marine Services (AMS) is the beneficial owner.
BusinessDay was unable to contact Shebah, while AMS had not responded to a request for a statement as of press time.
On Thursday, a note from Rystad Energy, independent energy research and business intelligence company, said the FPSO was not producing at the time of the explosion.
Aside from any fatalities, Rystad Energy said, “The primary concern is the potential environmental implications of the situation, which will be hard to quantify until after the dust settles and the aftermath is assessed.”
According to Rystad, the impact of an oil spill from Trinity Spirit yesterday is likely to be considerably lower than the most recent large offshore oil spill, the Deepwater Horizon crisis that leaked around 4.9 million barrels into the US Gulf of Mexico in 2010.
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Despite the recent setbacks, Nigeria’s local content under the Nigerian Content Development and Monitoring Board (NCDMB) has recorded giant strides, which has led to the rise of so many indigenous oil companies across the value chain with the capacity to replicate the tasks carried out by the IOCs.
Before the NOGICD Act, there were only 44 registered indigenous oil service companies in Nigeria but has now risen to over 93, rigs and marine vessels owned by Nigerians were less than 5 percent owned by Nigerians. This has risen to 40 percent.
For instance, a few years back, Shell Petroleum Development Company (SPDC) sold its interests in four oil blocs to indigenous companies including Seplat, Neconde Consortium led by Nestoil plc, Shoreline Natural Resources, and 45 percent interest in OML 40 to Eland Oil & Gas Limited and Starcrest Nigeria Energy Limited.
Also, AITEO, Oando, Seplat, Eroton, First E&P, and a host of other indigenous companies are major players in the oil and gas business in the country, with the full backing of the Local Content Act implemented by the NCDMB.
In 2017, the NCDMB launched the $200 million NCI Fund, which is funded from the Nigerian Content Development Fund established by the Local Content Act, helping to fund asset acquisition and assisting in loan refinancing.
In fabrication, reports from NCDMB showed the number of fabrication yards across the country has increased, line pipes are now almost wholly produced in-country, pipe coating plants are springing up, which ultimately leads to capital retention, job creation, and skill enhancement for Nigerians.
By 2027, the NCDMB says it intends to increase local content to 70 percent, which will see the retention of as much as $14 billion within the country, annually. But the inability of local oil firms to rise up to recent oil spills and handle re-mediation works in case of emergency calls for concern, experts say.
