ukti guide to doing business in the nigerian o & g sector - current 05

NIGERIA OIL AND GAS

A GUIDE TO DOING BUSINESS IN THE NIGERIAN OIL AND GAS SECTOR

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A Guide to Doing Business in the Nigerian Oil and Gas Sector a

A GUIDE TO DOING BUSINESS IN THE NIGERIAN O IL AND GAS SECTOR

WHO IS THIS REPORT FOR?

THIS REPORT IS AIMED AT REASONABLY EXPERIENCED UK EXPORTERS THAT ARE NEW OR WISH TO EXPAND THEIR INTEREST IN THE NIGERIAN MARKET. It is written primarily to provide a basic guideline to small to medium sized companies (SMEs) that have had export success in other markets and who are considering approaching or expanding into the Nigerian market. It is not aimed at experienced operating companies or larger contractors, but may provide additional information for them.

HEALTH WARNING

NIGERIA IS NOT AN EASY MARKET. If you have NO export experience then Nigeria may not be the market for you. If you are an experienced exporter with a good product to offer and have the energy and time to invest in establishing a long-term potential there are numerous opportunities in both oil and gas, and the market will continue to develop over the next 25-40 years. Think now about joining the other UK Companies that already have long-term profitable relationships with Nigeria. For those who are prepared to put in the leg-work and be patient Nigeria could offer significant rewards.

DISCLAIMER

Whereas every effort has been made to ensure that the information given in this report is accurate, UK Trade & Investment and its sponsoring departments accept no responsibility for any errors, omissions or misleading statements in that information and no responsibility is accepted as to the standing of any firm, company or individual mentioned in the report.

EFFECTIVE DATE

The material contained in this document was assembled as of 1st January 2005. Unless otherwise stated, the report is based on information available at that time. The intention is to update the information and re-issue the report on a regular basis. UK Trade & Investment would appreciate any feedback or comment from companies regarding the report.

PRODUCED: MARCH 2005

A Guide to Doing Business in the Nigerian Oil and Gas Sector b

MAGNITUDE OF OPPORTUNITIES IN OIL AND GAS

UPSTREAM

Exploration

New Field Development

Maintain Existing Fields

Upgrade Existing Fields

Main Opportunities

Seismic Seismic processing Databases Drilling Logging, coring & completion technology Related services (mudlogging etc.)

Repairs and parts Maintenance (corrosion prevention, solids and water management etc.) Health, Safety and Environmental (HSE) Training

JV potential EPC, turnkey and sub-contracts (process, consulting etc.) Efficiency improvement, product optimisation Environmental

Environmental Gas Gathering Land reclamation Sustainable development

Overall Prognosis

Sector will be revitalized in 2005 as a result of the new licensing round.

Several new projects; mainly deepwater for both for oil and gas.

Plenty of work on existing fields as production is enhanced.

Potential for further growth and will be a niche area in the future.

Prognosis for UK plc

Long term opportunities for players already in market. Need to be established locally to maximise any future opportunities.

Strong international competition. Can be part of the supply chain. Niche opportunity for high spec engineering; especially in deepwater.

Good short term opportunities for SMEs especially if they already have a local presence.

Several new projects especially for those involved in gas gathering for LNG. Marginal field programme also important.

MAGNITUDE OF OPPORTUNITIES IN OIL AND GAS

DOWNSTREAM

Transport and Distribution

Refinery Maintenance

Refinery Upgrading

Decommissioning

Main Opportunities

EPC contracts for pipelines, export terminals and civil Corrosion prevention, pigging, instrumentation. LNG/GTl rapidly expanding market.

Repairs and parts Maintenance (corrosion prevention, solids and water management etc.) Health, Safety and Environmental (HSE) Training

JV potential EPC, turnkey and sub-contracts (process, consulting etc.) Efficiency improvement, product optimisation Environmental

Environmental Land reclamation Sustainable development

Overall Prognosis

Good medium and long term prospects for work.

Limited opportunities with existing refineries.

Good prospects with several new private refineries planned.

The long term offers good opportunities. Little at present.

Prognosis for UK plc

Good opportunities for companies to enter market, especially in gas transmission and distribution. Also to provide goods and services into the LNG supply chain.

Long term opportunities for SMEs and suppliers in a deregulated market.

Potential for new entrants to establish a presence in the market.

Little to encourage investment now with the exception of a few land/water remediation projects. Long term future.

A Guide to Doing Business in the Nigerian Oil and Gas Sector c

EXECUTIVE SUMMARY

Nigeria is now the world‟s sixth largest oil producer and occupies the number one position in Africa.

Nigeria is an OPEC member, and is a supplier of crude oil to both Western Europe and more

significantly to the United States. Oil production is important to the country, contributing nearly 50% of

Nigeria‟s GDP and 95% of the country‟s foreign exchange earnings. Nigeria is also fast becoming a

major gas exporter through the development of LNG facilities. Nigeria currently produces around 2.3

million bopd from 120 producing oilfields. Nigeria‟s proven reserves now stand at 34 billion barrels of

oil, from its onshore, proximal, deep and ultra deep offshore areas. The Federal Government has

plans to double production to 4.0 million bopd by 2010, and increase reserves to 40 billion barrels.

Most of the increase in oil production will come from the new discoveries being made in deepwater

offshore, and will require significant levels of new investment. The government estimates that around

$30 billion will be required over the next 5 years to meet their targets. Nigeria is somewhat

constrained by its OPEC quota, but has requested an increase of around 10% as a result of its recent

deepwater discoveries.

Gas (including condensate) production has become increasingly important as the country develops

the major reserves and associated gas transportation and utilisation systems. It has proven natural

gas reserves of 160 trillion scf, and current production is of the order of 3.8 billion scfd. A large

proportion (85%) of associated gas produced was flared, with the remainder used as either fuel gas or

sold to industries. The government has insisted that the amount of gas flared should be eliminated by

2008, and the figure has dropped to around 45%, with penalty fines being imposed on those

companies still flaring. One conspicuous use of the flared gas has to provide feedstock into the Bonny

NLNG plant, which now has 6 trains in development and exports a total of 21.0 million tpa and utilises

40% of the previously flared gas. Future gas development schemes include the West African Gas

Project, Brass LNG, GTL and other export/domestic utilisation schemes.

The downstream sector has been underperforming in comparison with the upstream sector. The state

owns four refineries, but due to poor maintenance and other factors, these refineries are only

producing at around 40% of their capacity (445,000 bopd), which results in Nigeria having to import

around 30% of its refined requirements. Nigeria is continuing to deregulate the downstream market

and 16 new refineries are planned, along with price subsidies being removed from both petrol and

diesel. Gas transmission and distribution markets will also be opened up, with the introduction of a

new Gas Act in 2005. This will allow a more free market approach, and opportunities for investment.

Likewise NEPA the state electricity corporation is slated for privatisation, and there are several

independent power plants under construction or being planned.

The Oil and Gas industry in Nigeria is nearly 50 years old, and is still dominated by the six major oil

companies who made the original discoveries back in the 1960s, and these are: Shell, Mobil, Elf,

Texaco, Agip and Chevron. To date, these companies still account for 95% of the oil and gas

production. In the 1990s the government introduced a number of incentives to encourage new

companies to enter the market and to date a further 40 foreign and indigenous companies are now

active in the market, although their output is still low. In particular the government introduced PSCs

for the deepwater, and transferred 25 marginal fields to indigenous operators. The upcoming 2005

licensing round and recent awards in the Sao Tome JDZ should further open up the market, and

introduce new players.

A Guide to Doing Business in the Nigerian Oil and Gas Sector d

Government involvement in the industry is through the state oil company: Nigerian National

Petroleum Corporation (NNPC), which has around 60% share in the upstream sector through joint

ventures with the oil companies and via its various subsidiaries including Port Harcourt Refining

Company (PHRC), Nigerian Petroleum Development Company Limited (NPDC) and National

Engineering and Technical Company Limited (NETCO). National Petroleum Investment Management

Service (NAPIMS) is a subsidiary which is involved in optimising the Federal Government of Nigeria

(FGN) investments in the upstream, and its main role is to oversee the contract and tender process in

the oil sector, where the government is an investor. Department of Petroleum Resources (DPR) is the

regulatory body, which is responsible for licensing, monitoring and regulation of the oil industry. There

is no Ministry of Petroleum, and the de-facto function of Minister is held by the Special Adviser to the

President – Dr Edmund Dakuru.

All the oil and gas is to be found in the Niger Delta, although other parts of Nigeria have been

explored. This is a prolific hydrocarbon province, and success ratios are high and finding costs low.

There are several giant oil and gas fields (greater than 500 million bbls), and the advent of success in

the deepwater means there is another 25-40 years of further growth. The first deepwater discovery

(Bonga) was made in 1995, and there are several new fields (Agbami, Erha) in the development

stage. These fields along with several upgrades of onshore fields, and gas gathering schemes means

there are over 400 individual projects, with total project expenditure in excess of $12 billion over the

next three years.

United Kingdom is Nigeria‟s number one trading partner, and has been supplying oil and gas products

and services to Nigeria for over 50 years. The traditional method has been through an international

supply chain, with the suppliers interacting with the major contractors and service companies. Agents

and facilitators also have played a major role in accessing the market and winning contracts. Recently

the Nigerian Government has pushed to improve „local content‟ from the existing low 10-15% share,

by encouraging the oil majors to undertake more work in country and legislation to enforce this may

appear in 2005. As a result UK Trade and Investment is encouraging UK companies to consider

having a local presence in country, and establish a local subsidiary. Agents and middleman, which

abound in great numbers are being phased out, and replaced by local joint venture partners.

Nigeria is a difficult business environment and historically has been beset with poor infrastructure,

security problems and endemic corruption. Working conditions have improved over the past few

years, especially since the return to democracy and the election of Obasanjo as President in 1997.

However UK companies entering the market should be aware of all the limitations, and construct a

robust business plan which addresses all the risks. The infrastructure has improved with the advent of

mobile phones, domestic airways and private power suppliers. Security is still a problem, and the local

communities‟ disenchantment with both the oil companies and the various governments means

several areas are difficult to work in, like Warri and Benin City, (in the onshore delta area). The

Government is keen to address the issue of corruption, and although obvious fraudulent practices are

declining, the signs of low levels of corruption such as „grease‟ (equnje) money, or „dash‟ and the

ubiquitous „419‟ scams are still in evidence.

UK Trade and Investment believes that Nigeria presents significant business opportunities in the oil

and gas sector over the next 5-10 years, with the potential for another 40 years of growth. Nigeria is a

difficult market, and is not for the inexperienced exporter, but with the right advice companies can

succeed. The move to „local content‟ will invariably mean that the companies positioning themselves

for the long term will need to base their operation in Nigeria and either accept a long learning curve or

form an alliance with a local company, to establish a presence. The purpose of this document is to

outline the current state of the oil and gas sector, highlight the opportunities and give suggestions as

to where companies can access the advice to undertake business.

A Guide to Doing Business in the Nigerian Oil and Gas Sector i

TABLE OF CONTENTS

EXECUTIVE SUMMARYC 1. THE OIL AND GAS SECTOR ............................................................................ 1

1.1 COUNTRY OVERVIEW ...................................................................................................... 1 History ................................................................................................................................................................ 1 Climate and Weather .......................................................................................................................................... 1 Vegetation and Physical Features ...................................................................................................................... 1 People and Culture............................................................................................................................................. 2 Political Environment .......................................................................................................................................... 2 Economy ............................................................................................................................................................ 2

1.2 THE STRUCTURE OF THE OIL AND GAS SECTOR....................................................... 4 Overview ............................................................................................................................................................ 4

1.3 OIL SECTOR – UPSTREAM AND DOWNSTREAM ......................................................... 8 Overview ............................................................................................................................................................ 8

1.4 GAS SECTOR – UPSTREAM AND DOWNSTREAM ..................................................... 14 Overview .......................................................................................................................................................... 14 Natural Gas Utilisation ...................................................................................................................................... 14 Natural Gas Development Schemes ................................................................................................................. 16 Other Export Schemes ..................................................................................................................................... 18 Domestic Gas Utilisation .................................................................................................................................. 18 New Gas Legislation ........................................................................................................................................ 18

1.5 SERVICES (TRAINING, SECURITY, HEALTH, SAFETY AND ENVIRONMENT) ......... 19 Overview .......................................................................................................................................................... 19 Sustainable Development ................................................................................................................................. 19

2. MARKET TRENDS AND AREA OF OPPORTUNITY ..................................... 21

2.1 EXPLORATION ................................................................................................................ 21 Current Trends ................................................................................................................................................. 21 New Licensing Round - 2005........................................................................................................................... 22 Nigeria Sao Tome and Principe ........................................................................................................................ 23

2.2 FIELD DEVELOPMENT ................................................................................................... 24 Overview .......................................................................................................................................................... 24 Marginal Fields ................................................................................................................................................. 26

2.3 OPERATIONS AND MAINTENANCE .............................................................................. 28 Overview .......................................................................................................................................................... 28 Opportunities .................................................................................................................................................... 29

2.4 DOWNSTREAM................................................................................................................ 29 2.4 DOWNSTREAM................................................................................................................ 30

Overview .......................................................................................................................................................... 30 Gas Transmission and Distribution Projects ..................................................................................................... 34 Compressed Natural Gas ................................................................................................................................. 34 Independent Power Plants ............................................................................................................................... 35

2.5 ENVIRONMENTAL SERVICES ....................................................................................... 36 Environmental legislation .................................................................................................................................. 36 Issues and Opportunities .................................................................................................................................. 37 Budgets ............................................................................................................................................................ 38

2.6 TRAINING IN THE OIL AND GAS SECTOR ................................................................... 39 Overview .......................................................................................................................................................... 39 British Council .................................................................................................................................................. 39 Petroleum Technology Development Fund ....................................................................................................... 39

3. DOING BUSINESS IN NIGERIA ...................................................................... 41

3.1 CONSTRAINTS ON DOING BUSINESS IN NIGERIA..................................................... 41 Overview .......................................................................................................................................................... 41 Day-to-Day Business Operations ..................................................................................................................... 42 Nigerianisation ................................................................................................................................................. 42 Other Concerns Facing Investors ..................................................................................................................... 45

3.2 GENERAL LEGAL AND FINANCIAL FRAMEWORK ..................................................... 46 Legal framework ............................................................................................................................................... 46 Finance ............................................................................................................................................................ 46 Debt ................................................................................................................................................................. 47 Banking ............................................................................................................................................................ 47

3.3 BRANCH REGISTRATION AND JOINT VENTURES ..................................................... 48 Overview .......................................................................................................................................................... 48 Branch registration ........................................................................................................................................... 48

A Guide to Doing Business in the Nigerian Oil and Gas Sector i i

Forming a Nigerian Joint Venture ..................................................................................................................... 48 Working Under the Name of Another Foreign Company ................................................................................... 49 Registration with the DPR, NAPIMS ................................................................................................................. 49

3.4 AGENTS ........................................................................................................................... 50 Overview .......................................................................................................................................................... 50

3.5 TAX ................................................................................................................................... 51 Overview .......................................................................................................................................................... 51 Tax Authority .................................................................................................................................................... 53 Pioneer Status .................................................................................................................................................. 53

3.6 EXPORT CREDIT GUARANTEE DEPARTMENT ........................................................... 54 3.6 EXPORT CREDIT GUARANTEE DEPARTMENT ........................................................... 54

Nigeria ............................................................................................................................................................. 54 3.7 CORRUPTION .................................................................................................................. 55

Overview .......................................................................................................................................................... 55 To Particularly Watch Out For .......................................................................................................................... 55 New UK Legislation .......................................................................................................................................... 57

3.8 BUSINESS ETIQUETTE AND OTHER GENERAL INFORMATION ............................... 58 Hints for the Business Visitor ............................................................................................................................ 58 Foreign Personnel ............................................................................................................................................ 58 Language ......................................................................................................................................................... 59 Dress ............................................................................................................................................................... 59 Meeting etiquette .............................................................................................................................................. 60 Negotiations and Decision-making ................................................................................................................... 60 Patchy Communications ................................................................................................................................... 60

4. APPROACHING POTENTIAL CLIENTS ......................................................... 62

4.1 INTRODUCTION............................................................................................................... 62 4.2 THROUGH AGENTS/DISTRIBUTORS ............................................................................ 63 4.3 OIL COMPANIES AND MAJOR CONTRACTORS DIRECTLY ...................................... 64 4.4 LOCAL CONTENT - THROUGH JOINT VENTURES ..................................................... 65

Local Content ................................................................................................................................................... 65 5. MARKETING ENTRY STRATEGY .................................................................. 69

5.1 A MARKET STRATEGY FOR SUPPLIERS .................................................................... 69 A Permanent Presence in Nigeria..................................................................................................................... 70 Contractor Registration .................................................................................................................................... 70 Nigerian Private Companies Are More Risky .................................................................................................... 70

5.2 A MARKET STRATEGY FOR SERVICE PROVIDERS................................................... 71 Establishing A Market Presence in Country ...................................................................................................... 71 Priority Clients for Service Providers ................................................................................................................ 72 Additional Demands ......................................................................................................................................... 72 Local Companies ............................................................................................................................................. 72

5.3 A MARKET STRATEGY FOR SUB-CONTRACTORS .................................................... 73 Priority Targets ................................................................................................................................................. 74 A Permanent Market Presence ......................................................................................................................... 74 Local Content ................................................................................................................................................... 74

5.4 A MARKET STRATEGY FOR CONTRACTORS ............................................................. 75 Identifying Opportunities in Nigeria ................................................................................................................... 76 Initially Focus on Smaller Projects .................................................................................................................... 76 Establish a Permanent Market Presence .......................................................................................................... 76

6. WHO’S WHO IN THE OIL AND GAS INDUSTRY IN NIGERIA ...................... 77

6.1 MAJOR OPERATORS ..................................................................................................... 77 Overview .......................................................................................................................................................... 77 Department of Petroleum Resources (DPR) ..................................................................................................... 77 Nigerian National Petroleum Corporation ......................................................................................................... 78 National Petroleum Management Services (NAPIMS) ...................................................................................... 80 Nigerian Petroleum Development Company Limited (NPDC) ........................................................................... 80 Nigerian Gas Company Limited (NGC) ............................................................................................................. 81 National Engineering and Technical Company Limited (NETCO) ..................................................................... 81 Integrated Data Services Limited (IDSL) ........................................................................................................... 82 Port Harcourt Refining Company ...................................................................................................................... 82 Shell ................................................................................................................................................................. 83 ExxonMobil ...................................................................................................................................................... 85 ChevronTexaco ................................................................................................................................................ 86 AGIP ................................................................................................................................................................ 87 Total ................................................................................................................................................................. 88 NLNG ............................................................................................................................................................... 89 Other Companies ............................................................................................................................................. 89

A Guide to Doing Business in the Nigerian Oil and Gas Sector i i i

6.2 MAJOR SERVICE COMPANIES ..................................................................................... 91 6.3 LAWYERS AND CONSULTANTS ................................................................................... 92

Lawyers............................................................................................................................................................ 92 Consultants and Tax Advisors .......................................................................................................................... 92

7. OPPORTUNITIES ............................................................................................ 93

7.1 FORTHCOMING EVENTS ............................................................................................... 93 Calendar of Events ........................................................................................................................................... 93

7.2 OPPORTUNITIES AND PROJECT LISTING .................................................................. 94 Detailed Project Sheets .................................................................................................................................... 94

8. ASSISTANCE .................................................................................................. 95

8.1 UK TRADE AND INVESTMENT ...................................................................................... 95 Overseas Market Introduction Service (OMIS) .................................................................................................. 95 Programme Arranging Services (PAS) ............................................................................................................. 96 Off-the Shelf Information .................................................................................................................................. 96

8.2 TRADE ASSOCIATIONS ................................................................................................. 97 8.3 OTHER SOURCES OF INFORMATION .......................................................................... 99

APPENDICES APPENDIX 1: Country Data .................................................................................................................................................. 100 APPENDIX 2: Tendering Procedure ...................................................................................................................................... 101 APPENDIX 3: Importing Through an Agent ........................................................................................................................... 105 APPENDIX 4: Establishing a Joint Venture ........................................................................................................................... 107 APPENDIX 5: Establishment of a Nigerian Subsidary by a Foreign Company ....................................................................... 109 APPENDIX 6: UK Bribery and Corruption Law ...................................................................................................................... 113 APPENDIX 7: Nigerian Organizations .................................................................................................................................. 115 APPENDIX 8: Oil Company List ............................................................................................................................................ 117 APPENDIX 9: Directory of Petan Members ........................................................................................................................... 118 APPENDIX 10: Other indigeneous Technical Oil Field Service Companies ............................................................................. 120 APPENDIX 11: Major Service Companies .............................................................................................................................. 121 APPENDIX 12: Key Industry Contacts in UK ........................................................................................................................... 122

APPENDIX 13: Selected Websites.......................................................................................................................................... 124

APPENDIX 14: Glossary of Terms .......................................................................................................................................... 125 APPENDIX 15: Energy Conversion Table ............................................................................................................................... 126

LIST OF TABLES Table 1: Economic Forecast............................................................................................................................................. 3 Table 2: Sub Saharan Production and Reserves - 2002 ................................................................................................... 5 Table 3: Major Oil Fields in the Niger Delta ...................................................................................................................... 9 Table 4: PSC Arrangements .......................................................................................................................................... 13 Table 5: Natural Gas Reserves (TCF) ............................................................................................................................ 14 Table 6: Gas Production and Utilisation by Company ..................................................................................................... 15 Table 7: Seismic Programme - Agip ............................................................................................................................... 21 Table 8: Summary of Well Drilling and Major Rig Workover Programmes ...................................................................... 22 Table 9: Drilling Activity – End of 2004 ........................................................................................................................... 22 Table 10: List of Recently Allocated Marginal Fields ........................................................................................................ 27 Table 11: Crude Oil Production - 2003 ............................................................................................................................. 28 Table 12: Comparison of Nigeria‟s Downstream Sector with the Rest of the World .......................................................... 30 Table 13: Approvals for Private Refineries Licensing ....................................................................................................... 32 Table 14: Market Share in the Distribution Chain – 2003 .............................................................................................. 33 Table 15: Gas Projects .................................................................................................................................................... 35 Table 16: Infrastructure Constraints ................................................................................................................................. 43 Table 17: Approaching Clients Introduction ...................................................................................................................... 62 Table 18: Approaching Clients through Agents/Distributors .............................................................................................. 63 Table 19: Approaching Potential Clients through Oil Companies ...................................................................................... 64 Table 20: Approaching Clients through Local Content ...................................................................................................... 65 Table 21: Service Provision Categories - Exploration ....................................................................................................... 67 Table 22: Categorisation of Service Companies by Ownership Structure ......................................................................... 67 Table 23: Local Content – Evaluation Criteria .................................................................................................................. 68 Table 24: List of Indigenous License Holders ................................................................................................................... 90 Table 25: Exploration Market Share 2002 ........................................................................................................................ 91 Table 26: Example Project Listing .................................................................................................................................... 94

A Guide to Doing Business in the Nigerian Oil and Gas Sector iv

LIST OF FIGURES Figure 1: Map of Nigeria .................................................................................................................................................... 1 Figure 2: Tourist Guide to Nigeria...................................................................................................................................... 3 Figure 3: Nigerian Crude Oil Production 1980-2003 .......................................................................................................... 5 Figure 4: Nigeria‟s Oil and Gas Fields . ............................................................................................................................ 8 Figure 5: Reserves History ................................................................................................................................................ 9 Figure 6: Geographical Distribution of the „Big Six‟ .......................................................................................................... 10 Figure 7: Deepwater Discoveries .................................................................................................................................... 11 Figure 8: Six Major Operators Percentage Equity ............................................................................................................ 11 Figure 9: Split of the JV Barrel ......................................................................................................................................... 12 Figure 10: Historical and Projected Trend of Gas Flaring .................................................................................................. 15 Figure 11: Drying Tapioca ................................................................................................................................................. 16 Figure 12: World LNG Plants ............................................................................................................................................ 17 Figure 13: Aerial View of NLNG – Bonny Island ................................................................................................................ 17 Figure 14: Exploration Funds ............................................................................................................................................ 21 Figure 15: Sao Tome Licensing Round ............................................................................................................................. 23 Figure 16: NLNG Train 4 and 5: Gas Gathering ............................................................................................................... 25 Figure 17: Bonga . ...................................................................................................................................................... 25 Figure 18: Bunkering ......................................................................................................................................................... 29 Figure 19: Products Import Trend ...................................................................................................................................... 31 Figure 20: Crude Oil Production/Person ........................................................................................... 31 Figure 21: Cost of 1 litre of Petrol ...................................................................................................................................... 31 Figure 22: Protestors ......................................................................................................................................................... 34 Figure 23: Ethnic Unrest.................................................................................................................................................... 44 Figure 24: Onne Free Port ................................................................................................................................................ 53 Figure 25: Freedom of the Press ....................................................................................................................................... 61 Figure 26: Constraints ....................................................................................................................................................... 66 Figure 27: A possible strategy in brief ............................................................................................................................... 69 Figure 28: A possible strategy in brief ............................................................................................................................... 71 Figure 29: A possible strategy in brief ............................................................................................................................... 73 Figure 30: A possible strategy in brief ............................................................................................................................... 75 Figure 31: NNPC Organogram as at January 2005. .......................................................................................................... 79 Figure 32: PHRC Organogram .......................................................................................................................................... 83 Figure 33: Shell Organogram ............................................................................................................................................ 84 Figure 34: ExxonMobil Organogram .................................................................................................................................. 85 Figure 35: ChevronTexaco Organogram ........................................................................................................................... 86 Figure 36: TOTAL Organogram ......................................................................................................................................... 88 Figure 37: NLNG Organogram .......................................................................................................................................... 89 Figure 38: A fun site worth looking at ................................................................................................................................ 99

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A Guide to Doing Business in the Nigerian Oil and Gas Sector 1

1. THE OIL AND GAS SECTOR

1.1 COUNTRY OVERVIEW

History

Nigeria is the „Heart of Africa‟ and is a country of great diversity. A former colony of the United Kingdom, the country won independence on 1 October 1960 and the Federal Republic of Nigeria came in to existence three years later, on 1 October 1963. The political entity known as Nigeria, is named after the river Niger (3rd largest in Africa) and was created in 1914.

Figure 1: Map of Nigeria Nigeria is situated almost at the centre of the curve on the map of the African continent. The country occupies a land mass totalling 923,800 sq. km. In comparison to the United Kingdom, Nigeria is four times larger and is equal in size to the countries of France and Germany put together. The average population density is about 96 persons per square kilometre.

Climate and Weather

Nigeria derives her climate from being situated 4

o and 14

o latitude north, which is south of the

path of the north westerly winds and outside the southern equatorial doldrums. In the Niger Delta and most coastal area, it is an equatorial climate becoming tropical in the middle belt and arid to the north. The climate is dominated by two seasons November-April/May (Dry Season), and May/June-October (Wet/Rain

season). There is also an unsteady period of break in August and September during which the rain may stop or reduce in intensity. The country enjoys abundant rainfall in the south and semi-arid climate in the north. Temperatures vary between 23

o - 31

oC in the south, with high humidity; 18

o -

40oC in the north.

Vegetation and Physical Features

There are four district vegetation zones which trend roughly east-west and which reflect the rainfall distribution pattern in the country, which decreases as you go north. Mangrove swamps are found in the coastal strip, which is some 50 kms wide. In this belt is the swampy, water logged soil and brackish water, and is made up of a tangled mass of stems and aerial roots, which is typical of mangroves. Further inland the tidal influence reduces and water becomes less saline, giving way to fresh water swamps. This belt covers the area between Lagos to around Port Harcourt. Further inland is a belt of tropical or equatorial rainforest which is 150-250 kms wide.

Beyond the flood plains of the Niger and Benin rivers, the land rise to a steep escarpment with moderate rainfall, and which comprise the middle Savannah belt. In the northern extreme of the country in places like the Sokoto plains, high plains of Hausa and up to the Chad Basin, this vegetation zone covers about a quarter of the country, and is known as the Sudan Savanna. Here, the total annual rainfall and humidity is low and the dry season lasts between 6-8 months, and the vegetation is dominated by short grasses with the landscape left bare for the widely grazing livestock.



People and Culture

At about 127 million people, Nigeria remains the most populous nation in African and it is widely held that one out of every four Africans is a Nigerian. In terms of population distribution, there is noticeable concentration of humans in three major axes; Oyo-Ondo axis in the south west around Lagos; Imo-Akwa Ibom axis in the south east and Kano-Katsine-Sokoto axis in the north west. Although major cities such as Ibadan, Lagos, Port Harcourt, Kano, Kaduna and scores of others are areas of heavy human and vehicular concentration, about 80% of the population still live in rural areas, engaging in subsistence agriculture for a living. Total labour force in Nigeria comprises more than 43 million people, although not all of these persons are gainfully employed. Nigeria is culturally diverse; with the Yoruba, Hausa and Ibo being Nigeria‟s three main ethnic groups but even in these, there are various subgroups totalling 250. These groups are also diverse in terms of religious beliefs, arts and crafts. In view of such complexity, it is surprising that the English Language is the lingua franca and language of official communications and commerce. Christianity and Islamic religions are the two most pronounces religious beliefs, with a significant proportion of the population still practising traditional religion.

Political Environment

Prior to the adoption of the American Presidential system of government in May 1979, Nigeria had operated the British Parliamentary system of government. The Presidential system has an Executive President, leading the Executive arm of government, the National Assembly where the Upper House (Senate) is headed by the Senate President and the Lower House by the Speaker. The Federal System is completed with a free judiciary. At the state level, this arrangement is replicated by the office of an Executive Governor but only one House Assembly doing legislative duties. Nigeria currently has a 36-state structure with the Federal capital being centrally located at Abuja. Olusegun Obasanjo, a former military ruler was elected as Nigeria‟s first civilian president for nearly 16 years. He took office in May 1999 and his party the People‟s Democratic Party (PDP) also won comfortable majorities in both houses in the National Assembly. Mr Obasanjo was re-elected in April 2003 elections, in which the PDP also extended its grip on power at both the federal and state levels of government. The next general elections are scheduled for 2007, but Obasanjo is precluded for standing because of the constitution.

Economy

Nigeria is the powerhouse of the west Africa region, and it has demonstrated its commitment to privatisation and reform. Nigeria‟s economy is based upon hydrocarbons production, which accounts for over 90% of foreign earnings and nearly 80% of government revenues. Real GDP grew at around 5% in 2003 which was impressive, as compared with previous years (Table 1). The International Monetary Fund (IMF) expressed hope for the future because the government seems to have adopted tighter fiscal policies and saved revenues from recent oil earnings – a change from the widely expansionary fiscal policies of 2002 and early 2003. Forecast for economic growth continue to be robust between 5 and 10%. International reserves are up in 2004 and the Nigerian government is making progress in negotiations to reschedule Paris-club debt.

Gross domestic product per capita is still around $419 per annum, which places Nigeria amongst the poorest countries in the world, and once a food exporter, economic growth has failed to keep pace with population growth has meant that Nigeria is now a net food importer. Establishing a sound base for future economic growth the Obasanjo administration has begun to make changes ending subsidies on fuel and initiating a programme of privatisation.



Table 1: Economic Forecast

2000 2001 2002 2003 2004f 2005f

Nominal GDP, US$mn 44,619 46,553 45,234 51,566 59,559 67,302

Real GDP growth, % change 4.0 4.6 1.6 5.0 8.0 5.0

GDP per capita, US$* 389 395 374 416 469 517

Population, mn 114.8 117.8 120.9 123.9 127.0 130.2

Fiscal balance, % of GDP -6.18 -5.06 -5.44 -1.38 -1.08 -1.00

CPI, % change y-o-y 6.9 13.0 12.9 14.0 12.0 10.0

Lending rate, % change eop 21.3 23.4 24.8 19.6 19.0 17.0

Exchange rate (NGN/US$, eop) 109.55 112.95 126.40 136.50 145.00 148.00

Oil production („000 b/d) 2,104 2,199 2,013 2,185 2,300 2,200

Oil price (OPEC basket, US$/b) 27.60 23.12 24.36 28.09 35.00 31.00

Exports (fob, US$mn) 23,761 19,598 17,671 27,416 32,718 27,899

Imports (cif, US$mn) 10,553 11,482 13,342 16,885 18,574 19,502

Trade balance (fob-cif, US$mn) 13,208 8,116 4,329 10,531 14,145 8,397

Current account balance (US$mn) 4,694 1,256 -5,108 -1,558 2,199 -3,549

-% of GDP -11.47 -3.15 -12.19 -3.02 -3.69 -5.27

Foreign reserves (ex gold, US$mn) 9,911 10,457 7,331 7,128 8,300 8,200

Import cover (months) 7.08 6.87 4.14 3.18 3.37 3.17

Sources: Various

Figure 2: Tourist Guide to Nigeria

In Nigeria hundreds of different people, languages, histories and religions all sit shoulder to shoulder in a hectic colourful and often volatile republic. It is a country struggling to contain the sum of its parts within a democratic framework. A chronic crime problem, religious intolerance, large-scale unemployment and overcrowding in poor living conditions regularly push the rule of law to the brink. Despite this, there is still an unfaltering optimism on Nigerians that their proud nation will indeed make it to the party!

Best time to visit: December to March

Essential experiences: Viewing wildlife at Yankari Game Reserve in Jos, Club-hopping in Lagos, visiting the

ancient mud city at Kano. Shopping for rare books at the Onitsha Winter‟s Market, exploring the Niger Delta.

Read: Anything by Nobel prize writer Wole Soyinka, internationally acclaimed writer Chinua Achebe or Ben Okri,

a crowd pulling favourite on the western literary circuit.

Listen: To world renowned musician, the late Fela Kuti, whose electric fusion of traditional Yourba call-and-

response chanting w/freestyle jazz (Afrobeat) was always in demand. Other favourites are king of juju music Sonny Ade, the granddaddy of afro-reggae, Sonny Okosun and soul singer, Sade.

Watch: A Deusa Regra (Black Goddess) by Nigerian director Ola Balogun.

Eat: Equsi (a fiery hot yellow stew made from meat, red chilli, ground dried prawns

and green leaves) or Pepper soup (a thick stew with meat, chilli, tomatoes, onions and palm-nut oil).

Drink: Palm wine (a favourite drink all over Nigeria, especially in the south where

the palm trees grow).

In a Word: Sannu („hello‟ in Hausa).

Trademarks: Fantastic music, money scams, masochistic travellers, violence,

corruption, oil rich economy, Niger Delta.

Surprises: Nigeria is home to over 20% of Africa‟s entire population, „juju‟, the

native magic that was the original basis for Caribbean voodoo, is still an element in many tribal cultures.

Source: Lonely Planet – West Africa



1.2 THE STRUCTURE OF THE OIL AND GAS SECTOR

Nigeria‟s Oil and Gas industry is a high priority for the UK.

Nigeria is the 6th largest oil producer in the world and a member of OPEC.

Nigeria‟s production is over 2.0 million bopd (currently 2.3 million bopd), and is expected to double to 4.0 million bopd by 2010.

Nigeria also has significant gas reserves (160 tcf) and is rapidly becoming a gas exporter.

A high level of investment will be required to develop new oil and gas fields, and increase the capacity of the country‟s refining and petrochemical sector.

Nigeria has long been open to international oil companies and contractors, but indigenous oil and gas service companies have been slow to develop, but there is a move to increase „local content‟.

Increasing reserves of oil and gas and the move towards deep offshore exploration and production will ensure the industry will have another 25-40 years of growth which will provide significant opportunities for UK companies.

Overview

The Nigerian Oil and Gas industry is just a little less than a century old with real exploration starting in 1908, when the drilling of a few shallow boreholes. After the First World War, the Shell Overseas Exploration Company and D‟Arcy Exploration (later BP) opened up the country. Although Shell initially had the whole of Nigeria as one huge concession, the search was to be narrowed to the Niger Delta where in 1956, the first successful well was spudded at Oloibiri in 1956. This success beckoned on other multinational companies, especially as the Shell-BP relinquished parts of its onshore licences in 1956, and was marked by the entry of Mobil, Gulf Oil, Elf Petroleum, Texaco and Agip. These companies began to dominate the industry and rapidly became known as the „ Big Six‟.

Today, Nigeria has risen very fast and steadily to host the world‟s 9th largest reserves at about 34

billion barrels. Nigeria is currently in the 6th position in the world and 4

th in OPEC, in terms of daily

production which averages around 2.3 million bopd and has consistently produced between 1.5 and 2.0 million bopd over the past two decades (see Figure 3). Nigeria has the capacity to increase reserves to 40 billion barrels within the next few years, and a concomitant increase in production to 4 million bopd.

„In the next 2 years, Britain will depend on the Niger Delta for 10% of its oil and gas needs, because its oil is drying up.‟

Richard Gozney, HM High Commissioner to Nigeria, 2004

Although Nigeria has for over 40 years been established as a leading producer of crude oil, The country has considerable gas reserves, which are put at around 160 tcf. Current gas production is around 3.8 billion scfd, which is mostly associated gas produced in the course of crude oil production.



Figure 3: Nigerian Crude Oil Production 1980-2003

Source: NNPC

Until lately, virtually all of the gas had been flared, with the rest deployed mainly for reinjection to aid secondary oil recovery and a little for domestic gas utilisation. The current flaring rate is put at about 45%. In response to government‟s gas monetisation efforts, which had included gas flare penalties, incentives and tax credits to encourage gas-based projects, flaring is scheduled to be eliminated by 2008, but this target is unlikely to be achieved until a few years later. To this end, not only is gas reinjection being intensified, all the companies are involved in gas-based projects tied to utilising the gas being produced in their operational areas.

In addition to opening up of the exploration arena in the deep and ultra deep sections of the offshore, Nigeria has undertaken exploration elsewhere onshore both in inland basins such as Chad/Benue but without much success. The marginal fields programme, has provided additional interest for both local and foreign companies. Added to this is the far lower cost of finding oil in Nigeria compared to other petroleum areas. Table 2 lists a comparison of oil and gas production through Sub-Saharan Africa, and Nigeria can easily be seen to be as the dominant player.

Table 2: Sub Saharan Production and Reserves - 2002

Country

Production Reserve

Oil BOPD

Gas MCFD

Oil Bbls

Gas Tcf

Angola

875,000 1,8000,000 12.5 9.5

Cameroon

100,000 200,000 0.4 3.9

Congo

230,000 850,000 1.5 -

Dem. Rep. of Congo

23,000 83,000 - -

Equatorial Guinea

221,000 335,000 2 -

Gabon

243,000 260,000 2.5 -

Ghana

3,000 - 0.01 0.27

Ivory Coast

15,000 160,000 0.14 -

Nigeria

2,100,000 3,800,000 34 160

TOTAL

4,685,000 7,488,000 53.05 174.67

Source: OPEC

In addition to the „Big Six‟ oil companies who control around 95% of the oil and gas sectors, several new international players enter the market in the 1990s when a new form of licensing (PSCs) was introduced. These new companies are finding it difficult to establish themselves as are the several dozen small indigenous oil companies who are now active in the market. The state is omni present throughout the industry, mainly through NNPC and its subsidiaries and is such an influential party.



The present civilian government of President Obasanjo first elected on 29/5/99 has been re-elected for a second term. The ministry of Petroleum Affairs is with the Presidency. The Group Managing Director of the Nigerian National Petroleum Company is Engineer Funso Kupolokun. The NNPC is currently undergoing reforms moving away from a regulated and total ownership by government to commercialisation and deregulation. Recently new Group Executive Directors and Managing Directors for its subsidiary companies were appointed and the number of Directorates was cut to 4 from 6, eliminating the directorates of development, engineering and technology as well as Commercial and Investment. More changes are on going.

In 1971, Nigeria joined OPEC and in line with OPEC resolutions, the state owned and controlled Nigeria National Oil Company was established. This latter became the Nigerian National Petroleum Company (NNPC) in 1977. The Federal Government of Nigeria (FGN), through the NNPC, became the dominant player in the downstream industry by acquiring equity shares in all the international oil marketing companies in the country. It currently holds around 60% stake in the upstream sector through joint venture agreements between NNPC and all major international players in the onshore operations.

The NNPC has been an effective instrument for the Nigerian Government. It manages government equity shares in the joint venture companies and has entered into Production Sharing Contract (PSC) with the major oil companies to develop the offshore. This is in addition to direct exploration and production, management of four refineries, a complex petrochemical plant, crude oil and petroleum products marketing, construction and maintenance of 21 depots and network of pipelines across the country and distribution of natural gas. NNPC is in the process of commercialising its subsidiary companies and activities.

National Petroleum Investment Management Service (NAPIMS) is an incorporated division of NNPC and its mission is to optimise the benefits accruing to the Government from its investments in the upstream sector of the petroleum industry. NAPIMS major role is to protect the national‟s strategic interests in the upstream sector of the industry, and in performing this task, it earns a margin on investments made in the sector. This is achieved through cost reduction strategies to maximise Petroleum Profit Tax (PPT) and also enhance margin; promote local content input by developing in-country technology capability and use of local supplies and material; encourage gas utilisation and commercialisation; promote maximum co-operation in communities of oil and gas producing areas as well as ensure the environmental protection standards are maintained. Importantly NAPIMS major role is to oversee the contract and tender process in the oil sector.

The Department of Petroleum Resources (DPR) the successor to the Petroleum Inspectorate, is the watchdog of the Nigerian oil industry. It has wide regulatory powers and its responsibilities include but are not limited to the following:

Award of Oil Prospecting Licences (OPL)

Administering conversion of OPL to Oil

Mining Leases (OML)

Approval of field development plan

Setting production allowable for all wells

Monitoring of industry work programmes

Administration of fiscal incentives

Monitoring of liftings and exports of oil at terminals All companies must register with the DPR in order to do business in the sector. If a foreign company is in a joint venture with a local company only one company needs to be registered. Registration is done on a calendar year basis and the cost is the same whether registration is done on 1 January or 30 December. There are 2 categories of registration depending on the services on offer by the company. In the terms of downstream actively Nigeria has four refineries with a capacity of 445,000 bopd, but due to poor maintenance and other operational problems is only able to operate at around 45%. As a consequence, Nigeria has to import around 60% of her refined products. The cost of petrol and diesel has historically been subsidised but the Federal Government of Nigeria (FGN) is gradually reducing the subsidies, but not without a certain degree of protest.



The National Electric Power Authority (NEPA) is the current state monopoly of power generation and operates all generating stations and the national distribution. The sector is due to be deregulated and NEPA is presently billed for privatisation. Under the plan, NEPA‟s transmission network will remain a single entity – the Nigeria Transmission Company – but the generation sector will be split into six independent companies. Eleven companies will be created from NEPA‟s current distribution operations. No timetable on the creation of the new companies has been announced, but the Government has already encouraged development of Independent Power Production (IPP) with active involvement of oil and gas companies.

Nigeria has approximately 5,900 megawatts (MW) of installed electric generating capacity – three hydroelectric plants and five thermal power stations. However, the power sector as a whole was generating only 1,600 MW at the start of the Obasanjo administration in 1999 because of the chronic problems affecting the power industry such as mismanagement, lack of infrastructure maintenance, vandalism and power theft. Nigeria faces a serious energy crisis due to declining electricity generation from domestic power plants. Power outages are frequent and the power sector operates well below its estimated capacity.

Currently, only 10% of rural households and approximately 40% of Nigeria‟s total population have access to modern forms of electricity including electricity. NEPA has announced plans to boost this electricity share to 85% by 2010. NEPA‟s plan calls for an additional 15,000 kilometres (9,000 miles) of transmission lines, 16 new power plants, and new distribution and marketing facilities. According to NEPA‟s own information, 13.9% of NEPA‟s installed capacity is more than 20 years old, 57.1% of installed capacity is more than 15 years old, and 79.6% of installed capacity is over 10 years old. Despite endemic blackouts, customers are billed for services rendered, partially explaining Nigeria‟s widespread vandalism and power theft and NEPA‟s problems with payment collection.

Nigeria is plagued by ethnic violence, labour unions and rumours of corruption within its petroleum industry. In its recent past, the country has had several bloody clashes in its oil rich Niger Delta, where oil seems to have caused more problems than it has solved. Can the current government bring about a lasting change and use its massive resources to profit the people of the country.

J. Nickle, Senior Staff Writer, Petroleum Africa

2010 ASPIRATIONS

NIGERIAN GOVERNMENT

To maximise Nigeria‟s share of OPEC quota

To increase oil reserves to 40 billion bbl

To increase oil production to 4 billion bopd

To capture equal revenue from gas

To increase „local content‟ to 70%

To ensure sustainable development

To promote best HSE practices



1.3 OIL SECTOR – UPSTREAM AND DOWNSTREAM

Nigeria is the largest oil producer in Africa, has the largest reserve base in Africa and holds 3% of the world‟s current oil reserves.

Nigeria has been a member of OPEC since 1967.

Aspirations to boost oil production to 4 million bopd by 2010.

Ambitions for longer term growth up until 2050.

Nigeria aims to invest $30 billion in the oil and gas sector over the next 5 years.

Nigeria has substantial refining capacity but due to operational problems refines less than 50% of its capacity.

Nigeria imports a considerable amount of refined products.

The downstream sector is gradually being deregulated and there are plans to build 16 new refineries.

Overview

Estimates of Nigeria‟s proven oil reserves are 34 billion barrels and the majority of these reserves are found in relatively simple geological structures along the country‟s coastal Niger River Delta. Recently newer reserves have been discovered in the deeper waters offshore Nigeria, and these present the bulk of future opportunities. Table 3 list some of the major oilfields in the Niger Delta.

Figure 4: Nigeria’s Oil and Gas Fields Nigeria is known for producing high quality sweet crude, with gravities ranging from 21

o American Petroleum

Institute (API) to 45o API. Nigeria‟s

main export crude blends are Bonny Light (37

o API) and Forcados (31

o

API). Approximately 65% of Nigerian crude oil production is light (35

o API

or higher) and sweet (low sulphur content).

Nigerian crude oil production averaged 2.1 million bopd in 2003 but is currently around 2.3 million bopd. This was higher than their official OPEC quota which in August 2004 was 2.14 million bopd. One of the big issues facing Nigeria is whether OPEC will raise its quota for Nigeria in lines with the country‟s aspirations for enhanced production.

Six oil companies – Shell, Chevron, Mobil, Texaco, Agip, and Elf – dominate the oil industry in Nigeria. Together, they hold some 95% of the oil reserves and operational assets. Another 40 other companies has minor interests, some of which were recently acquired. PanOcean is typical of these smaller companies. Figure 5 illustrates the major companies individual reserve history, which have been steadily rising. The six large operators have quite different geographic spreads. Shell‟s operations extend over the whole Niger Delta, while the other majors are concentrated in specific parts, either onshore or offshore. (Figure 6). Production from joint ventures (JV‟s) accounts for nearly all (about 95%) of Nigeria‟s crude oil production, with those operated by Shell, producing nearly 50% of Nigeria‟s crude oil. In the future Production Sharing Contracts (PSCs) will become increasingly important as the deepwater areas opens up.

Source: DPR



Figure 5: Reserves History

Source: NNPC

Table 3: Major Oil Fields in the Niger Delta

Field Oil Reserve

(Million barrels)

Associated Gas Reserve

(Billion cubic feet)

Operator

Agbami 800 500 Chevron

Apoi North-Funiwa 500 750 Texaco

Amenam-Kpono 500 350 Elf

Bonga 875 175 Shell

Bomu 875 1,500 Shell

Cawthorne Channel 750 900 Shell

Delta 300 220 Chevron

Edop

733 350 Mobil

Ebegoro 160 350 Agip

Forcados-Yokri 1,235 1,100 Shell

Imo River 875 600 Shell

Jones Creek 900 350 Shell

Meren 1,100 1,300 Chevron

Nembe Creek 950 1,500 Shell

Obagi 670 811 Elf

Okan 800 1,000 Chevron

Ubit 945 600 Mobil

Source: DPR/NNPC

0 2 4 6 8

10 12 14 16 18 20

1999 2000 2001 2002 2003 2004

Year

SPDC

Mobil

Chevron

Agip

Elf

Texaco

Reserves (Billions bbl)



Figure 6: Geographical Distribution of the ‘Big Six’

Source: NNPC

Mobil

3.5

4.5

5.5

6.5

4 5 6 7 8 9

WARRI

PHC

Deg E

Deg N

non-producing producing

SPDC

3.5

4.5

5.5

6.5

4 5 6 7 8 9

WARRI

PHC

Deg E

Deg N

non-producing

producing

Chevron

3.5

4.5

5.5

6.5

4 5 6 7 8 9

WARRI

PHC

Deg E

Deg N

non-producing

producing

Agip

3.5

4.5

5.5

6.5

4 5 6 7 8 9

WARRI

PHC

Deg E

Deg N

non-producing

producing

Elf

3.5

4.5

5.5

6.5

4 5 6 7 8 9

WARRI

PHC

Deg E

Deg N

non-producing

producing

Texaco

3.5

4.5

5.5

6.5

4 5 6 7 8 9

WARRI

PHC

Deg E

Deg N

non-producing

producing



With the advent of state-of the-art exploration techniques, the average exploration success rate has moved from an average of 11% to currently over 60%. This is among the best in the world. To date, 5,284 wells have been drilled in Nigeria, predominately in the Niger Delta. Of these some 603 are discovery wells. The average production costs per barrel are $3.5 and $5.0 onshore and offshore respectively, which is amongst the lowest in the world. Current emphasis is on the deepwater where success ratios are high, finding cost per barrel are low and each well is capable of producing 20,000 bopd making production costs low. Figure 7 illustrates the areas with some of the new deepwater discoveries.

Figure 7: Deepwater Discoveries

Source: JDA

Figure 8: Six Major Operators Percentage Equity

0%

20%

40%

60%

80%

100%

Shell Mobil Chevron Elf Agip Texaco

Inte

rest

NNPC Shell Mobil Chevron Elf Agip Phillips Texaco

Source: DPR

However the tax/royalty regime has become a victim of its own success, which has led to more discoveries and the inability of NNPC to fund its share of the operations. Also rising production costs especially in the Niger Delta, and low oil prices meant the major oil companies were seeing their margins being squeezed. As a consequence in order to „modernize‟ the system, and guarantee a return of investment for the oil companies, a revised set of terms for the joint venture was agreed in the 1990s, called Memorandum of Understanding (MOU). This essentially allowed oil companies to have a guaranteed profit margin on every barrel, even at very low oil prices and in exchange to sacrifice its margins to the government at higher oil prices (in effect a windfall tax). Figure 9 illustrates the profit split of the JV barrel, at a price of $10, 15 and 20 per barrel.

A major problem facing Nigeria‟s upstream oil sector has been insufficient government funding of its JV commitments. The Government has two major funding arrangements for oil production in the country – Joint Venture (JV) and Production Sharing Contract (PSC). There are also a few service contracts arrangements. Under the JV arrangements, the Government and its partners contribute to projects according to their equity holding on a cash call basis on a regular basis as the project progresses. Figure 9 illustrates the percentage interests of the 6 major oil companies.

For instance, NNPC and its JV partners proposed an operating budget of $6.5 billion for 2004, subject to approval by the National Assembly. NNPC was to spend $3.7 billion during 2004 and the partners were to provide $2.8 billion, in the ratios mentioned here. However, the legislature finally approved an NNPC budget of only $3.2 billion, leaving a shortfall, of $500 million, which meant several projects had to be withdrawn or postponed.



Figure 9: Split of the JV Barrel

Source: NNPC

The other major change was the introduction of Petroleum Sharing Contracts (PSCs) in the 1990s. These were specifically introduced to deal with exploration in deepwater, where production costs for a typical field could easily exceed $5 billion. The Government was in no position to fund its upfront costs in these developments, so adopted PSCs, which are the norm in many countries where the government has limited resources e.g. Angola. Essentially with PSCs, all the exploration and production costs are funded upfront by the oil companies and the government has no financial commitment or risk. In the event of a discovery and the field is developed then the ensuing production is split between the operator and Government, in a pre-agreed ratio. Any profits deriding from the oil production is split accordingly. The over-riding aim of all these contract revisions has been to guarantee margin for the oil companies at low oil prices, withdraw the necessity for NNPC to fund exploration and field development, and to improve fiscal terms where the risk are higher such as in the deepwater. Some of the more salient fiscal terms available to the industry for oil are listed below:

o There is a minimum guaranteed notional margin of $2.50 per barrel, after Tax and Royalty on the company's equity crude.

o The minimum guaranteed notional margin increases to $2.70 per barrel if the actual capital costs exceed $2.00.

o The notional fiscal cost is now $4.00 per barrel instead of $3.50 per barrel. o Tax inversion rate of 35% rewards for prudent producers whose operating cost is less than

$1.70 per barrel. o No penalty for small companies producing below an average of 175,000 bbls per day, for

operating cost not greater than $3.00 per barrel. o No penalty for companies producing above 175,000 bbls per day, for operating cost not

greater than $2.30 per barrel. o Capital cost of ullage fees limited to 50% of total sum paid to third parties in respect of crude

oil transportation, processing and terminalling is excluded from operating cost in determining high cost producers.

o All levies and other impositions to Government, or state and/or local governments or their agencies including, without limitation, Central Bank of Nigeria commissions, other than Royalty and PPT, are treated as allowable costs.

o Investment tax allowance of 50% for PSC arrangements.

Oil Price: $10 /bbl Oil Price: $15 /bbl Oil Price: $20 /bbl

Partners Take Margin

Based on New 2000 Memorandum of Understanding

$5.12 51.2%

$4.0 40%

$9.84 65.6%

$4.0 26.67%

$14.78 73.9%

$4.0

20%

6.1

%

$1.2222 7.73%

$1.16

$0.88 8.8%

Govt Take (Equity + Taxes)



PSC Arrangements

Operator Block

Addax 90,225,118,98

AGIP 244,116

AMNI 310,409

Chevron 250

Conoco 220

Elf 222

Esso 209,214

Nigus 496

Noreast 840,902

Opic 208

Orandi 322

Oranto 320

Panaclatic 204

Petrobras 324

Phillips 318

Queen 135

Seagull 230

SNEPCO 219,250

Solgas 226

Statoil 217,218

Summit 205,206

Sunlink 496

Texaco 213

Ultramar 227

Union Square 201

Yinka Folawiyo 309

Table 4: PSC Arrangements



1.4 GAS SECTOR – UPSTREAM AND DOWNSTREAM

Nigeria is the 7th largest holder of natural gas reserves in the world.

Government is planning new gas legislation in 2005 to aid future investments.

Domestic gas utilisation is low, with little developed infrastructure.

There has been very little exploration solely for non-associated free gas.

Nigeria has been afflicted by high levels of gas flaring, which are due to be eliminated by 2008.

Nigeria has become a gas exporter through the development of NLNG at Bonny.

Tremendous opportunities exist for UK companies in both gas exploration and utilisation.

Overview

In energy terms, the quantity of natural gas in Nigeria is said to be greater than the quantity of crude oil. It is estimated that the country's reserve-production ratio for gas is greater than 100 years compared to that of crude oil of less than 30 years. Nigeria's gas reserves are estimated at 160 TCF which puts them in the top 10 in the world.

Table 5: Natural Gas Reserves (TCF)

Associated Gas (TCF)

Non Associated Gas (TCF)

TOTAL

Ultimate Recovery 114 72 192

Produced 24 2 26

Remaining Reserves 90 70 160

Source: NNPC

There had been no conscious effort by any of the oil companies (both majors and independents) to only explore for and produce natural gas in Nigeria. Rather, as the gas-oil ratio is high in most reservoirs, gas fields are discovered during oil exploration and usually are not developed. Because of this, Nigerian gas resources remain largely unexplored and unexploited; and as a consequence, the downstream segment of the gas industry is also underdeveloped and is characterised by a low level of utilisation. These disincentives for gas development are all being addressed by a new National Gas Policy currently under consideration by the Nigerian legislature. New legislation governing the operations of the Nigerian natural gas industry should be ready by the fourth quarter of 2005.

Natural Gas Utilisation

Historically around 95% of Nigeria‟s natural gas was flared, but measures were introduced in the 1990‟s to combat flaring and the rate has steadily declined to around 45% (see Figure 10). This was primarily due to lack of a market and the gas produced as a by product to the production of oil. The government has introduced a policy to reduce gas flaring by the end of 2008 and there are currently penalties in place for those companies not adhering to this policy.



Figure 10: Historical and Projected Trend of Gas Flaring

0

20

40

60

80

100

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Year

% G

as F

lare

d

Source: NNPC

The history of the Nigerian natural gas industry is one of contradictions. The country is deficient in power production, which is a prerequisite for the implementation of a national industrialisation programme. The agricultural sector is hindered by a lack of fertilisers for the realisation of national agricultural aspirations. These two deficient sectors are dependent on natural gas for the realisation of their potentials. However, until very recently, the national petroleum industry flared most of its associated gas production, due mostly to a lack of demand for the gas. Table 6 shows gas utilisation and flaring data for 2003, for the major oil companies.

Table 6: Gas Production and Utilisation by Company

Jan – Sept 2003 (billion standard cubic feet)

Company Gas Produced

Gas Utilised

Gas Flared

% Gas Flared

SHELL 492.59 276.50 231.46 46.99

MOBIL 265.24 162.02 90.45 34.10

CHEVRON 152.52 55.18 97.34 63.82

AGIP 297.55 257.29 138.73 46.62

ELF 94.43 62.50 28.25 29.91

TEXACO 12.39 0.11 12.28 99.14

PANOCEAN 15.21 0.73 14.48 95.24

ADDAX 28.28 1.51 23.75 83.97

AGIP ENERGY 5.84 0.05 5.79 99.11

TOTAL 1,364.04 715.89 642.52 47.10

Source: NNPC

The problems of natural gas utilisation in Nigeria are multi-faceted. There have been many barriers to the speedy implementation of gas utilisation projects and include: Financing is a problem with only the oil companies currently available to provide private finance. Investment requirement are considerable, and the state enterprises have limited funds and the government funding is targeted towards large scale infrastructure development. Gas pricing has always been an issue with domestic gas prices often below the costs of supply. The main consumers mainly NEPA have a long history of poor payment, resulting in an effective subsidy of around $50-90 million per year. Price setting appears to be discretionary and not transparent. A number of fiscal reforms are required to attract downstream investment. At present the most favourable terms appear to be for existing upstream investors, and these act as a barrier to most non-oil investors. Institutionally there appears to be a lack of

Projected



coordination between the main groups, and a need for a clear policy. The existing policy are clearly written primarily for oil, and not gas. Hence, insufficient legislative or regulatory provision for activities in the downstream sector such as transmission, distribution and supply of gas. Existing contractual arrangements are opaque and potentially discriminatory and not a sufficiently robust platform from which to develop the downstream sector. Third party access to the transmission and distribution network is discriminatory, i.e. No standard terms or conditions for third party access. The government is addressing the issue by formulating a new gas policy which should be unveiled in 2005.

Figure 11: Drying Tapioca

Gas flaring is one of the most controversial subjects in Nigeria. Virtually every person who lives in the Delta has some exposure to gas flaring because of the number of wells which produce associated gas. Some communities live so close to flares that they live in constant 24 hour daylight. The amount of gas flaring is considerable and Nigeria has always been consistently rated the country with the highest percent of gas flaring.

Natural Gas Development Schemes

Nigeria still flares about 45% of the natural gas it produces and re-injects 12% to enhance oil recovery with the remainder being available for utilisation. The new industry strategy is to collect the associated gas and utilise it, in both domestic and more importantly export schemes. The most ambitious of these are the Liquefied Natural Gas (LNG) schemes which not only contribute to eliminate gas flaring, but generate considerable export dollars. Nigeria has become the only sub-Saharan African country to produce and export LNG.

Nigeria‟s most ambitious natural gas project to date, is the $3.8 billion LNG facility on Bonny Island, the first phase of which was completed in September 1999. The facility processes 397 bcf of feedstock annually which equates to 1.09 million scfd per day. The consortium behind the project – Nigeria Liquefied Natural Gas (NLNG) is comprised of NNPC (49%), Shell (25.6%), Total (15%) and Agip (10.4%), but is managed by Shell. Initially, the facility was supplied from dedicated natural gas fields, but within a few years it is anticipated that half of the input gas will consist of associated (currently flared) natural gas, including gas from Akri/Oguta, Otumara, Utapate fields and offshore blocks as well. When the planned enlargement of the plant is completed, NLNG envisions Shell supplying 56% of feed gas, with Agip 25% and Total 19% the remainder.

The NLNG or Bonny Island LNG facility currently has three trains in operations. The fourth and fifth trains are under construction and expected to start up by mid-2005. The total cost of the fourth and fifth trains is $2.1 billion and plans have been approved for a sixth train, which is expected to add another 194.8 bcf to the plants capacity, bringing the total to 1.1 tcf per year. NLNG officials hope to have the sixth train operational by 2007. In terms of output, NLNG will become the third largest plant after Malaysia and Indonesia and there are further plans to build a seventh and eighth train (see Figure 12).



Figure 12: World LNG Plants

Source: Cedigaz

In addition to the liquification plant, NLNG also operates a fleet of LNG vessels through Bonny LNG as the shipping company is known. It already has 15 vessels and an additional eight vessels are needed to meet the shipping requirements for the fourth and fifth trains. Since the development of the NLNG plant, customers located in Italy, France, Turkey, Spain and Portugal have signed long-term purchase agreements with NLNG. Shell have just agreed to provide gas from the unfinished trains 4 and 5 to BG Group plc (formerly British Gas) on a 22 year contract with the gas destined for BG‟s Lake Charles Terminal in the US.

Construction on the plant site commenced in February 1996 and by August 1999, one of the two trains (Train 2) was ready. The plant was built on 2.72 sq km of primarily reclaimed land in Finima, Bonny Island (see Figure 13). Once completed the Nigeria LNG Plant will have an overall capacity of 21 million tpa of LNG and 3.4 million tpa of LPG.

Figure 13: Aerial View of NLNG – Bonny Island

Feedgas which is estimated at 2.8 million scfd is supplied to the plant from the onshore concession areas of the eastern part of the Niger Delta. The NNPC/Shell/Agip/Total joint venture is currently supplying gas from the Soku field, which in future will be supplemented by mainly associated gas from other fields. Gas is supplied to NLNG at three points: Soku, Obite and Obiafu. The Gas Transmission System (GTS) consists of pipeline of 20 to 36 inches in diameter and length of approximately 201km.

0 5 1 0 1 5 2 0 2 5

Current Capacity

Debottlen./Revamping

Under Construction

Projected

Mtpa

MLNG III

Train I Train H

Trains 4 and 5 (or Gorgon)

Trains 3, 4 and 5

3rd train

2nd train

3 x 2.95 + 2 x 4.2 Mtpa

Indonesia

Algeria

Malaysia

Indonesia

Australia

Qatar

Brunei

Oman

NIGERIA

Algeria

Abu Dhabi

Qatar

Trinidad

Alaska

Libya

Algeria

Yemen Venezuela

Russia

0 5 15 20 25 30

Source: NLNG



Other Export Schemes

Plans for additional LNG facilities are being developed. ConocoPhilips, ChevronTexaco and Agip signed an agreement with the NNPC for the establishment of the Brass River LNG plant. The $3 billion facility, which is expected to be operational in 2009, will be a two-train operation with a capacity of 974 bcf per year. A new LNG plant is scheduled to be built in Ondo/Oqun state by a consortium composing ChevronTexaco, BG and NNPC. The new LNG plant in Ololcola, straddling Ogun and Ondo state and is scheduled for commissioning in 2008, and will cost $6 billion. The plant is scheduled to provide an output of 30 million tpa of LNG.

The Escravos gas project, in which the NNPC holds a 60% share and ChevronTexaco a 40% share, is another project that will expand Nigeria‟s natural gas industry. The gas is currently used domestically, but plans are that gas from the project will be exported to Benin, Togo and Ghana through the West African Gas Pipeline (WAGP). The main Escravos plant is expected to process 400 million scfd of natural gas from ChevronTexaco‟s northern offshore fields. Gas processed at the Escravos plant will not only serve as feedstock for the WAGP but also the $1.3 billion, Escravos gas-to-liquids (GTL) facility, scheduled to come online in 2008. The Escravos GTL facility will utilise technologies developed by ChevronTexaco to consume about 176.5 million scfd of gas. Other companies are also considering establishing GTL plants in Nigeria.

Nigeria and Algeria continue to discuss the possibility of constructing a “Trans-Saharan Gas Pipeline”. The 4,000 km pipeline would carry gas from oil fields in Nigeria‟s Delta region via Niger to Algeria‟s Beni Saf export terminal on the Mediterranean. It is estimated that construction of the $7 billion project would take six years. It is currently in the feasibility stage.

Domestic Gas Utilisation

Domestic consumption is currently running at around 600 million scfd, of which 80% is used by NEPA, the state power utility. There were high hopes that NEPA would be able to use around 1400 million scfd by the year 2010, but this is unlikely at present. The fertiliser industry, only consumes around 50 million scfd, and as most of the cement is imported, cement industry consumption is similarly low at around 50 million scfd. Industry again is not a great consumer with Lagos based industries only consuming around 80 million scfd. At present, the state gas company Nigeria Gas Company (NGC) owns the majority of the transmission capacity, operating more than 1100 km of pipelines.

Several distribution schemes are planned to help promote domestic consumption of natural gas. The proposed $580 million Ajaokuta-Abuja-Kaduna pipeline will supply gas to central and northern Nigeria, while the proposed Aba-Enugu-Gboko pipeline will deliver natural gas to portions of eastern Nigeria. The Lagos State government and Gaslink Nigeria Limited (Gaslink), a local private gas distribution company, are developing a pilot program to deliver natural gas to nine residential neighbourhoods in the state. Gaslink, another private company supplies natural gas to nearly 30 industrial customers in Lagos‟ Ikeja industrial district and plans to expand operations to include 150 industrial customers, 250,000 residential/commercial customers and 25 independent power plants.

New Gas Legislation

New gas legislation is due in the latter half of 2005, and this should help attract new investors to explore and develop the gas reserves, especially the non associated or „free‟ gas, which is separate from oil production. At present the following incentives are available to the oil companies interested in exploring for gas.

o All Capital costs of upstream gas investments up to the custody transfer points. o The upstream producer is exempted from payment of royalty and PPT. o The LNG projects receive a 10 years tax holiday. o The LNG project is also exempted from withholding tax on interest and dividends. o There is an additional investment allowance of, 20% for upstream projects, 35% for NGL

extraction and gas-to-liquid facilities and 15% for downstream projects. o Downstream investments receive accelerated capital allowances of 90%. o Downstream gas projects which received a 3 year tax holiday.



1.5 SERVICES (TRAINING, SECURITY, HEALTH, SAFETY AND ENVIRONMENT)

Nigeria is an emerging market for HSSE services

The country has introduced a number of new legislations to cover the oil and gas sector, most noticeably in the environmental arena.

The major oil companies undertake all their operations to international standards.

Health and Safety is not as advanced with the indigenous companies.

Environmental issues are mainly concerned with oil pollution in the onshore, low lying swampy Niger Delta area.

Training is a major development area in the oil and gas sector, with one of the main aims to combat high unemployment and improve „Nigerianisation‟.

Overview

Within the local Nigerian companies there are only basic Health, Safety and Environment Management systems, awareness of health and safety and patchy preventative measures. Mostly HSE policies are on paper and there is little awareness of actual health and safety. Health and safety risks are not systematically identified and health and safety figures are rarely monitored. Even at the most basic level of road safety and safe equipment handling there is little awareness. In comparison, within the foreign oil companies health and safety is a priority and much time and effort is spent on implementation to international standards. Joint venture HSE is a priority.

Security ranks as the main risk for many international oil companies. There is a history of disruptions caused by local communities which has led to several periods of disruption to oil production, and loss of revenues. Most oil companies are upgrading their security provisions and there are regular opportunities to participate in this arena.

Nigeria‟s main environmental challenges result from oil spills, gas flaring and deforestation. Oil extraction in the Niger Delta region especially, has caused severe environmental degradation, owing to the legacy of oil spills, lax environmental regulations, and government complicity during previous military regimes that governed the country. Although the situation is improving with more stringent environmental regulations for the oil industry, other areas of concern are marine pollution which is still a serious problem, and air pollution from gas flaring, exhaust emission from the explosion in car ownership, and electricity generators is likewise very noticeable.

In Nigeria there is a workforce of around 43 million, high unemployment and a rapidly growing young population (50% of the population are under 20 years old). Training and sustainable development is a major priority for the oil and gas companies. Increasingly there are demands for foreign companies to take on a certain percentage of Nigerians and train them. As a consequence there are short to medium term opportunities in training and medium-long term opportunities in consulting and training of Nigerian operators and contractors. All the oil companies are involved in sustainable development and some examples are given below.

Sustainable Development

Shell, as part of its youth empowerment programme, operates a Youth Training Scheme to establish and sustain skill acquisition, to enable young people to achieve gainful employment. A major plank of the youth empowerment programme is the Shell Intensive Training Programme (SITP). The scheme was designed to develop the skills of young Nigerian graduates and technicians through a rigorous re-training programme, and thus prepare them for employment in the oil industry. The SITP has continued to assist Shell to „grow its own timber‟. Since inception in 1998, over 1,000 trainees have graduated from the scheme and about 600 of them have been employed by Shell. Other companies in the industry also pick staff from this pool of well-trained people.



Shell also commenced a six month long pilot behavioural change projects for university students as part of the World Summit on Sustainable Development (WSSD) Heritage Projects on HIV/AIDS. The aim is to develop 250 peer counsellors from among the River State University of Science and Technology students, who will hopefully act as role models and ambassadors for a positive behavioural change among the students. If the pilot proves successful, the project will be replicated across the Niger Delta.

Shell are also in the forefront of the development of micro and small scale enterprises which are crucial for the achievement of broader community development objectives, particularly in the area of poverty alleviation. The Micro-Credit and Business Development unit aims at reviving the traditional economy of the Shell JV operating areas by promoting self-help enterprise development, removing credit-related constraints to the start-up and expansion of micro-enterprises and the building of local capacity to operate and manage micro-credit schemes. A prominent feature of the micro-credit and business development initiative is the participation of the beneficiaries in the planning, implementation and in equity participation and project ownership by communities and community groups. The Shell JV is the highest private investor in social development, investing more than US $ 50 million annually in community development projects.

Mobil‟s current focus on economic empowerment has helped to facilitate greater economic independence of the people, especially in the operational communities. This has been achieved through implementation of various skill training programmes and the current disbursement of micro credit loans valued at about N12 million to over 200 beneficiaries (mainly women and youths). In addition the Rice Project being sponsored by the Mobil JV has the capacity to hire over 500 people and train about 1600 in modern farming.

Chevron place emphasis on conducting its operations in an environmentally sensitive manner and over the past few years, both the Nigerian Conservation Foundation and the Federal Environmental Protection Agency (FEPA), among other organisation concerned with the environment, have recognised these efforts. Chevron integrates environmental standards throughout its worldwide operations. The company‟s policy of „Protecting People and the Environment‟ – emphasizes safe operations, compliance, pollution prevention and community programme. In recent times Chevron has been engaged in the significant upgrade of its production facilities, including the installation of improved equipment to reduce discharges and reduce the risk of oil spills. This project will be completed soon at the cost of about $400 million.

Total attaches great emphasis on „local content‟ in it procurement and contracts process. In the current development of the Amenam/Kpono project for example, about 50% of the project surface was executed locally in Warri, Delta State. These include the two drilling decks, jackets and the bridge. The construction works provided about 500,000 man hours of engineering and technical work for Nigerian engineers, technicians, welders, fitters, electricians and other skilled labour. This was in addition to the positive multiplier effects on the local economy through the creation of secondary employment and economic empowerment. Scheduled follow-up constructions of additional facilities will generate a further 350,000 man hours of work for Nigerians.

EITI

The Extractive Industry Transparency Initiative (EITI) was launched by Tony Blair in June 2003 through DFID and is better known as „Publish What you Pay‟. EITI was launched principally to promote transparency, accountability and efficiency in the management of the revenue realised from a country‟s natural endowments. This objective will be achieved by publishing a number of key government financial indicators including revenues received from oil and gas, as well as other solid minerals extracted from the soil. EITI, if practised according to the terms of the initiative will promote good governance at all levels. See www.dfid.gov.uk.

Nigeria was the first country to embrace the EITI initiative, and has appointed officials to manage the process and has participated in all the forums and events.

http://www.dfid.gov.uk/

MMM AAARRRKKKEEETTT TTTRRREEENNNDDDSSS AAANNNDDD AAARRREEEAAA OOOFFF OOOPPPPPPOOORRRTTTUUUNNNIIITTTYYY


Expenditure - 2004

1.91% 5.10%

92.99%

Exploration

Appraisal

Development

2. MARKET TRENDS AND AREA OF OPPORTUNITY

2.1 EXPLORATION

Exploration success ratios in Nigeria are very high, by international standards.

Finding costs are low.

Deepwater success ratios are excellent.

Funding has recently moved away from exploration into operation/maintenance and field development, In response to the high oil price.

New incentives are required to stimulate onshore exploration, especially in frontier areas.

Current Trends

Exploration success has improved over the past decade from around 10% - 50% to over 60%. This is mainly due to the advent of improved exploration techniques, such as 3D seismic. However, overall the amount of money spent on exploration has declined recently because of security problems inherent in entering new areas, especially in the onshore delta and the need for oil companies to increasingly target „low risk‟ prospects. This decline in expenditure is shown clearly in Figure 14, which shows that now only 1.91% of the JV budget is being spent on exploration.

Figure 14: Exploration Funds

Source: NNPC

The current level of exploration actively is low, and this is especially true to the front end work such as seismic. Table 7 illustrates the forward programme for Agip over the next 5 years, which by international standards is relatively small.

Table 7: Seismic Programme - Agip

Description Unit 2003 2004 2005 2006 2007 2008 Total

Seismic Acquisition

Sq. Km 750 250 200 50 0 - 1250

Seismic Processing

Sq. Km 1887 540 770 770 400 - 9584

Seismic Reprocessing

Sq. Km 640 - - - 420 500 1560

Source: NNPC/Agip

The same is true for Chevron‟s well drilling programme which is outlined in Table 8 overleaf.



Current drilling activity is relatively modest, with only 5 exploration wells being drilled in the Niger Delta out of a total of 25 wells, of which none are on land.

Table 8: Summary of Well Drilling and Major Rig Workover Programmes

Year Explor. Wells Appraisal Dev. Compl. Workovers

2002 3 - 33 - 4

2003 2 - 21 0 6

2004 0 - 30 0 2

2005 2 - 46 0 2

2006 3 - 51 0 0

2007 3 - 41 0 4

2008 3 - 28 3 0

Source: NNPC/Chevron

Table 9: Drilling Activity – End of 2004

Company Rig Well Class OML/ OPL

Location Terrain Spud Date

Depth

Addax TC Head ADS-9H Dev 123 East Offshore 05/08/04 7,666 ft

Addax TC Head ADS-7ST Dev 123 East Offshore 30/08/04 9,661 ft

Elf Baltic 1 Egina-2 App 102 East Offshore 16/08/04 3,464 ft

Elf Baltic 1 Ampk 1-24 Dev 99 East Offshore 07/08/04 1,117 m

Elf Baltic Ampk 1-25 Dev 99 East Offshore 11/09/04 1,117 m

Esso Scarabeo-VH Erha-19 Exp 209 West Offshore 01/07/04 2,136 m

Esso Scarabeo-VII Erha-19 Dev 209 West Offshore 05/06/04 1,901 m

SNEPCO Sedco-709 Bonga 13 Dev 118 East Offshore 22/08/04 10,413 ft



Mobil Noble ED Eku-20B Dev 67 East Offshore 05/07/04 1,711 m

Mobil Adriatic VIII Awawa-8A Dev 104 East Offshore 29/08/04 2,691 m

Mobil Adriatic VII Awawa-8A Dec 104 East Offshore 13/08/04 2,650 m

Mobil Percy John Yoho-28B Dev 104 East Offshore 20/06/04 3,241 m

NAOC BK C Osiama Exp 63 East Offshore 04/07/04 3,696 m

NAOC T.26 Obrikom 17 Dev 61 East Swamp 14/06/04 3,882 m

NAE Scarabeo-7 Agbara Deep 1 Dev 472 East Land 28/08/04 4,960 m

Chevron Parker Delta South Dev 90 East Offshore 08/08/04 2,968 ft

Chevron Noble Lloyd Delta South Dev 90 East Offshore 10/09/04 2,921 ft

Continental North Pride Otuo-North Dev 59 East Offshore 18/06/04 8,100 ft

Oil & Gas Sedco Energy Nsioko 32 Exp 249 East Offshore 11/07/04 12,536 ft

Shell SX-12 CAWC-32ST Dev 18 East Land 19/09/04 1,920 ft

Shell SX-12 CAWC-52 Dev 18 East Swamp 01/08/04 2,811 ft

Shell Ensco 100 JK-03 App 74 East Offshore 19/07/04 2,968 m

Shell Tecon Hydra Egbema 1 Dev 20 East Land 01/07/04 11,296 ft

Source: NNPC

New Licensing Round - 2005

In August 2004, a new licensing round for 2005 was announced for Nigeria. The licenses were originally expected to be awarded in 2004, but ongoing sector-wide reforms reportedly made the delay necessary. Department of Natural Resources (DPR) has announced that 63 oil blocks will now be put on offer during the second quarter of 2005. The exploration blocks are located in all parts of the country, both onshore, offshore and deep offshore. Several geological basins will be covered and include Niger Delta, Benin, Anambra, Chad Basins and Benue Trough, in addition to deep water. The number of blocks on offer is higher than usual and results from the inclusion of acreage in the less prospective blocks such as the Chad Basin and a reduction in size of the blocks. The new deepwater blocks will be around 1250 sq km in size, about half the normal size. The Nigerian Blocks on offer are:

Deepwater OPL – 251, 252, 257, 258, 314, 315, 319, 321, 323, 325, 327, 328 Continental Shelf OPL – 241, 454, 233, 471, 239, 240 Onshore Niger Delta – 135, 228, 231, 234, 235, 236



Also on offer 11 Anambra basin blocks, 16 in the Benue Trough and 12 in the Chad Basin. As usual the DPR who handles the licensing activity will undertake an international roadshow (London, Houston and Singapore), which will include a visit to the UK on April 4

th/5

th 2005 closing date is 29

th

May 2005. Further details can be found on www.dprnigeria.com.

Nigeria Sao Tome and Principe

In 2000, the Presidents of the FRN and the Democratic Republic of Sao Tome and Principe laid the foundations for the establishment of the Nigeria-Sao Tome and Principe Joint Development Authority (JDA). Covering a total area of some 28,000 square kilometres, the JDZ lies strategically in one of the important deepwater basins, and has the potential to be a major hydrocarbon province based on the number of world class discoveries witnesses in the region in recent times- Bonga, Agbami and Akpo fields in Nigeria; Zafiro, Alba and Ceiba discoveries in Equatorial Guinea (see Figure 15). In 2003, the JDA announced the first JDZ Licensing Round, with a simplified tax regime consisting of one single tax payable to one body, the Joint Development Authority. ChevronTexaco has just signed for Block 1 with a $123 million signature bonus. The JDZ will shortly announce the companies which were successful in the 5 new deep water blocks offered in December 2004.

Figure 15: Sao Tome Licensing Round

Source: JDA

http://www.dprnigeria.com/



2.2 FIELD DEVELOPMENT

Significant medium to long term opportunities in the rapidly expanding sector.

Several new oil field development projects, especially those in deepwater.

Increased gas utilisation leading to a number of new gas projects, across the „Gas Chain‟.

New business opportunities for gas/condensate developments.

Twenty five Marginal Fields to be developed by indigenous operators.

Overview

Field developments account for over 93% of current funding current scenario and this results from the endless supply of deepwater discoveries plus the increased utilisation of gas. More than 95% of the projects are being undertaken by the oil majors, and over $30 billion has been committed for the next 5 years. This equates to over 300 projects. These encompass both large field development of mainly deepwater discoveries, and a smaller onshore/shallow water fields. In addition there are an increasing number of field upgrades and has gathering systems. The list of projects is endless and further details will be available as a Project Listing, which will be available from the commercial section of UK Trade and Investment in Lagos and Port Harcourt, and will be kept current. The purpose of this section is to give a brief overview of the ongoing plans of the major oil companies for field development over the next five years.

Shell Shell is the most dominant of the major oil companies, and has the largest work programme. Its work programme is based upon a number of clear objectives, which are to commercialise oil and gas reserves, (through enhancing production) eliminate gas flaring by 2008 and deliver the gas feedstock for Trains 3 and 4 at NLNG, plus maximise opportunities for condensate production. In addition to utilise synergies between oil and gas development and were possible use existing infrastructure, plus use early and mobile production facilities. The sum total of reserves that Shell are developing exceeds 5 billion barrels and expenditure will be close to $12 billion over the next 5 years.

The list of Shell projects is extensive and varied. Many of the projects are grouped together to nodal developments, which take into account Shell‟s objectives of using existing infrastructure and developing both the oil and gas reserves. A typical project would be the Alakiri Node Project which involves the development of 4 oilfields namely Alakiri, Asaritoru, Buguma Creek and Orubiri fields, which together contain 22 million barrels of proven oil. The project also involves the exploration of the Alakiri East prospect for unproven reserves. In addition the project encompasses the gathering of associated gas and supplying 60 million scfd into the domestic gas grid. The project is scheduled to be completed between 2004 and 2007, at a cost of $77 million.

Currently Shell has 22 similar nodal projects planned for the onshore, covering upwards of 40 fields. The size of the project varies enormously from the 6 million bls Warri River project to the mammoth 702 million bls South Forcados project and likewise expenditure various between $17 and $817 million. In addition to the development of oil reserves and concomitant increase in oil production, many of the projects will focus on gathering the expelled associated gas and feeding the gas either into the domestic gas grid or providing feedstock to NLNG Trains 3 and 4.

In addition to this series of nodal projects, Shell and its subsidiaries are involved in a number of large field development and gas gathering systems. One of the largest is the Offshore Gas Gathering System Pipeline (OGGS) which provides for the evacuation route for non associated gas from a number of large offshore oilfields including Bonga, as well as surplus gas from the western division, in line with planned production growth and export. Figure 16 highlights the OGGS system, along with other schemes destined to provide gas to NLNG Trains 4 and 5.



Figure 16: NLNG Train 4 and 5: Gas Gathering

Complimenting the offshore evacuation of gas, is a scheme known as Eastern Gas Gathering System (EGGS(, which is designed to evacuate associated gas from the Nun River and Gbaran Ubie areas (refer to Figure 16). The schemes will deliver 300 million scfd of gas to provide an alternate route for the Soku – Non Associated Gas and a back-up for potential third party gas. The scheme will cost around $310 million and be delivered from 2002 – 2007.

Figure 17: Bonga Bonga is one of Shell‟s most famous field developments and is Nigeria‟s first deepwater development. Bonga which was discovered in the late 1990‟s contains over 875 million bbls and 175 bcf of associated gas. The field is in deep water and is due to come on-stream in 2005. It will produce around 200,000 bopd. The topsides for this development were fabricated in Wallsend (UK) by Amec, the EPC contractor (see Figure 17). The EA field, located in shallow water (25m) off the coast of Nigeria is another Shell offshore development, was discovered in 1965. The field contains reserves of about 360 million bbls of oil

and its development involved the production into a Floating Production Storage and Offloading (FPSO) facility for process and discharge into awaiting tankers, with gas exported to shore via the Offshore Gas Gathering System Pipeline (currently under construction). The gas is sold to NLNG for

EA

B I G H T O F B O N N Y

Bonny

Akri / Oguta

Soku

Obite (Elf)

Nun River

Gbaran & Ubie

Bonga

Southwest

(SNEPCO)

H K

ELPS

S Forcados

FY Ughelli

Otumara

Esc Bch Jones Ck Sapele

Odidi

Oben

Alakri

Obigbo

Utapate

OGGS

3 3

4/5

4/5

3

3

4/5

3 3

4/5

3

GTS 1

Kalekule 4/5

4/5 4/5

Amenam (Elf)

1/2

4/5

1 - 3 Obiafu (Agip)

Belema

Caw Ch 1/2

4/5

Nembe Ck 3

To Ajaokuta & Proposed Abuja PL To NEPA Lagos, Agbara Otta & WAGP

ALSCON

NLNG

NAFCON

EGBIN ABUJA IPP MAJOR INDUSTRY

POWER PLANTS

NLNG

ABA industries

Afam 4/5

4/5

Bonga

Bonga

4/5

Source: Shell

Source: Shell



conversion to LNG for export. The development of the field involved drilling 55 wells, 44 of which are horizontal and 7 multilateral horizontal, with a peak production capacity of 140,000 bopd. The field commenced production of oil in December 2002, through Shell‟s new FPSO facility.

Also, Shell is progressing a portfolio of gas supply projects to meet the requirements of the extended NLNG plant where Trains 4, 5 and 6 are being constructed. These include associated gas gathering (AGG) projects in Gbaran, Ubie, Nun River, Otumara, Oguta, H-block, Kalaekule and Utapate fields as well as the Eastern Gas Gathering System (EGGS), which is an additional pipeline system to overcome the capacity constraints of the existing gas pipelines. A liquefied Petroleum Gas (LPG) extraction facility, due for commissioning in the first half of 2003 will significantly increase the volume of associated gas supplied by Shell to the NLNG from 150 million scfd to 500 million scfd.

ChevronTexaco ChevronTexaco owns the Agbami deep-water block in partnership with Famfa an indigenous company. The FPSO for Agbami has a design capacity of up to 200,000 bopd. ChevronTexaco is handling the project through its wholly owned subsidiary Star Deep water Petroleum Ltd. Development of the deep offshore field is expected to cost US1.2 billion as the FPSO will itself cost around $850 million. In August 2003 Star Deep Water started pre-qualifying-interested contractors for EPC contract for the Agbami FPSO and Facilities. The scope is for 300meter new FPSO capable of processing 250,000 barrels of Crude oil and 450 million scfd of gas with gas re-injection pressure of 7,000 psi. Daewoo have just been awarded the EPC for the FPSO.

ExxonMobil ExxonMobil awarded the FPSO contract for the deep offshore Erha field to Bouygues Offshore a subsidiary of Saipem. The contract covered engineering, procurement, construction, towing and commissioning of the FPSO as well as the supply of anchor chains. It is scheduled to arrive mid 2005 and the FPSO has completed dry –docking and production started for 2007. The Erha field development is estimated will cost $2.4 billion.

Mobil Producing Nigeria another member of the ExxonMobil family, in February 2003 announced the start-up of production from the Yoho development project. Yoho came on stream using a FPSO almost two years ahead of full-field start-up and the Early Production System (EPS) is expected to add production capacity in excess of 90,000 bopd. Yoho is a US$1.2 billion project with estimated recoverable resources of 400 million bbls.

Total The Amenam Kpono project is the largest field development in shallow waters world wide, it started production on the 14 July 2003. It has a plateau production potential of 125,000 bopd. The fabrication of the well-head platform, their connecting bridge and the jacket for living quarter and the well head platforms have been completed in Warri, Delta State. Amenam/Kpono is a field straddling oil-mining leases (OML) 99 and 70 has reserve potentials of 500 million barrels. The project cost is about $1.2 billion.

Agip AGIP has commenced oil production from its deep offshore Abo Central Field. The field start-up at a flow rate expected to reach 30,000 bopd of oil in the next six months, marked the first oil production from deep offshore in Nigeria. Agip with a share of 50.19% operates the field on behalf of NNPC, Shell as co-investor with a share of 49.81%. Abo Central Field is in water depth ranging between 500 - 800 meters, has a potential flow rate of 70,000 bopd and is the first producing Nigerian deepwater oil field.

Marginal Fields

A marginal field is any field that has reserves booked and reported annually to the DPR but has remained un-produced for a period of over 10 years. This could be for a variety of reasons including uneconomic reserves, preponderance of gas, not fully appraised. Several marginal fields have been identified by the DPR and these are located in concessions held by Shell, Mobil, Chevron, Elf, Agip, Texaco and Nigerian Petroleum Development Company (NPDC). These marginal fields have total estimated reserves of 250 million bbls.



The guidelines issued by the DPR for allocation of the fields to prospective investors provided that they met a number of criteria, such as existing holders could not apply, that new farminee had to be a Nigerian incorporated company, have expertise in the oil industry, etc. However one aspect allowed the Nigerian entrepreneur to involve a foreign technical partner, but who was not too hold more than 40% equity participation. There were several fiscal incentives granted to the prospective operators of the marginal fields, which included reduced Petroleum Profit Tax, reduced Royalty, etc. In addition initial charges were low, such as data packages which were priced at $2,000 and application fees were low. Signature bonuses were set at $150,000.

However the guidelines also stipulated stringent conditions by which the operator could develop the fields, and included instigation of work programmes within 12 months of the award. The marginal fields needed to be developed and produced within five years. Any approval for development needed to include a gas utilisation plan and environmental considerations. All the marginal fields also had to be developed on sole risk basis, with the Nigerian investors funding the entire exploration and production costs and they could not involve joint venture partners.

Of the 116 potential fields identified, only 24 such fields, holding an estimated crude oil reserve of 214 million bbls, were allocated in 2003 to successful indigenous bidders (see Table 10) .Bids were awarded by a committee, comprising representatives of DPR, NNPC and the Existing Operator. The bidding attracted a record response and 142 companies applied, of which 70 were pre-qualified and 31 companies were finally successful. Seventeen companies plan to operate the companies on a sole risk basis, while the remaining seven fields would be jointly managed. FDR has stressed that successful companies should not become sleeping partners with foreign technical experts, but should jointly conduct operations, and use their expertise to acquire more upstream interests.

One significant aspect of Marginal Field is that the Indigenous Company becomes a farminee of the existing Operator, and although has certain rights, such as acting as if it was the OML holder, and can deal directly with the DPR it is not entirely separate. It has to broker third party access to operating facilities, pay over-riding royalties of $1 per barrel to the Farmor, and hand back the field after production having agreed an equitable split of abandonment costs.

Table 10: List of Recently Allocated Marginal Fields

S/No FIELD OML Reserves (Million Barrels)

1. Asuokpu/UMUTU 38 16.0 2. Asaramateru 11 7.10 3 Atala 46 2.40 4 Eremeor 46 3.90 5 Ibigwe 16 17.2 6 Ofa 30 5.20 7 Oza 11 7.30 8 Qua Iboe 13 13.1 9 Stubb Creek 14 18.4 10 Tom Shot Bank 14 8.60 11 Tsekelewu 40 2.20 12 Uguo 13 14.2 13 Ororo 95 5.65 14 Akepo 90 3.90 15 Ogedeh 90 7.40 16 Ajapa 90 4.60 17 Dawes Island 54 1.40 18 Tbc 54 Tbc 19 Tbc 88 4.00 20 Ekeh 88 3.00 21 Umusadege 56 49.3 22 Obodugwa/Obodeti 56 4.80 23 UmusatilIgbuku 56 6.70 24 Amojo/Matsogo/Igbolo 56 7.90 TOTAL 214.25

Source: DPR



2.3 OPERATIONS AND MAINTENANCE

Traditionally operations and maintenance has had a low priority because of poor returns, as opposed to new field development.

High oil prices have revitalised this sector.

Many new so called „brownfield‟ projects.

Short term opportunities, until new fields are developed or oil prices drop.

Most existing fields are located onshore, and there are operational issues related to working within the Niger Delta.

Overview

The „Big Six‟ oil companies account for around 95% of the oil produced, and this is unlikely to change in the near future. In terms of type of arrangement around 98% is from joint venture agreements and only 2% is from the new PSCs (mainly deepwater). This is likely to change in the future with more production from deep water and a rise in importance of PSC. Very little is produced by the service contracts. A total of 752,859,989 barrels of crude oil (both for domestic consumption and export), was lifted by NNPC and the joint venture oil producing companies in 2002. This equates to an average of 1.899 million bopd.

Table 11: Crude Oil Production - 2003

COMPANY 2002 PRODUCTION % Of total 2003 PRODUCTION (Barrels) production (Barrels)

SHELL 262,402,725 36.15 329,905,000

MOBIL 174,462,728 24.04 175,247,000

CHEVRON 117,876,675 16.24 125,204,000

AGIP 59,390,627 8.18 71,961,000

ELF 48,439,157 6.67 48,940,000

TEXACO 9,761,479 1.34 9,472,000

PAN-OCEAN 4,456,492 0.61 4,818,000

TOTALJV 676,789,883 93.24 765,546,000

PSC/SC 15,541,959 2.17 20,802,000

SOLE RISK 33,528,147 4.62 N/A PRODUCERS

TOTAL 725,859,989 100.00

Source: NNPC

Out of the total crude oil liftings, NNPC lifted around 55.60 % of which 68.62% were exported in respect of the Federation Account. The liftings for domestic consumption were then supplied to the three local refineries. Year 2003 production is shown for comparison in Table 11. Crude oil and condensate production increased appreciably in 2003, with JV and PSC production increasing by 11.8% and 33.84 % respectively. The rapid PSC production increase is the result of the coming on stream of several PSC projects in 2003 mainly from deepwater and is likely to increase in the future. .



Figure 18: Bunkering

A particular problem found in the swamp like delta area is the physical theft of crude oil from flowlines, wells, which is commonly known as „Bunkering‟. This illegal theft can take several forms from the small scale filling of barrels to organised extraction from flowlines. In addition as a result of this bunkering, which often involves organised gangs, many of the flowstations are shutdown or closed for long periods. The extent of the problem is widespread and official figures suggest that between 50,000 and 80,000 bopd are stolen, although unofficially the figure is believed to be substantially higher. The monetary loss based on current crude oil prices is around $2 billion per year.

Opportunities

Traditionally Opportunities and Maintenance (O&M) has been a lower priority for companies in Nigeria, and it has been historically cheaper and more convenient for operators to install new equipment rather than maintain the existing infrastructure, much of which is more than 40 years old. In recent times, there has been considerable upgrading of the existing systems (particularly onshore) to improve deliverability and reliability. The business case has been for expenditure to maintain the system and thus achieve higher production rates.



2.4 DOWNSTREAM

Predominantly a state dominated industry.

Historical problems of poorly run organisations.

Plans to deregulate and privatise over the next few years.

Limited short term opportunities, because of lack of investment.

As privatisation starts to occur, more medium and long term opportunities will develop.

Overview

The downstream operations of the petroleum industry cover all activities following the delivery of crude oil to processing plants. The activities include refining and provision of feedstock, to petrochemical products, transportation, marketing of the finished products and other related auxiliary services. The downstream sector of the Nigerian oil industry is a sharp contrast with the upstream sector. While the upstream sector is regarded as successful (as shown by high productivity, asset regeneration and replenishment), the downstream sectors has a bad reputation as supply shortages, price shocks, product adulteration, smuggling, pipeline vandalisation and poor state of operating assets. Attempts to account for the disparity in performance reveal that the upstream petroleum industry is largely private sector driven, while the downstream sector is government controlled.

Table 12: Comparison of Nigeria’s Downstream Sector with the Rest of the World

Nigeria The Rest of the World

Still supplying leaded fuel products Most stopped producing unleaded fuel in 2000

Capacity utilisation (Refineries - 20-65%) Refineries 92%

Operation cost? NNPC pays $3/bbl including bridging and product distribution

$1.70 - $3/bbl refining margin

Productivity/man 10 thousand bbl/year 110 thousand bbl/year

Manpower 1,500+ 480 excluding contract workers

Upgrading Units 2 7

Input Loses 15% 0.4%

Chemical inputs 12.7% 3.9%

Salaries and overheads + General administration expenses 65%

15%

Repairs and Maintenance 18% 6.4%

Head of State/Petroleum Minister de facto MD MD is appointed on merit

Source: NNPC

While fellow developing countries such as the Philippines, South Korea and India phased out leaded fuel by the year 2000, Nigeria is still struggling to supply leaded fuel and in the process has been importing over $1 billion of petroleum products every year since the late 1990s. This is notwithstanding that its three local refineries has capacity of 445,000 bopd. Local consumption is the equivalent of 300,000 bopd. Figure 19 below shows the trend of petroleum products imports in the years 1997 - 2003 (2003 figures are January - June).



Figure 19: Products Import Trend

0

500

1000

1500

2000

2500

1997 1998 1999 2000 2001 2002 2003

Year

Valu

e (

$M

M)

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4

6

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e (

MM

MT

)

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Volume

Source: OPEC

Although Nigeria produced a considerable amount of oil, this is not reflected in earnings per person. Nigeria and Indonesia produce the least amount of oil per person of population and as a consequence the benefit to the populous is marginal.

Crud e Oil Pro d uctio n p e r Pe rso n 1999-2003

2 6 10 19 2040 45

89

130

257

310

383

0

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Indon

esia

Nig

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Alg

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OPEC

ave.

Iran

Iraq

Ven

ezuela

Libya

Sau

di Ara

bia

UAE

Kuw

ait

Qata

r

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0 B

bls

/ye

ar

Figure 20: Crude Oil Production/Person Source: OPEC

Refined products are expensive in Nigeria, with petrol, diesel and kerosene the highest within OPEC. Petrol cost almost twice the OPEC average.

Co st o f 1 Litre o f Pe tro l 2003

710 12

24 25 27 2831

35 3741

0

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Ven

ezuela

Iran

Libya

Qata

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ave

Indon

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eria

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ira

Figure 21: Cost of 1 litre of Petrol Source: OPEC



The marketing of government's equity crude from its JV partners is by NNPC, but through its NAPIMS subsidiary. Most of the crude oil is sold under term contracts except internal sales to PPMC for the supply of petroleum products for domestic consumption. NNPC deals directly with the buyers of Nigeria's crude oil, who have to meet normal international criteria. NNPC offers its buyers two formulae for crude oil sales. The standard formula is based on the spot price of dated Brent. The other pricing formula „netback pricing‟ uses a pricing mechanism under with the price is derived from the prices of the refined products obtained from the crude oil plus a processing fee. NNPC sells Nigeria's crude oil under spot cargo lifting and/or short-term lifting contracts. Early in 2003, new term contracts for lifting of crude oil were signed with Arcadia, Addax, Consolidated Oil, Vitol, Shell, Texaco, Queens Petroleum, AMNI International, Wintershall, Ghana National Petroleum Corporation, South African Government, Trafigura, Attock Oil, Indian Oil and Gas Commission and Glencore among others.

The Government has made moves to realise a fully deregulated downstream oil industry, by encouraging private sector investment in petroleum refining and mostly freeing the prices of petroleum products. In June 2002, the Government announced the approval of 18 applications for preliminary licenses to establish petroleum refineries. The list of the approved companies and their locations are shown in Table 13. At most two of the licensees are in a position to set up a petroleum refinery. There is a strong suspicion in the industry that many of the applicants for the license to establish petroleum refineries are only interested in the crude oil allocation contracts that they hope will accrue from the licenses. Government is however, not willing to give crude oil allocations to these companies prior to the commencement of operations.

The Bureau for Public Enterprises (BPE), the organization responsible for the privatization of state owned enterprises, has placed the downstream businesses of the NNPC (refineries, petrochemical plants and the pipelines and marketing companies) in the second schedule of the Government privatization process. This means that these businesses will be partially privatized in 2005. NNPC, is expected to retain 49% equity participation in the privatized companies.

Table 13: Approvals for Private Refineries Licensing

SN Company Location

1 Akwa Thorn Refming and Petrochemicals Ltd Ikot-Abasi Free Trade Zone, Akwa Ibom

2 Starex Petroleum Refmery Ltd Onne Export Free Zone, Rivers State

3 Badagry Petroleum Refmery Limited Badagry, Lagos State

4 Union Atlantic Petroleum Ltd Inogbe Island, Lagos State

5 Ode-Aye Refinery Ltd Okitipupa, Ondo State

6 Tonwei Refmery Bayelsa State

7 Southwest Refmery and Petrochemical Co Bayelsa State

8 The Chasewood Consortium Eket, akwa Ibom State

9 Rivgas Petroleum and Energy Ltd Rivers State

10 Orient Petroleum Resources Ltd Otuocha, Anambra State

11 Sapele Petroleum Ltd Sapele, Delta State

12 Total Support Refineries Ltd Calabar EPZ, Calabar, Cross River State

13 Clean Waters Refineries Ltd Rivers State

14 Niger delta Refinery and Petrochemicals Ltd Escravos/Forcados, Bayelsa State

15 NSP Refineries Ltd Omoku, Rivers State

16 Ilaje Refinery and Petrochemicals Ltd Atijere, Ondo State

17 Southland Associates Ltd Delta State

18 Owena Oil and Gas Limited Ilaje Ondo State

Source: DPR



In terms of the downstream sector, including distribution and marketing there are three main players; NNPC, Major Marketers and Independents. NNPC which owns and operates the four refineries in the country, also controls depots and a network of over 5,000 km of pipelines for evacuation and distribution of petroleum products in the country. The corporation manages downstream operation through its refining and petrochemicals directorate made up of its five subsidiaries.

1. Pipelines and Products Marketing Company Limited 2. Warri Refining & Petrochemicals Company Limited, 3. Port Harcourt Refining Company I & II, 4. Kaduna Refining & Petrochemicals Company Limited, 5. Eleme Petrochemicals Company Limited.

Eight major marketers dominate the marketing of petroleum products in the country:

1. Agip Nigeria Plc (Acquired by Unipetrol in 2002) 5. Mobil Oil Nigeria Plc 2. African Petroleum Plc 6. Oando (formerly Unipetrol Nigeria Plc) 3. Conoil Plc (formerly National Oil & Chemical

Marketing Plc) 7. Texaco Nigeria Plc 8. Total Nigeria Plc

4. Elf Nigeria Limited

Government and Nigerian investors had previously bought into these companies; and up until 2000, the ownership was equally 30:30:40 in term of the Nigerian government. However in 2000, the Nigerian government divested its shares in all the oil companies in which it had interests. Ocean and Oil, an indigenous petroleum marketing company, acquired the Nigerian government's shares in Unipetrol Plc, while Sadiq Petroleum, another local marketing company acquired government's shares in African Petroleum Plc. Government's interests in National Oil and Chemical Marketing Company Plc, and those of Shell, were acquired by another indigenous oil marketer, Conpetrol, in technical alliance with Petroleum India International.

Table 14: Market Share in the Distribution Chain – 2003 The Majors had a 52% share of the market in 2003 with individual shares of the individual companies ranging between 7% and 13%, without any of them dominating the market. However, the independents are increasing their market share at the expense of the majors, and their share of the products market is expected to rise dramatically in 2002, with the liberalization of the products supply system, which shall see the independents import petroleum

products directly, independent of the NNPC, which usually favours the major marketers in respect of products supply. The major main lines of products are gasoline, kerosene and diesel. They are also the largest manufacturers and sellers of motor oil and lubricants. Some of them also sell aviation fuel, bunkering fuel and insecticides.

New petroleum products prices were announced in October 2003, as the Government deregulated, the downstream sector of the oil business. This deregulation, which immediately increased product prices by over 50%, was as usual met with labour protests, but it appears that Nigerians are more willing to pay the commercial prices for petroleum products, as long as supply is regular and guaranteed.

1 TotalFinalElf 13%

2 Oando 12%

3 Mobil 7%

4 Texaco 7%

5 AP 7%

6 Conoil 5%

7 Independents 48%

Source: NNPC



It is reasoned that 1 in 5 people are involved in the oil industry especially in the downstream, where petrol prices are a very sensitive issue. The Government heavily subsidize the price of kerosene, petrol and diesel and is trying to remove these subsidies slowly, in order to alleviate the burden on the state.

Figure 22: Protestors

Gas Transmission and Distribution Projects

Over the past 10 years there has been considerable changes in the natural gas industry with a move to eliminate gas flaring and deregulate and privatise the gas distribution sector. As a consequence there has been an increase in the percentage of gas utilisation, which has led to a number of new gas transmission and distribution projects being sanctioned. The more midstream projects are dominated by the five major oil companies, and comprise a number of new gas gathering systems, with the gas being produced both as non associated gas and gas associated with oil production. Shell in particular has a number of new projects coming on stream. The three main downstream companies, Nigerian Gas Company Limited, Shell Gas Company and Gaslink are also involved in a number of gas distribution schemes to domestic, commercial and industrial customers.

A typical project is Agbara/Ota gas transmission and distribution project onshore Niger Delta. The project is a 72 kilometre gas pipeline with a PRMS capable of processing 42 million scfd with room for expansion, up to121 million scfd. Gas supply is from Shell, while the transmitter is NGC through the Escravos Lagos Pipeline System (ELPS). Another project is the Aba cluster gas distribution project is aimed at supplying natural gas to four industrial customers located at Ogbor Hill areas of Aba metropolis. The concept of the project is to extend the existing Aba gas supply system by constructing three additional pipelines from the existing NGC/SPDC manifolds in Aba to the four new SNG customers whose initial volume off-take is about 2 million scfd.

NGC plans to integrate all gas transmission systems in the country. It is also planned that extensions of the systems would be made to the far northern states of Borno and Sokoto as well as to the central industrial state of Kano. The resulting highly interconnected system would provide full flexibility and better management of adjustment of supply and demand throughout the country. In the domestic market investment options exist for investors who may wish to do so in gas transmission and distribution in joint ventures with NGC for specific projects such as gas based IPP and such energy intensive sectors as cement, glass and paper industries. Third parties could also purchase gas from NGC at city gates and distribute to industrial and other users. The company has already signed agreements with Unipetrol Plc/Gaslink and Shell Nigeria Gas in this regard for gas distribution to two major industrial areas in Lagos and Ogun States of Nigeria.

Table 15 list some of the major gas projects being undertaken in Nigeria over the next few years.

Compressed Natural Gas

In transportation, Compressed Natural Gas (CNG) as an alternative vehicle fuel has a great future in Nigeria especially in view of the need to export more crude oil or refined products for additional foreign revenue. Other business lines being considered by NGC, in line with government's natural gas utilization/monetization objectives are the establishment of gas-based fertiliser plants, natural gas. These are open to private local and foreign investments for which NGC is ready to engage in useful discussions.



Table 15: Gas Projects

Company Project Description Location Est. Cost Start Time

NNPC/Shell/Agip/Elf LNG Project – Trains 1& 2 Bonny Island $3.8 bn 1999

NNPC/Shell/Agip/Elf LNG Project – Trains 3 Bonny Island $1.8 bn 2002

NNPC/Shell/Agip/Elf LNG Project – Trains 4 & 5 Bonny Island $3.0 bn 2005

NNPC/Shell/Agip/Elf LNG Project – Trains 6 Bonny Island $1.8 bn 2007

NNPC/Agip Independent Power Plant Kwale

NNPC/Agip Philips LNG Project Brass, Bayelsa $1.5 bn 2008

ExxonMobil/Shell Pressurised LNG Project Offshore Delta $4.5bn 2010

NNPC/Statoil/Shell Floating LNG Project Offshore Niger Delta

TBA 2012

NNPC/Chevron Texaco

Okubie Gas Project Okubie $30m 1999

NNPC/Chevron Texaco

Knox Oil LPG Extraction Proj.

Offshore Niger Delta

TBA Proposed

NNPC/Chevron Texaco

Knox Oil Methanol Escravos TBA Proposed

NNPC/ ExxonMobil Mobil Methanol Project Bonny Island $615m Proposed

NNPC/ ExxonMobil Independent Power Plant Bonny Island $400m 2007

NNPC/ ExxonMobil Gas-to-Liquids Project Bonny Island TBC 1998

NNPC/ ExxonMobil Eastem Area Gas Project QIT TBA 2005

NNPC/ BG/ Chevron Texaco

West Niger Delta LNG Project

Escravos $6bn 2008

NNPC/Chevron Texaco

Gas-to-Liquids Project Escravos $600m 2008

NNPC/Chevron Texaco

Escravos Gas Project – Phase 3

Escravos TBA 2008

NNPC/Shell Gas Gathering Obigbo North TBA 2007

NNPC/Shell Gas Gathering Cawthorne Channel

$230m 2007

NNPC/Shell Gas Gathering Forcados-Yorkri $300m 2007

Viva Methano/Lagos State Government

Methanol Project Akodo Export Processing Zone, Lagos State

$400m 2008

West African Gas Pipeline Company

West African Gas Pipeline Lagos/Cobonou/ Lome/Accra

$600m 2008

Trans Sahara Gas Pipeline Company

Trans Sahara Gas Pipeline Nigeria-Algeria-Tunisia-Europe

$6bn 2012

Source: NNPC

Independent Power Plants

Coupled with the trend to increase the amount of gas utilisation, there has been a desire to use the gas for delivering independent power projects. The gestation period for many of these is considerable and to date only half a dozen have progressed from the conceptual stage. One of these is the Afam Power Plant, where Shell has acquired the interest from NEPA and intends to rehabilitate 6 power units, and add three new units. Shell intends to increase total investment by around $335 million over the period 2002 -2005. Another Shell project is the Abuja Power Plant which is a new gas powered 1000 MW plant. Shell would provide the feedstock and the power would be sold into the national grid, via NEPA. In order for the project to materialise, considerable amount of infrastructure needs to be build bu NAG. Shell envisages the project to require a capital investment of $816 million.



2.5 ENVIRONMENTAL SERVICES

The Oil Majors operate to international standards, and are particularly sensitive to the fragile swamp areas in the Niger Delta

Most Nigerian companies will have a manager assigned to manage the companies environmental activities, although that person is often General Manager – E & P.

The current legislation (which is restrictive) in the area of environment is currently loosely enforced but signals are that this will change.

Priorities are the clean up of contaminated land and water within the Niger Delta, resulting directly from oil spills.

Second priority is for water and waste treatment.

Short-term opportunities in remedial work following oil spills.

Significant opportunities exist for companies to position themselves with the view to medium to long-term returns.

Environmental legislation

There is existing legislation in the environmental area but at the current time it is fairly loosely enforced. The Petroleum Industry was already regulated by various articles in a number of laws governing the oil industry. The provisions of these laws were however aggregated into the DPR Guidelines issued in 1991, which from then on constituted the operational environmental code of the industry.

When the Federal Environmental Protection Agency (FEPA) was established by law in 1988, it was charged with a task of “protection and development of the environment, and biodiversity and sustainable development. FEPA, in pursuance of its remit under the law put in place a welter of regulations, which govern effluent limitation, pollution abatement, and hazardous wastes. Subsequent to its creation a new ministry has been created the Federal Ministry of the Environment (FMEnv) which is responsible for ensuring the formulation of and compliance monitoring of environmental standards. This relatively new government department has integrated the role of its predecessor (FEPA) and has wide powers covering all industries, including the petroleum industry.

The DPR guidelines are the ones which the oil industry tends to adhere to, and which cover the following areas; waste discharge, substances used in operations, spill prevention and clean up, waste conversion and environmental impact assessment studies (EIA). The guidelines also prescribe the frequency of reporting, recording of activities, measurement, internal control recovery. In outlook and approach the guidelines appear to be fashioned largely after the regulations of the State of Louisiana (US) and the UK environmental regulatory models. The approach of the Nigerian rules is largely end-pipe, whereas the Louisiana rules dwell on environmental quality objectives. Their solid waste programmes are however identical. Enforcement of environmental standards is by institutional conflict, with operators are caught between compliance with DPR regulations and those of FEPA and the FMEnv which has replaced it. A vital role now being played by the FMEnv is the approval of EIAs.

However, although Nigeria scores high in terms of the volume, of its environmental legislation, it has yet to record the level of monitoring, which compels compliance. The monitoring is poor, enforcement is even poorer. Apart from gas flaring penalties, non-compliance is rarely enforced.



Minister of Environment: Cola Bala Mande Total Energy Consumption (2002E): 0.94 quadrillion Btu (0.2.% of world total energy consumption). Energy Related Carbon dioxide Emissions (2002E): 91.94 million metric tons (0.4% of world carbon dioxide emissions). Per Capita Energy Consumption (2002E): 7.8 million Btu (vs US value of 339.1 million Btu). Per Capita Carbon Dioxide Emissions (2002E): 0.76 metric tons (vs US value of 19.97 metric tons). Energy Intensity (2002E): 8,484 Btu/ $ nominal-PPP (vs US value of 9,344 Btu/$ nominal-PPP). Carbon Dioxide Intensity (2002E): 0.70 metric tons/ $ nominal-PPP (vs US value of 0.55 metric tons/ $ nominal-PPP). Fuel Share of Energy Consumption (2002E): Oil (67.2%), natural Gas (25.5%), Coal (0.2%). Fuel Share of Carbon Dioxide Emissions (2002E): Natural Gas (50.9% of which 38% was gas flaring), Oil (48.9%), Coal (0.2%). Status in Climate Change Negotiations: Non-Annex I country under the United Nations Framework Convention on Climate Change (ratified 29 August 1994). A signatory to the Kyoto Protocol. Major Environmental Issues: Soil degradation; rapid deforestation; desertification; recent droughts in north severely affecting marginal agricultural activities. Major International Environmental Agreements: A party to Conventions on Biodiversity, Climate Change, Desertification, Endangered Species, Hazardous Wastes, Law of the Sea, Marine Dumping, Marine Life Conservation, Nuclear Test Ban, Ozone Layer Protection and Whaling.

Source: DOE

Issues and Opportunities

There is increasing focus on environmental areas within Nigeria and environmental awareness amongst the Nigeria subsidiaries is growing. The Government have been increasingly open about environmental problems as a result of the oil industry. The following areas are priorities for the oil sector in Nigeria.

Oil Spills: This is the high ticket item and receives most publicity. Spillage from flowlines, pipelines are common occurrence and although companies always insist that it is due to vandalism, often it is caused by equipment failure and/or corrosion. Much of the infrastructure is more than 40 years old. The remedial clean up and monitoring offers substantial rewards for companies prepared to take onboard this work, which often occurs in high risk securely areas. More emphasis is now being placed on preventable measures, including rapid response teams.

Contaminated Land / Water Remediation: The identification, assessment and remediation of contaminated sites (mainly from a legacy of oil spills) and material is a priority area. Nigeria is focused on the treatment and remediation of contaminated groundwater, especially in the environmentally sensitive delta area. Nigeria have plans to catalogue and prioritise the various sites requiring clean up and remediation.

Wastewater treatment: The purification of water and the removal of pollutants from wastewater (water/oil separation equipment or services, tank and pipe cleaning, filtration) is of interest. Water cut from producing wells is increasing dramatically in some fields and current separation technology is relatively basic.

Air Pollution Control: The removal of gas and particle pollutants from air (using flare systems, scrubbers, ambient air monitoring) is on the agenda of the Nigeria environmental committee. In new projects international operators report increasing pressure from Nigeria to reduce flaring by 2008. On a practical level, the JV‟s all have plans to reduce the amount of gas flaring. In the power industry NEPA have commissioned several feasibility studies to look at fitting de-NOx technology to their existing power stations but in most cases it was thought to be too expensive.

Waste Management: Collection, recovery, disposal and treatment of wastes (waste recovery, storage, treatment) is seen to be important but tangible opportunities are constrained to supply of emergency response and spills clean up equipment at the various facilities. A recent survey by DPR indicated that there were 134 illegal waste dumps, which equates to over 35,000 metric tonnes.



„”The biggest task to be undertaken by the environmentalist lobby will be the remedial clean up of the Niger Delta after the oil production stops.”

Environmental Consultant

Environmental Consultancy and Services: (Including a wide range of consultancy services, including setting up environmental management systems, training, audits, geological services, policy research etc.) are clearly a part of a wider move towards more environmental awareness but there is no budget identified for such services. Environmental Impact Assessment (EIA) present the most obvious short term opportunity, but there are numerous competent companies in the market already.

Environmental Monitoring, Instrumentation, Analysis and Assessment : The monitoring and analysis of emissions and discharges, process control, software development and modelling (probes, sampling, down hole services, seabed surveys) are a medium to priority concern. More focus seems to be on remediation of existing problems (reactive) rather than ongoing monitoring and prevention (proactive). In the short to medium term there are likely to be opportunities with new field developments and foreign operators and in the longer term there may be opportunities with the JV companies. This type of approach is particularly applicable when the bigger fields have been developed both onshore and offshore.

Budgets

It has been estimated by various parties that the total annual cost of implementing all the required environmental precautions and remedial services in Nigeria over the next 5 years will be $1 to $1.5 billion. The problem lies in that there is no budget for such services and the joint ventures are finding it difficult to allocate funds and resources to this arena, unless there is a compliance issue such as EIA. As a result, many operators are turning to local companies to provide the services as a low cost alternative.



2.6 TRAINING IN THE OIL AND GAS SECTOR

Training presents tremendous opportunities for UK companies

Nigeria annual expenditure on training is estimated at anything between $75 to $150 million dollars.

It is thought that over 500 training courses are arranged annually, within this sector.

The UK has traditionally been a recipient of Nigerian training funds.

The British Council service GETIS provides an overview of specific opportunities in Nigeria.

There are numerous short term opportunities to provide training, both in-house and in the UK.

Longer term opportunities exist for those companies prepare to set up in Nigeria and offer longer term „in-house‟ programmes.

Overview

Training is a major area of interest for companies targeting the Nigerian oil and gas sector. There is an appetite for training in the sector and the NNPC and its‟ subsidiaries use training as an incentive to motivate staff. In an environment where salary scales are capped, lengthy training courses abroad with hard currency allowances are very popular although the Government is beginning to cut back on this number of overseas courses with a view to utilising the local environment and „train the trainers‟ concept.

There have been several success stories in Nigeria, with regard to UK companies. TTE, the management and technical training institute based in Middlesbrough have a long term relationship with many Nigerian companies. In particular Bonny LNG where there is a current programme for training of 120 plus technicians annually. Another UK entity Univation is engaged in advising the Nigerian government on a training strategy for NNPC professionals, through the PTDF programme.

British Council

The Global Education and Training Information Service (GETIS) is the British Council web- and email-based market information service for those involved in the overseas marketing of UK education and training services. The service includes a website: containing; detailed descriptions and background on overseas education and training systems; An analysis of the opportunities for UK education and training providers in the market, plus detailed listings of key institutions and other background details. An integrated email news service giving daily bulletins of developments overseas that have potential marketing value for UK providers of education and training. Also, a special access to British Council services, events, fairs, missions etc.

In Nigeria, where a major proportion of training providers serve the oil and gas sector GETIS provides an overview of the opportunities in the market as well as providing detailed profiles of the oil and gas training institutions and key contact names and addresses of the main decision

Petroleum Technology Development Fund

The Petroleum Technology Development Fund (PTDF) is an agency of the Government charged with capacity building and technology transfer. Its mission is to train Nigerians to qualify as graduates, professionals, technicians and craftsmen in the fields of Engineering, Geology, Science and Management in the Oil & Gas industry in Nigeria and abroad.



Programmes of Action:

o Raising the existing endowments and creating new ones to provide scientific and technological foundation in the oil and gas related areas within Nigerian Universities.

o Award of Scholarships to postgraduate and special undergraduates students.

o Establishment of the Petroleum Training Institute Effurun and College of Petroleum Studies Kaduna as centres of excellence for petroleum teaching, studies and research.

o Sponsorship of Seminars, Workshop, Conferences and Visits to petroleum undertakings in Nigeria and Abroad.

o Links with Foreign Institutions for Training of Nigerians in Petroleum related disciplines.

o Provision of Basic Scientific and Technological Education.

o Identification of all areas where there is considerable dearth of Indigenous Manpower.

o Develop plans to address the shortfall.

o Creation of Comprehensive Network of Inter Library and Inter Laboratory Cooperation across all participants in the Petroleum Sector through On-line System.

Government Objective on PTDF:

o To enable Nigerians compete favourably in all sectors of the Oil and Gas Industry and make Nigeria a Human Resources centre for the West African Sub- Region.

o West African Region, Gabon, Angola is now hub of petroleum activities hence demanding highly skilled personnel.

o Increased offshore exploration activities requiring new competencies and skills.

Petroleum Technology Development Fund Plot 672, Port Harcourt Cres, Area II, Gaarki Abuja, Nigeria

Tel: 234 -9- 3142216,7 Fax: 234-9-314229

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3. DOING BUSINESS IN NIGERIA

3.1 CONSTRAINTS ON DOING BUSINESS IN NIGERIA

Nigeria has traditionally been perceived as a difficult market because of unethical business practices.

Almost limitless number of opportunities, in the rapidly growing oil and gas sector.

The five major oil companies currently provide the bulk of the projects within this sector.

In the past most UK companies have done business via agents or contractors outside Nigeria. In the future UK companies will need to have more of a „face‟ in Nigeria.

Government (both Federal and State) involvement needs to be considered, when conducting business, especially if the UK company has a presence in Nigeria.

Very active set of indigenous suppliers and companies of variable quality.

Companies have to take into account the issue of „local content‟.

Any business plan needs proper „risk‟ management, which should include an early exit strategy if the market position becomes untenable.

Overview

Nigeria presents an expanding market with a whole range of opportunities within the oil and gas sector over the next 25-40 years. However, the traditional way of doing business is changing and the provision of services and suppliers direct to contractors outside the UK or through „middleman‟ or agents in Nigeria is coming to a close. The government has made it very clear that they wish to promote „local content‟ and this will be done either by mutual consent using existing agreements or by the introduction of new legalisation. This will mean that UK companies will either have to set up their own subsidiaries in Nigeria or form joint ventures in order to secure future contracts.

“Nigeria is not for the faint hearted, but there certainly are opportunities.” British Businessman

There are currently four main ways of supplying goods and services into Nigeria:-

1. External to Nigeria A UK company can undertake the work entirely outside Nigeria and provide the goods/services to the contractors/companies. If work is completed entirely overseas there is no withholding tax, or other recourse to Nigeria. This contracting method is losing ground and will be restricted to high specification niche items, which cannot be manufactured in Nigeria in the foreseeable future.

2. Through an Agent Goods are supplied direct into Nigeria through an agent or facilitator who then provides the contractual link to the end user in the supply chain, be it a contractor or the oil company. UK companies often loose control over the pricing/presentation of their goods once they are in the hands of agents. These „middleman‟ often have differing business goals from the suppliers, and this can lead to conflict of interest and less than satisfactory marketing of the product in country.



3. UK Subsidiary (Predominantly UK owned) UK company establishes a Nigerian subsidiary: „Acme Nigeria Ltd‟, or branch office with a predominantly UK ownership and no substantial Nigerian control. UK subsidiary has a local presence in country and supplies direct into market via subcontractors/joint venture or direct to the end user. As a result the company has much better control over product delivery, and a much better customer interface.

4. Affiliate/Joint Venture (Predominantly Nigerian ownership) UK company or its Nigerian subsidiary forms a joint venture with a Nigerian company to bid on contracts and its Nigerian partner has a majority shareholding. Alternatively the UK company establishes an affiliate with significant Nigerian equity holding (60% or more). Either way the resulting venture will be categorised for ‟local content‟, as being predominantly Nigerian owned and as such be preferentially treated in any tender situations.

The move to „local content‟ as dictated by the Nigerian government and supported by the major oil companies will mean that the first approach will be restricted to the 10-20% high end of the market, where high specification goods cannot be manufactured locally. The desire to eliminate middlemen who are perceived to add no value is supported by all parties. Often UK companies will provide products into Nigeria to middlemen and then loose control of the final price, contract terms, etc to the detriment of the supplier and the final recipient. Thus inevitably more and more work will be awarded, especially to low value/low technical items to companies based in Nigeria who can demonstrate a high percentage of „local content‟. The first stage, therefore, for companies who wish to embrace this approach is the establishment of a branch office or subsidiary.

Having established the best method for establishing a presence in Nigeria, UK companies have a variety of approaches to secure the contracts, which are outlined in detail in section 4 and section 5. The decision making process in itself is also not simple. Decisions are rarely made by single individuals or the operating company. All major contracts/tenders over $500,000 have to be approved by a bid committee comprising of members from the joint venture, which will invariably include NNPC, who will be represented by their subsidiary NAPIMS. This organisation plays a major role in managing the investment portfolio of NNPC and is very influential in the contract award process. Therefore, to win any major contract UK companies need to persuade more than one partner with influence, either in the operating company, NAPIMS and to some extent local/state/federal stakeholders. As a consequence, the decision making process can be slow and drawn out. Final decisions can often take several months before they are decided. When compiling bids it is important to consider the implications of a delayed decision and to make any bid time limited.

Day-to-Day Business Operations

Nigeria has a reputation as a difficult place to do business, and in addition to the often lengthy and drawn out bidding process, day-to-day business operations can be difficult in Nigeria. There are four main issues which cause most of the day to day problems. One is the relatively poor state of the infrastructure. The lack of a reliable power system will often result in delays, especially to manufacturing entities and the poor state of the internet/broadband/landlines will make some routine tasks more onerous. Electricity provided by the state is sporadic and low voltage. Most business premises and houses are usually supplied by privately owned diesel generators. In addition poor refinery maintenance has led to widespread fuel shortages. Queues outside petrol stations, lasting several days are common. As an alternative fuel can be bought on the black market, but it is much more expensive. Table 16 outlines some of the infrastructure constraints as perceived by companies operating in Nigeria in 2001.

Nigerianisation

The subject of Nigerianisation is a hot topic. It represents a significant attempt to redress a major issue that permeates through Nigerian society, not just in the industry. Why doesn't the oil and gas industry create more jobs? The Nigerian government has recognised that there is an urgent need to ensure that young Nigerians can access jobs that pay well, jobs that do not compromise their status and jobs that are otherwise held mainly by expatriate workers. It is estimated that up to 300,000 Nigerian males will leave the formal education system and enter the job market in 2004. Anticipated population growth will ensure this number increases annually.



Table 16: Infrastructure Constraints

Service No Problem Little to average Problem

Severe to very severe problem

Electricity 0 3 94

Water 0 29 53

Telephone 0 43 50

Post 2 63 24

Roads 0 61 19

Rail 2 4 10

Airways 8 66 13

Ports 0 32 23

The situation has only improved since 2001. However, many of the roads are still poorly maintained. Rocks used to repair holes in the road are usually washed away during the rainy season whilst other sections of the road can become flooded or covered with mud, making road accidents common. The other annoying feature of the road system, are the frequent roadblocks which are manned by police looking for „dash‟. These can easily add 10-20 % extra time onto the road journeys. The road network comprises 104,300 miles of which 21,300 miles (about 20%) are paved. The World Bank estimates that it will take 30 years to bring the network up to acceptable standards. Rail journeys take roughly twice as much time as road journeys, and should generally be avoided. Most major cities have airports and domestic air travel can be simplest way of covering major journeys. Most of the inexpensive domestic airlines have aircraft and service to the standards of European budget airlines and with the advent of Virgin Atlantic as a part of Nigerian Airways, things are likely to improve. The airports in Lagos and Abuja are small but functional and largely hassle-free, but first time visitors should be prepared to take up the offer of „meet and greet‟ assistance, and the British High Commission can provide a list of companies who can provide this service. Concerns about safety standards in Nigerian airspace not reaching international standards seem to have been addressed in recent years.

Telephone lines between major cities are workable but communicating between cities is extremely difficult. Under-funding and bad working conditions within Nigerian Telecoms, often results in lines frequently being disconnected. Reconnection charges are not regulated effectively and can be exorbitant. Obtaining redress through official channels is time consuming and often unproductive. Postal services are slow and unreliable. The big improvement has come with the mobile phone sector where competition and international operators provide a reliable service to a significant proportion of the business community. There are now over 3.2 million mobile phone owners operated through two major networks.

“Mobile phones are the main instrument of business in Nigeria. You need to know the mobile phone numbers of all the important contacts.”

Nigerian Businessman

Lagos (Apapa and Tin Can Island) is the largest port in Nigeria with 20 berths and 15 warehouses. Port Harcourt, the second largest, has 9 berths. There are also ports at Warri, Sapele and Calabar. A free port operates at Onne close to Port Harcourt, mainly servicing the oil and gas industry. Airfreight is mainly to Murtala Mohammed (Lagos) airport, but also available to Kano in the north and Port Harcourt. There is no airfreight at present to Abuja.

Source: Nigerian Economic Summit Group, 2001



Figure 23: Ethnic Unrest

Political and ethnic strife in the Niger Delta region, including violence, kidnapping, sabotage and the seizure of oil facilities, often disrupts Nigerian oil production. Several acts of vandalism have occurred over the past decade. Example, in 2003 include; a serious fire on a Shell oil well in May caused by fuel thieves; a major oil spill in June caused by thieves using drills and hacksaws on an 18 inch pipeline in Imo State; a second June spill in Bayelsa State causing damage to farmland and streams; and a deadly fire that killed 10 villagers “scooping” oil from a vandalised pipeline in Agbani in late July. Local communities are claiming millions of dollars in compensation for environmental damage that results from the pipeline vandalism, as well as recourse from the numerous deaths resulting from fuel theft related accidents.

Similarly Chevron in April 2004 had two American employees killed when their boat was attacked near Warri. A recent upsurge in violence between groups in Warri is thought to be part of a struggle over which group will receive compensation from an oil spill that occurred in 2003. Youths have also take violent action when denied employment with multinational oil companies, and kidnappings have been undertaken to demand payments from the companies. The execution of Ogoni environmental activist Ken Saro-Wiwa in November 1995 attracted international attention to the plight of the various

Fire caused by Fuel Thieves ethnic groups in the oil producing areas of Nigeria. In addition to inter-ethnic tension, there have been persistent attacks again oil companies by youths protesting environmental degradation and demanding their share of federal resource allocation. The attacks have resulted in disruptions of oil production, domestic supply and exports.

The other three issues are less tangible and more difficult to assess. One is the general security issues which require precautionary measures and a degree of risk assessment. Most companies operating in Nigeria seek security advice and have local security protection. For first time visitors they should take the appropriate advice and seek assistance with regards entry formalities and movement in Nigeria. Good information is available from a number of sources including: www.fco.gov.uk (travel advice by country). The degree of threats continues to vary from day-to-day, with areas in the Niger Delta at particular risk, such as Warri and Benin City, whereas the „expat‟ areas in Lagos and Port Harcourt are considered to have a lower security risk.

Somewhat allied to the issues of security, is those of the local communities, especially in the delta area. Local communities, along with other „stakeholders‟, such as labour unions, local/state government are increasingly becoming involved in the affairs of the companies operating within the oil and gas sector. The most visible action is towards the five major oil companies who are seen as „soft‟ targets and who are held responsible for many of the community issues in the delta, which have been going on for over 40 years. More and more the supplies and subcontractors are being drawn into these conflicts and arguments and can if not properly managed, interfere in the day-to-day operation of foreign subsidiaries or affiliates. Local communities are claiming millions of dollars in compensation from both environmental and personal damage.

Workers employed by the oil and gas sector must belong to one of two unions, provided that employees number less than 50. These are the Nigerian Union of Petroleum and Natural Gas Works or the Petroleum and Natural Gas Senior Staff Association of Nigeria. All companies operating in the oil and gas industry should apply for the official approval, before disengaging any Nigerian staff from their employment. The name, appointment, length of service, nature of work, reason for disengagement and terminal benefits accruing to the relevant employee are required to be included in any such application It is common for employees to enter into litigation with a company once they have been terminated. Conditions of termination should always be laid out explicitly in the employment contract.

The last factors which pervades through the working environment is corruption, which can take many forms and dealt with in some detail in section 3.7.

http://www.wfco.gov.uk/



Other Concerns Facing Investors

UK Companies operating in Nigeria have other concerns, in addition to those of infrastructure. One is the issue of security of investment, which although governed by of the Nigerian Investment Promotion Commission Act still causes concern. The act stipulates that: a) No enterprise shall be nationalised or expropriated by Government of the Federation b) No person who owns, whether wholly or in part, the capital of any enterprise shall be compelled by law to surrender his interest in the capital to any other person. Although compulsory acquisition is unlikely to occur, the law provides for payment of fair and adequate compensation. The right of access to courts, for the determination of the investor‟s rights and the amount of compensation. Foreign exchange „shall not be liable for seizure‟ or suffer from any form of expropriation by the Federal or any other State Government.

Freehold interests in Nigeria do not exist. All land comprised in the territory of each state is vested in the Governor of the State, who may grant a renewable leasehold interest of up to 99 years. Some states have restrictions on the length of the lease that a non-Nigerian controlled company can acquire. Companies doing business in the oil and gas sector tend to enter into short term (3-5 year) renewable leases on land and buildings subject to the negotiated terms of an agreement.

Also the Nigerian economy will remain entirely dependent upon revenue from petroleum activity for the foreseeable future, and as a consequence the risks of instability in petroleum policy are limited, especially as any perceived risk to foreign investment is likely to discourage the major oil companies. To date the majors although often frustrated by bureaucracy, have remained in the country and continue to invest.

Doing business in Nigeria can be very time consuming and is mired in bureaucracy, which tends to slow decision making. There is a need for all companies doing business in Nigeria to have personal contacts at ALL levels within NNPC, NAPIMS, DPR and the major oil companies. Hospitality can add considerably to the cost of obtaining the necessary permits and contracts, which are often awarded on the basis of strong personal relationships, as well as technical competences. Fostering these relationships can be time consuming and costly, as expense accounts tend to be more generous here than other arenas. Nigerians tend to travel and like visiting London and Houston for business. Companies who are committed to investing in Nigeria, must be prepared to incur large initial expenditure in setting up businesses. This can be minimised by working through an experienced Nigerian agent or partner with an established network of contacts.

Once a business becomes established, its more senior contacts usually enable it to avoid the lower levels of the administration, which can be very time consuming. Profit margins are considerably higher in Nigeria (typically 50-60%) than anywhere else and cost are quickly recouped. Companies may wait 2 or 3 years before winning their first contract, but the long-term investment prospects in Nigeria are extremely favourable.



3.2 GENERAL LEGAL AND FINANCIAL FRAMEWORK

It is essential to spend adequate time on the commercial and legal aspects of doing business in Nigeria.

The general legislation and financial framework is relatively easy to understand and well developed. The problem lies in interpretation.

However, it is far better (and cheaper) to spend time up front making sure the commercial aspects of the contract are clear with both parties.

The banking system has improved substantially over the past few years

However, ensuring prompt and professional payment is a major concern, to most UK companies, especially when dealing with local entities.

There is ready access to lawyers and advice in Nigeria.

”Doing business in Nigeria in terms of the legal framework is surprisingly easy, until there is a problem.”

British Expat

Legal framework

In Nigeria there is a hierarchy of legislation which is easily accessible and relatively easy to understand. Companies doing business in Nigeria are subject to the general laws applicable in Nigeria, which for the most part is based on English law. There are a number of companies both within Nigeria and externally that can give legal and general advice about operating in Nigeria. A selected listing of local lawyers is given in section 6.3, and a more detailed listing can be obtained from the UK Trade and Investment commercial section in both Lagos and Port Harcourt.

In recent years the government policy has been geared towards attracting foreign investment. New legislation addresses investors concerns about expropriation and repatriation of funds. Foreigners are now permitted to own 100% of business ventures incorporated in Nigeria without any limit on initial equity capital.

Arbitration is an option under the Nigerian system, although it is not commonly used. In the rare cases that a commercial case should need the legal system or enter the courts the process is slow although there have been a number of cases where the foreign party has ultimately won the case or achieved a favourable settlement.

Finance

Contracts involving an element of construction in country with the Nigerian operators are usually awarded on a turn-key or engineering, procurement and construction/commissioning (EPC) basis, where the contractor assumes responsibility for the design, procurement, construction and commissioning of a facility or project.

„Lump sum‟ contracts are preferred and used with the exception of a small number of service providers and international operators who are working under a more integrated-services type contract. It is absolutely critical to clarify the precise form and timing of the payments in the context of frequent project delays, possible exchange rate fluctuations and unforeseen changes (such as sudden changes to import regulations). We recommend that advice is taken about the proportion of local currency and hard currency of the payment as at times there has been a shortage of local currency in the state-owned companies. Even where there are clear scope changes it is difficult to get „claims‟ addressed quickly and settled. In Nigeria „lump sum‟ tends to mean just that.



„Bid bonds‟ and „Performance bonds‟ are also common and it is important to ensure that any such bond is clearly documented and transparent in the contract and wider discussions.

It is possible to include milestone payments in a large project and the operators are familiar with this approach. Again it is extremely important to clarify before finalising a contract when, how, under what conditions and in what currency these payments will be made. Various types of letters of credit are the method that most companies operating in Nigeria currently use when dealing direct with state-owned operators and contractors. How easy and quick it can be to obtain one varies from client to client.

Debt

Companies that have been doing business with Nigeria for many years report that the debt situation is improving and Nigerian organisations are catching up with their debts. The situation varies from operator to operator and it is worth conducting some informal market research (by talking to companies already in Nigeria) to find out what can be expected with respect to payment. In general, it is that preferable when shipping goods into country, a request is made for payment for goods in advance; either by cash or a letter of credit confirmed by a reputable bank.

Banking

The deregulation of the financial sector in the 1990s has led to a rapid increase in banks and there were now at the end of 2002, over 90 banks in the country (with a network of over 3,018 branches).

The Governor of the Central Bank has issued a decree that by 31/12/05 banks in Nigeria must have a minimum capitalisation of N23bn. It is expected that this will happen, through mergers and acquisitions, brining the number of banks down to between 20 and 30.

The banking system has improved substantially over the past few years and there are upwards of a dozen banks which can provide good local banking and provide remittances back to the UK. The commercial section of the British High Commission, both in Lagos and Port Harcourt can provide validated lists of the most suitable banks. Examples of banks which have achieved a good reputation are Chartered Bank, Broad Bank and Union Bank.



3.3 BRANCH REGISTRATION AND JOINT VENTURES

To carry out work in country it is preferable to have a recognised Nigerian presence.

This will inevitably involve the formation of a Nigerian subsidiary.

The company can either be 100% foreign owned or have a variable percentage of Nigerian equity.

Once formed the subsidiary can operate in Nigeria, either alongside or in a joint venture with other companies including Nigerian ones.

Branch registration is a relatively straightforward process, both in terms of time and money.

Following completion of the branch registration, the companies needs to be registered with the DPR, in order to provide services into the oil and gas sector.

It is also useful to be listed on the preferred bidders of the main companies such as Shell, ChevronTexaco, ExxonMobil, NNPC, NAPIMS, etc.

Overview

To be eligible to carry out construction, engineering or long-term commissioning work in country, it is advisable for the company to be registered in Nigeria. This is for the company to take part in a joint venture with already established partners or for the company to work under the umbrella of an already registered company or act by itself. It is extremely unusual for operators in Nigeria to sign contracts for work to be carried out in Nigeria by a foreign company that is not already registered or intending to register. An additional requirement is for the company to register with the DPR, in order to be awarded any contracts with the oil companies.

Branch registration

Branch registration is a relatively straightforward process that should take around three months and cost between $3000 and $5000 dependent upon equity capital, and lawyers fees. We recommend that companies wishing to take this route take professional advice before doing so. Several companies publish a free advisory booklet about it and can give advice about the process. In the long term it offers the greatest degree of company control and enables a company to demonstrate commitment to Nigeria and build a brand name in Nigeria.

There are a number of procedures that must be completed before a company can apply for branch registration. These are outlined in detail in Appendix 3.

Forming a Nigerian Joint Venture

Nigerian law does NOT require all companies formed in Nigeria to be Nigerian controlled, they can for instance be 100% foreign owned and have no Nigerian directors. However, companies who are being evaluated on the basis of local content, will be scrutinised as to the percentage of Nigerian equity in companies and those who have Nigerian directors and/or a high percentage equity will be looked upon more favourably. Again, it is essential that legal and financial advice is taken before following this route.



A stock company with a Nigerian registration will mean that the company is subject to a number of particular regulations and laws covering employment of Nigerian nationals, income taxes, contract laws and auditing of accounts by the government. These in themselves are not onerous and are compatible with most international operations. The option of establishing a Nigerian company can offer a number of advantages, bidding for jobs in country as these entities have a preference for awarding to high-quality local companies where possible, especially if they have technical type up with a foreign company. An alternative to establishing a Nigerian subsidiary with substantial equity held by Nigerian‟s is to register as a 100% owned UK company and put together a joint bid or form an alliance with a Nigerian company. The partnership would together achieve a certain degree of „local content‟.

Working Under the Name of Another Foreign Company

A short-term option to get up and running quickly is to work in Nigeria under the umbrella of a foreign company that is already well-established in country or an indigenous company with a good reputation. Advantages include a quick start up time but there are disadvantages in that judgement will be made by the past performance of the umbrella company and that it will take much longer to establish a reputation in your own right. Again, professional advice should be taken if considering this route together with an informal research into the company profile in Nigeria.

UK Trade and Investment through Trade Associations such as WAAG can provide help in selecting suitable local companies with which to undertake an alliance. They also assist in preparing business plans, which address some of the business risks.

Registration with the DPR, NAPIMS

Companies that service the oil and gas sector are required to register with DPR. They only have to open a file with DPR so that they can be included in the preferred suppliers list. In future the criteria by which companies will be eligible for inclusion of the preferred suppliers list will be tightened and will almost certainly include an element of local content.

It is also recommended that your company is introduced and that it is listed in the preferred vendors list of other potential customers such as NNPC subsidiaries, including NAPIMS. Often this can be done by sending some marketing material and a covering letter expressing your wish to be included on suppliers list. It may be done by fax. Each company has slightly different procedures and may or may not require to be listed with DPR. NAPIMS by definition will be interested in the degree of local content and will have their own preferred suppliers, many of which are indigenous companies who have been operating for some years in Nigeria.



3.4 AGENTS

NNPC and the major oil companies prefer to deal direct with companies rather than through middlemen.

The word Agent is becoming a „dirty word‟.

Professionally qualified representatives can, however, play a role such as market analysts and help promote your goods in market.

Bad agents abound, good agents/ facilitators are very hard to find. The ratio is probably 1:5.

Legislation exists to cover agents and representatives but it is murky and still evolving – legal advice should be sought. This is especially important in regard to contract disputes ownership of goods and responsibility for post sale services.

Overview

Like many other countries in the region and other sectors in Nigeria operating through an agent or representative can be done as a potential route to the market in the early stages. NNPC and the major oil companies continue to emphasise their preference to „deal direct‟ with the manufacturer or supplier. The word „agent‟ in Nigeria has connotations of an unscrupulous middle man work ing for high and undeserved commissions (or worse).

In particular, companies should be aware of the number of unscrupulous companies who pretend to be agents or facilitators and are looking to maximize their returns through fraud or 419 scams. Wherever possible, UK companies should seek advice from UK Trade and Investment and other companies working in the sector as to the viability of these agents.

There is no doubt that agents played an important part in the supply chain over the past 25 years and many UK companies utilised them. They provided sometimes the only entry point into difficult working environments, where local knowledge and contacts were essential. However, times are changing and agents are being squeezed out and replaced by local companies who have technical agreements/ alliances with foreign parties.

Agents will however, always be part of the scene and they will niche roles, such as priority services, global search and subcontracting; to name a few. In reality, many will metamorphose into large subsidiary firms with foreign partners and the best ones will survive. Agents can also provide local advice, market knowledge and entry strategies, so can continue to be an integral part of an overall business plan.



3.5 TAX

Taxation issues in Nigeria are not simple. It is recommended that professional advice is sought and there are a number of well established foreign firms in Nigeria.

Most tax matters can be resolved through resolution. Substance takes precedence over form, with the Tax Authorities having wide discretionary powers.

Most UK companies overall do not see tax issues as being a hindrance to doing business in Nigeria.

Nigerian companies are taxed on their worldwide income.

There is a double taxation agreement with the United Kingdom.

Domestic taxpayers pay tax on all their income accrued, derived, or received in Nigeria.

Pioneer Company Status allows companies a variety of fiscal and other tax allowances.

Overview

Taxation issues are complex in Nigeria. Rules are not interpreted in a consistent way and practices can change with little notice. Local professional tax advice is recommended and there are abundant companies to use. The principal acts, which govern the taxation of companies are the Companies Income Tax Act 1979, and for individuals the Personal Income Tax Decree No 104 of 1993. The Nigerian tax year is January 1

st to December 31

st, but companies can choose to adopt a different year

if they so desire.

All companies incorporated in Nigeria are subject to taxes levied by the Government. The two main taxes applicable companies providing products and services are Corporation Tax and Capital Gains Tax.

Corporation Tax: After incorporation, companies are expected to register with the Federal Inland Revenue Service (FIRS), Every company is required to file tax returns made up of audited accounts and completed self-assessment forms, within six months after its financial year end. New companies have up to 6 months after the end of the first accounting period, whichever is earlier, to file their first tax returns. The Government derives most of its revenue from direct taxation. Corporation or company income tax is the main source and this is currently 30% based on profits generated. In the event that there is or appears to be no profit generated then a minimum tax is payable, provided that:

1. It has operated for at least 4 years 2. It has imported equity capital of less than 25%

The minimum tax rates are, and whichever produces the highest tax liability.

1. 0.5% of gross profits, or 2. 0.5% of net assets, or 3. 0.25% of paid up capital, or 4. 0.25% of turnover plus 0.125% of turnover in excess of Naira 500,000

If it appears to the FIRS that the companies stated profits are less than expected to have accrued, the FIRS has the ability to assess tax liability at 6% of turnover. For the purpose of the classification of profit, any income derived worldwide by the Nigerian company is subject to Nigerian income tax, although credit for some foreign tax paid is available at source.



Personal Income Tax (PAYE): Nigerian salaries and wages tax applies to all salaries, bonuses and benefits that arise from employment in Nigeria. These include income derived from, accruing in, brought into, or received in Nigeria. The definition of personal income also includes all gains or profits from any trade, business, profession or vocation, including any salary, wages, fees, allowances, gratuities, compensation, bonuses, premiums, benefits or other perquisites granted by an employer. Tax is payable on a sliding scale up to 25%. Foreign companies can pay their foreign nationals overseas but need to deduct the Nigerian tax due and pay it to the tax department.

Recently it has been common for tax officials to charge excessive amounts of PAYE tax, and to seal business premises with a view to enforcing payment. Any person wishing to dispute a tax assessment has the right to file an objection within thirty days from receiving the assessment. Such a person is not required to pay the tax assessed until the validity of such objections is determined. The only legal option available to the tax authority, in order to recover taxes payable under the PAYE scheme, is to sue for the same in a court of law. Legal redress against physical enforcement of payment is likely to be time consuming. Channelling all negotiations through a Nigerian agent or partner, who has good working relationship with the taxation authorities, will minimise such complications.

Withholding Tax: Withholding taxes are taxes deducted at source from specified payments. Companies, firms, government ministries and departments, parastatals and other statutory bodies are required to withhold taxes at the applicable rates when making payments. Tax credits are given to any body from whose income a withholding tax is deducted. These will offset part or all of the entire tax liability, when ascertained. In circumstances where taxes are higher than the final tax liability, the excess is carried forward to subsequent years.

The rate at which the withholding tax is withheld depends upon the income generating activity, as follows:

Income Rate

Dividends 10% All aspects of building/construction and related services. 5% Supply Contracts 5% Consultancy and Professional Services 5% Management/Technical Services 5% Commissions 5% Rents 10% Royalties 5% Interest 10% Director‟s Fee 10%

Capital Gains Tax: Capital gains tax is payable at the rate of 10% on the profit derived from the disposal of an asset.

Capital Allowances: Plant and machinery brought in as a replacement benefit from a one time 95% capital allowance in the first year with a 5% retention as the book value, until the final disposal of the asset. An investment allowance will also be granted for such replacements. Companies and organisations engaged in research and development are subject to 20% investment tax credit on their qualifying capital expenditure.

Education Tax: This tax is assessed at 2% of the assessable profit of a company. Money realised from this tax is expected to be channelled into the development of the education sector.

Double Taxation: The profits of an enterprise incorporated in either Britain or Nigeria are taxable only in that country, unless the company also carries out business through a permanent establishment in a second country. In this case only the profits attributable to that establishment may be taxed in the second country. Dividends payable to a UK citizen or company, from a Nigerian company may be taxed in both countries, but at a lower rate of taxation in Nigeria.



Tax Authority

The administration of the tax system in Nigeria is the responsibility of the Federal Board of Inland Revenue (FBIR), which is based in Abuja. The Government imposes all taxes, with the exception of personal income tax, which is the responsibility of the state governments. A person is deemed to be resident in Nigeria for tax purposes if they are resident for more than 183 days, in any 12 month period.

Pioneer Status

Incentives are available for certain manufacturing industries and those deemed as „pioneering‟, and UK companies establishing themselves in Nigeria maybe eligible if they are manufacturing products or are in deprived areas.

Companies need to make an application to be granted pioneer status, and appropriate pioneer industries are:

a) Manufacture of oil well drilling equipment containing predominantly Nigerian raw materials.

b) Manufacture of basic and intermediate industrial chemicals from predominantly Nigerian raw materials, including petrochemicals.

c) Manufacture of products made wholly or partly from metal e.g. pipes and tubes, nuts, bolts, washers, screws and nails, wire extruded metal sections.

d) Manufacture of machinery involved in the local manufacture of a substantial proportion of components.

e) Manufacture of fertilisers

The tax incentives include claiming 100% percent of their assessable profit as capital allowances, and carrying forward any losses indefinitely. Companies granted pioneer status, are exempt from corporation tax during the first five years of operation. Dividends payable by a pioneer company are exempt from deduction of withholding tax.

Figure 24: Onne Free Port

The ONNE free port was originally established in 1997 as a trade facilitating mechanism designed to attract new investment in Nigeria and has now become a distribution hub for the sub Sahara oil and gas industry. It is a tax free centre for processing manufacturing and assemblage of goods. Within an area of 16 sq km, ONNE free port has 1 million sq m of open storage area for fabrication, pipe racks, tubulars, casings, project and general cargo. In addition, 33,000 sq m of warehouses and a fully serviced residential camp plus ample office accommodation.



3.6 EXPORT CREDIT GUARANTEE DEPARTMENT

Export Credit Guarantee Department (ECGD) is the official credit agency of the UK government. It is responsible for supporting UK companies involved in the export of capital goods, or investments with a minimum value of £20,000. It terms of SMEs selling goods or services into a market ECGD provides three basic types of risk cover: Buyer Credit, Supplier Credit Finance and Export Insurance. For companies involved in larger projects (£20 million plus) they may wish to be involved in Project Financing cover.

ECGD cover has been in existence for sometime in Nigeria, but it is project related and there is no general country cover. These projects fall into the GDPM scheme which covers „Good Projects‟ in difficult market and under this scheme, ECGD and the UK Bank will structure a financial agreement so that the revenues earned from the project will be used to repay the loan that finances the UK export. It is necessary to have a commercially viable project, an operator knowledgeable in the field and a buyer for the end product who is willing to enter into a long term contract.

In terms of the Nigeria, the NLNG is a project which received GDPM or Project Financing cover. ECGD considered that with Nigeria‟s current debt problems, it was clear that the market („country‟) on its own was not one which ECGD could take any significant risk on. Only by reaching an acceptable security structure, externalising Nigerian country risk as much as possible could the project be supported. In terms of NLNG, the acceptable security was provided by the revenue streams from the LNG sold to credit working offtakers (based in Europe and USA) to be paid directly into bank accounts and for the payments of the loans to be made direct from these accounts, before any returns are made to the project shareholders.

Nigeria

Medium Term Case Indicator (£m) - GPDM only Cash Cover - Subject to security – CIRR or equivalent, or aid

funded. Consensus Category - Countries eligible for officially supported financing

at CIRRs. Maximum credit period 10 years. Interest support maybe considered for local costs.

ECGD PO Box 2200 2 Exchange Tower Harbour Exchange Square London E14 9GS

Tel: +44 (0) 20 7512 7797 Fax: +44 (0) 20 7512 7621 Website: www.ecgd.gov.uk

In addition a number of companies provide insurance to short-term credit to grant against non payment. These include NCM, Euler Trade Indemnity and Association of British Insurers. UK Trade and Investment suggests companies seek professional advice with regards insurance cover and asks other operations in the sector for their advice. Insurance cover for Nigeria tends to be variable and dependent upon the current prevailing economic/political conditions.

http://www.ecgd.gov.uk/



3.7 CORRUPTION

Evidence indicates that corruption is commonplace. There appears to be both large-scale corruption and small-scale facilitation payments to individuals.

Nigeria is second from bottom of Transparency International‟s index of corruption for 2004

There is a strong public drive to stamp out corruption in Nigeria.

New legislation means that UK companies can be prosecuted for an act of bribery committed wholly overseas.

Overview

There is anecdotal evidence that corruption is common in Nigeria. It apparently varies from facilitation payments to clear goods through customs up to individuals trying to solicit significant bribes in return for a favourable position in major contract awards. In addition the payment of reward money or „dash‟ is very prevalent, and where people are given tips, extras for performing routine work.

“Regarding 419 scams. Remember it takes two to tango!” A Senior Government Official

In line with their approach to unprofessional „agents‟, the Government encourage companies to deal directly and professionally, and where possible root out corruption. High profile investigations are often regularly triggered by any suspicions of „dirty dealing‟. To date several high ranking people and individuals within the oil sector have been implicated in corruption cases. The most recently publicized case has been the TSKJ (Technip, Snamprogetti, KBR and Japan Gas) case involving NLNG, where allegedly $185 million was paid to various officials by TSKJ to facilitate the award of the EPC contract.

To Particularly Watch Out For

The most high profile form of corruption is the so called 419 scam (named after the relevant section of the Nigerian Criminal Code), an example of which is illustrated in the picture box. These advance fee scams perpetrate throughout entire business hierarchy. Not only are they obvious as email/fax solicited requests, but can emerge in any type of business transaction including supply of equipment. The essence of the scam being that in order to move a proposition along, an advance fee needs to be paid (usually in cash) to see the transaction completed e.g. a purchase order may be held in abeyance until a cash sum is used to rectify matters.

There are a myriad of 419 schemes and scams – mail, faxed and telephone promises designed to facilitate victims parting with money. All involve requests to help move large sums of money with the promise of a substantial share of the cash in return. The laws from Section 419 and laws in place in other jurisdictions criminalising the offences do not scare away the criminals who profit from these crimes. The stakes and profits are simply too high and many individuals maybe involved with organised criminal gangs.

Victim‟s individual monetary losses can range from low thousands into multi-millions. True figures are often impossible to ascertain, because many victims, embarrassed by their naiveté and feeling personally humiliated, do not report the crime to the authorities. Others, having lost so much themselves, become “part of the gang” recruiting more victims from their own country of residence. There are tragic cases of victims being unable to cope with the losses and committing suicide.

Further information: www.419eater.com; www.fraud-aid.com and www.dec.org.uk

http://www.419eater.com/

http://www.fraud-aid.com/

http://www.dec.org.uk/



419

Good-day,

I came to know of you in my private search for a reliable and reputable person to handle a very confidential transaction which involves the transfer of a huge sum of money to a foreign account requiring maximum confidence. For the purpose of introduction, I am MR EDGAR HILDAGO, Head, Operations Manager, United Bank plc.

A foreigner, late Engr Barry Kelly, an Oil Merchant/Contractor with the Federal Government of Nigeria, until his death three years ago in a ghastly auto crash, banked with us here at pacific bank Plc., Lagos, and had a closing balance of USD$8.320M (Eight Million Three Hundred and twenty United States Dollars only) which the bank now unquestionably expects to be claimed by any of his available foreign next of kin or alternatively be donated to a discredited trust fund for arms and ammunition at a military war college here in Nigeria. Fervent valuable efforts are being made by the Bank to get in touch with any of the Kelly‟s family or relatives but all have proved to no avail. It is because of the perceived possibility of not going to be able to locate any of late Engr Barry Kelly's next of kin (he had no wife and children) that the management under the influence of our Chairman, Board of Directors, Retired Major General Kalu Uke Kalu, that an arrangement for the fund to be declared "UNCLAIMABLE" and then be subsequently donated to the Trust Fund for Arms and Ammunition which will further enhance the course of war in Africa and the world in general.

In order to avert this negative development, myself and some of my trusted colleagues in the bank now seek for your permission to have you stand as late Engr Barry Kelly's next of kin so that the fund, $8.320M would be subsequently transferred and paid into your bank account as the beneficiary next of kin.

All documents and proves to enable you get this fund have been carefully worked out and we are assuring you a 100% risk free involvement. Your share would be 20% of the total amount,5% has been set aside for expenses while the rest would be for myself and my colleagues for investment purposes, this money you shall transfer into an account which we shall forward to you as soon as your bank can confirm receipt of the money from our bank. We may rely on your business acumen to also invest in any sector of your choice where the returns on investment will be optimal.

If this proposal is acceptable to you and you do not wish to take advantage of the trust we hope to bestow on you, then kindly get to me immediately via my e-mail furnishing me with your status and details as below:

1. The Names you want to use for this transaction. 2. Your contact address 3. Your most confidential telephone number 4. Fax number 5. Exclusive e-mail so that I can forward to you the relevant details of this transaction.

Thank you in advance for your anticipated co-operation.



New UK Legislation

New UK legislation came into force on 14 February 2002 to deter UK companies and nationals from committing acts of bribery overseas. UK companies and nationals can now be prosecuted in the UK for an act of bribery committed wholly overseas.

The changes apply over two areas. The first makes it explicit that relevant UK law applies to the bribing of foreign public officials or office holders including MPs, Ministers, judges and „agents‟, whether public or private. In Nigeria because the majority of companies are state-owned, most company employees would be considered to be public officials.

The second and major change means that a UK national or a company or other entity incorporated under UK law can be prosecuted in the UK for bribery even if no part of the offence took part in the UK. Previously some part of the corrupt transaction needed to take place in the UK for the law to apply.

UK registered companies and nationals will be breaking UK law if they bribe someone overseas. Crown Servants and British Embassy employees who in the course of their duties become aware of, or receive information relating to, acts of bribery committed by UK nationals are obliged to report the matter so that UK authorities can decide whether to pursue an investigation. The maximum penalty for the offence is an unlimited fine and/or seven years in prison.

It is therefore important to protect the legitimate services of project consultants, intermediaries and agents from the significant risks of investigation and prosecution by the Nigerian authorities as well as those from the UK by working within a clearly documented legal agreement. Further information is provided in Appendix 4, which provides more detail.



3.8 BUSINESS ETIQUETTE AND OTHER GENERAL INFORMATION

The business environment in Nigeria is very western, and most UK companies can engage with Nigerians easily.

The main drawback to conducting business within Nigerians is differentiating between the honest businessman and the rogue.

Promises are often made which cannot be kept, or parties have ulterior motives.

Commencing business dealings is very easy, but bringing them to a conclusion can be difficult.

Hints for the Business Visitor

Visas: All visitors to Nigeria, except citizens of the member countries of the Economic Community of West African States (ECOWAS), are required to carry valid visas, which are obtainable at the Nigerian Embassies in the countries of the visitors. UK citizens can obtain visas at the Nigerian High Commission in London. The process is relatively easily but they will need a letter of invitation or recommendation from the inviting company in Nigeria, plus the applicant is in possession of a return air ticket to and from Nigeria, or an onward ticket to a further destination, together with the appropriate visit visa to that country. Businessman should enter first time on a single entry visa, but this can be upgraded to a multiple entry visa in Nigeria or in the UK, but the process can be cumbersome.

Meet and Greet: It is strongly recommended that first time travellers to Nigeria are met by a local contact at the airport. There have been instances of businessman handing over their documents and currency to complete strangers in good faith, and subsequently finding they have been stolen. The Commercial Section at the British High Commission keeps a validated list of companies that offer this service.

Currency: The main unit of currency is the Naira, which is divided into 100 Kobo. The recognised

symbols for the Naira and Kobo are “₦”and “K” respectively. The exchange rate of the Naira is determined by market forces, and is currently £1 = Naira 252.

International Time: Nigeria is one hour ahead of Greenwich Mean Time (GMT).

Business Hours: Business hours vary by industry and local working practices, but in general most businesses start early and finish early in order to avoid the rush hour traffic, especially in the big cities like Lagos.

Banks 08:00am to 05:00pm; Government Offices 07:30am to 03:30pm; and Private Offices 08:00am to 12:30pm and 01:30pm to 05:00pm. Government offices and most private offices are closed on Saturday and Sunday. Some banks, however, open for business on Saturday. Statutory Holidays: Nigeria has ten public and statutory holidays, and both the Muslim and Christian holidays are celebrated.

Units of measurement: Nigeria uses the metric system. In writing numbers, commas are used to

denote thousands while periods denote fractions e.g. ₦1,050.30 represents 1,050 Naira and 30 Kobo. Dates are written in the order of day month and year (dd/mm/yy) e.g. 25 January 2003; alternatively 25/01/03 or 25:01:03.

Foreign Personnel

Work Permits: Immigration formalities fall within the jurisdiction of the Federal Ministry of Internal Affairs. Although the Industrial Development Coordination Committee (IDCC) has taken over from the Ministry, the responsibility for granting business permits, expatriate quota and work permits, the Ministry is still responsible for granting resident permits to foreigners.



Any non Nigerian seeking employment in Nigeria in the private sector or wishing to do business in Nigeria is to seek the permission of the Minister for Internal Affairs. This is done by making an application on Form T/1.

Business Permits: Where a new company is to be established by a foreign investor, the consent of the IDCC must be obtained. The IDCC will then issue a business permit to the foreign investor. Companies wishing to employ foreign personnel must apply to the IDCC for expatriate quotas. The same form, IDCC Form 1, is used to apply for both the business permit and expatriate quotas.

Restrictions on Employment: As note above, the employment of foreigners for managerial and other positions is usually permitted only if qualified Nigerian nationals are not available.

Expatriate Quota: One of the responsibilities of the IDCC is to ensure that expatriate quotas are

issued. Businesses with a capitalisation of ₦5 million and above are entitled to two automatic

expatriate quota positions, while those with a capitalisation of ₦10 million and above are entitled to four automatic expatriate quota positions. All other requests for expatriate quotas are consider on merit.

Special Arrangement or Concessions: Because of the growing rate of unemployment in the country, the present attitude of the government is to monitor closely the employment of expatriates in those areas of economic activity where they are qualified Nigerians. As from January 1986, every expatriate employed to fill an expatriate quota below the level of the board or management committee of a company must have two Nigerians assigned within the organisation as understudies. A prompt report must be made to the Federal Ministry of Internal Affairs when any of the assigned persons leave the organisation. Furthermore, it is now a requirement that a definite and realistic program for the Nigerianisation of the posts held by expatriates on the board or on the management committees of companies must be drawn up for the approval of the Ministry of Internal Affairs. Once approved, the programme should be adhered to.

Living Conditions: The living arrangements of foreign personnel are usually the responsibility of the employer, and the employee would normally negotiate them with the employer before accepting a position in Nigeria. Expatriates working in Nigeria are often provided with living accommodation in

exclusive residential areas. Houses in these areas cost in the region of ₦3.5 million per annum. Company cars and domestic staff are also usually provided. There are private schools for expatriate children, including Italian, German, French, American, Dutch and Polish schools. There are also several private English language schools. Private school fees are relatively high.

Western food is available in department stores, hotels and some restaurants. Recreational facilities are generally available.

Language

English is the main language of business and nearly all managers in the oil and gas sector speak and read English well. Letters and faxes and marketing material will be read and understood in English, which is the language of business in the country. Official documentation from the government and also other state organisations will also being English.

Dress

Smart business dress is appreciated although because of the climate men often dispense with jackets and do not always wear ties. Businesswomen typically dress modestly with longer jackets and tops teamed with longer skirts or trousers. Although in the more cosmopolitan towns like Lagos, woman can be a little more expressive.



Meeting etiquette

An appointment is expected to be made for a visit although it can be very difficult to do this too far in advance, because of the poor communications and a reluctance by Nigerians to confirm appointments in advance by email/fax. Appointments can change at short notice and you may not be seen promptly so be prepared for this. It would be considered lucky to be see an officer without an appointment.

It is not uncommon to be invited into an office whilst others are there or for someone to answer several phone calls during the course of the meeting. A television or radio may be playing in the background and there may be several interruptions during the course of a meeting. Tea or coffee and or something to eat will nearly always be offered. A Nigerian host would be considered rude if he or she did not press their guests to eat and drink so it may be difficult to refuse.

The first part of the meeting would usually consist of introductions and personal conversation (Where do you live? What did you study? Where? Are you enjoying Nigeria? etc.). It is important not to cut this short as this is considered impolite. You will then typically be asked „what can I do for you?‟ and it is important to be able to give a clear and concise reason for your visit.

Hierarchy is important and your comments should be addressed to the most senior manager present. In an official gathering or a meeting where several people are present you can expect the most senior manager to formally welcome you and you should be prepared to respond in a similar way. Formal positions and titles are important and if someone is an „Engineer‟ or a „Doctor‟ it is important to include this when addressing them.

Negotiations and Decision-making

In general Nigerians respond to open and frank negotiation and prefer an American style of business (cards on the table at a fairly early stage). Negotiations can be lengthy and hard, and are often concluded over several meetings.

Some businesspeople report some suspicion/reticence on the Nigerian side in the early stages of a negotiation. It is important to establish your credentials and build your reputation in Nigeria (also outside the circles in which you are hoping to do business) particularly for companies that do not have a strong brand or well-recognised product.

Being open and frank about what you are hoping to achieve in Nigeria at an early stage (even in the first meeting) is important. Nigerians generally understand the business proposition very early, and the real skill is determining whether the other party can deliver.

“As with many countries, it is often difficult to find out who the real decision makers are in a company, and who controls the purse strings.”

GM Service Company

Patchy Communications

Landline telephones are unreliable in Nigeria and it can take a long time to get an open line. They system is run by the state and is not very efficient. Calls to the UK cost approximately £3.50 per minute, but most hotels charge higher rates. Voicemail is unusual and most managers will take calls via personal assistants and secretaries. These support people are very important in that they often act as filters, allowing access or not to individuals. Almost everyone in business has a mobile phone, and having access to these numbers, especially of the key players is a must. Mobile phones are used far more for business than they are in Europe and it would not be considered unusual for you to contact someone for the first time on a mobile phone. The three main systems are MTN, Vmobile and Globalcom. Several mobile phones brought into Nigeria from the UK will work in the country, especially Vodaphone related services.



Post is reasonable in Nigeria but for sending business documents a courier firm is recommended. Fax is the preferred method of communication and is used in place of email, which is still unreliable although everyone has an email address and they usage is rising rapidly. Nigeria, however, does not have extensive broadband so email rather than data transfer is more common. Most managers have a personal email address but will not volunteer it unless specifically asked.

Use of the internet is still limited but increasing steadily especially in the main commercial locations including Lagos and Abuja. There are now a number of ISPs, but poor telecommunications mean that lines are slow. Typical ISP providers are [email protected] and [email protected].

Etiquette is such that faxes and official communications are addressed using job titles and positions, as well as names of the recipients.

Telephones, faxes and emails are not suitable in Nigeria for commercially or personally sensitive communication.

Nigeria‟s press is a constant source of amusement, but it is very informative and opinionated. The press has a number of tabloid and broad sheet publications which covers the entire spread of opinion. The press is believed to be „Free‟ and not particularly influenced by government dictates. Oil and Gas are virtually never out of the press and can be found most days in the headlines, either because of economic reasons, petrol prices, bunkering, environment or security reasons.

The papers are a relatively good source of up-to-date information, plus they contain tenders for oilfield projects.

Figure 25: Freedom of the Press

mailto:[email protected]


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4. APPROACHING POTENTIAL CLIENTS

4.1 INTRODUCTION

In general there are three main conduits to securing contracts: through agents; direct to the oil companies/major contractors or through an alliance/joint venture.

All have their pros and cons.

In the future the use of agents will decrease as it is seen as adding little value will become the norm.

Involvement with local companies will become more prevalent.

Regardless of the type of approach visit to the market are considered essential, and contact with both the major oil companies and NNPC/NAPIMS/DPR is considered crucial.

This chapter gives an overview of the main potential conduits into the sector and the pros and cons of each approach. The recommendations given below and in each section are generalisations – there are always exceptions (particularly in Nigeria). As with all enter into market it is best target as much advice as possible beforehand and to develop a robust business plan.

Table 17: Approaching Clients Introduction

Degree of NNPC Influence

Winning Business Carrying Out Work

Getting Paid

Overall

Through Agents.

Low. Expect a closed bidding process.

Routine. Depends upon agent.

A potential route „in‟ for first timers and for niche players.

With oil companies or major contractors directly.

Moderate to high, since NNPC is a joint venture participant.

Moderate to difficult, because of stiff international competition. Expect an open technical process, but lengthy commercial process.

Moderate, but requires some presence in Nigeria.

Varies between the oil companies and contracts.

Tread carefully. Need to have good local contacts.

Through a joint venture

Moderate. Depends on type and size of contract.

Process is not always transparent. A lot of legwork needed.

In general quite difficult. High standards and shortage of skilled workers mean high degree of input.

Problematic. Needs to have a good initial contractual arrangement.

The best long term approach to the market, since it is likely to become the norm.

Source: UKTI



4.2 THROUGH AGENTS/DISTRIBUTORS

Traditional approach and presents access to the main markets.

Not necessary to be established in Nigeria.

This approach is best suited to equipment suppliers, especially these offering „niche‟ or restrictive services such as spare parts.

The higher the technical content the more chance of success in importing from abroad.

Huge vendor lists and extensive database of bid records.

Regular contact in Nigeria is needed to maintain preferred status.

Prompt payment is a major issue.

Table 18: Approaching Clients through Agents/Distributors


Winning Business

Carrying Out Work

Getting Paid Overall

Through Agents/ Distributors.



A good easy route in for first timers.

With oil companies directly.

Moderate to high.

Moderate to difficult. Expect an open technical process.

Moderate, but requires some Nigerian pressure.

Varies between the oil companies.


With foreign companies and foreign joint ventures.

Moderate. Depends on ownership of company and size of contract.


In general quite difficult. High standards and an unskilled local workforce, mean high degree of input.

Difficult. The best long term approach the market.

Source: UKTI



4.3 OIL COMPANIES AND MAJOR CONTRACTORS DIRECTLY

Wide range of opportunities for both sales and projects but not without risks.

Large amount of legwork required, especially in Nigeria.

Rarely down to a single decision-maker – input from NAPIMS, has to be considered.

Regular contact is needed to maintain a preferred status.

Table 19: Approaching Potential Clients through Oil Companies


Winning Business

Carrying Out Work


Through Agents.



An good easy route in for first timers.

With oil companies/ major contractors directly.

Moderate to high.










Source: UKTI

Companies like Shell will present a number of challenges to companies seeking to undertake business in Nigeria. These include:

Business principals

Contractor payment (improving with SAP)

Competent contractor & vendor management

Claims management

Online bidding (e-business)

Community disturbance in projects

Standards within projects & lateral learning

Contract cycle time

Nigerian content & sustainable development

Compliance monitoring – CPPM

Working CP plan

Vendor Assessment Criteria

Physical presence – office

Evidence of experience

CASHES policy

Qualified staff

Equipment

QA/QC manual

Financial strength



4.4 LOCAL CONTENT - THROUGH JOINT VENTURES

Clients could be both the oil companies and major contractors.

Huge range of opportunities both for sales and contracts with products and services.

Ideally suited to low value/high volume items such as valves, where a large degree of „local‟ content can be added to in country.

Offers the best long term growth opportunity.

Table 20: Approaching Clients through Local Content


Winning Business

Carrying Out Work


Through Agents.



An good easy route in for first timers.

With oil companies directly.

Moderate to high.










Source: UKTI

Local Content

„Local Content‟ is becoming a significant issue in Nigeria, and the Government is determine no improve the current scenario. They have outlined ambitious target aimed at increasing the amount of local content from the current low level of 10-20% to 70% by 2010. The government has very clear goals and in the event that it sees little progress may introduce legislation to achieve these.

“EPC contractors to date have shown scant notice of local content, and now it is time for them to put something back into Nigeria.”

General Manager, NAPIMS

At present the type of product/services which can be undertaken locally is directly related to two main constraints which are the size (often related to financial resources) and the technical complexity of the project. It is realised that not all projects will be undertaken in Nigeria and that certain products and services will have to be imported such as LNG components and subsea design and engineering.



Figure 26: Constraints

There are numerous definitions of the term „local content‟, but the general understanding is the degree of value added to the local economy both in terms of employment, investment and utilisation of Nigerian resources both human and financial. Companies are already obliged to register with and the Government has tasked DPR with registering local firms and assessing their competency and their ability to deliver local content. In relation to the constraints highlighted earlier, the DPR has indicated where the product/service falls into the low, medium, high technical category and also the degree to which the product could be delivered by local content in Nigeria. Those items deemed to have low technical impact will almost certainly need to be undertaken in Nigeria immediately, whereas medium technical items could be undertaken in Nigeria within the next 3-5 years. Items considered to have a high technical specification can be manufactured outside Nigeria, but with time production moved into the country. Table 21 illustrates the current categorisation of services in the exploration according to the definition of low, medium and high import.

In addition to the technical complexity or impact antenna, there are several approaches as to ascertain whether a company has a high percentage of „local content‟. One approach is to assess the degree of ownership of the company and this is illustrated in Table 22. There are other criteria such as „value add‟ to products in Nigeria, and they degree to which local resources both human and material are used.

The subject is evolving and there are no firm controls in place yet, with the various studies, recommendations being circulated for comments. The Nigerian government may well decide to legislate companies to fulfil certain „local content‟ criteria or they may present guidelines as indicated here – only time will tell. A draft legal act is currently being circulated for comment amongst the oil industry fraternity.

Size (Financial)

Small

High

Tech

nic

al

Co

mp

lexity

Big

Low

The constraints on improving indigenous contractor participation are opportunity, size (finance) and technical

capacity



Table 21: Service Provision Categories - Exploration

Competencies High Tech Impact Medium Tech Impact

Low Tech Impact

Exploration Services

1. Seismic data acquisition (3D, 4D, 4C) 2. Seismic data processing 3. Advanced seismic interpretation (attributes analysis, AVO, 3D visualisation, etc)

1. Bio-start studies 2. Geo-chemical services. 3. Routine seismic data

interpretation 4. Simple velocity surveys.

1. Mud logging .ADT

2. Routine Field interpretation.

Drilling/Drilling Service

1. Mud Engineering 2. Cementing 3. Coil tubing 4. Gravel packing 5. Directional drilling 6. Wireline operation 7. Completion 8. Liner running 9. Well Test 10 Formation Evaluation 11. Logging 12. Stimulation 13. Fishing services 14. Hire of coiled tubing drilling Rigs –

HPHT 15. Hire of offshore rigs 16. Hire of drilling rigs HPHT or above

15,000 ft 17. Drilling bit supply and services –

diamond bits

1. Well heads 2. Mud solid control 3. Control 4. Mud engineering 5. Cementing 6. Coil tubing 7. Graving packing 8. Directional drilling 9. Wireline Ops 10. Logging 11. Coiled tubing Hire of

land swamp drilling rigs 13. Hire of drilling rigs

above 10,000 ft. 14. Drilling bit

1. Casing running

2. Borehole survey

3. Fluid Filtration

4. Land drive pipe

5. Wireline operations

6. Pumping services

7. Slickline services

8. Logging services

9. Hire of drilling rigs less than 10,000 ft.

Petroleum Engineering

1. Reservoir stimulation studies - HPHT 2. Reservoir characterisation and modelling

1. Reservoir stimulation studies

2. Reservoir characterisation and modelling

3. Simple NRWO (swabbing, zone switch etc)

4. Well testing

1. Well testing services

Source: DPR

Table 22: Categorisation of Service Companies by Ownership Structure

Category Title Description

A

Wholly indigenous Company

An indigenous company or contractor is one, which is WHOLLY owned by Nigerians; has recognisable establishment and its own resources in Nigeria appropriate to be to able to perform:

Equipment must by 100% owned by the company

At least 80% of Directors must be Nigerian Nationals

A minimum of 80% of top management must by Nigerians

A Minimum of 90% of senior field personnel must be Nigerians

B Majority Nigerian Shareholding Company

A company registered in Nigeria with majority Nigerian shareholding that has the establishment, expertise, assets and financial capability appropriate to the type and level of work it claims to be able to perform.

C Alliance or Joint Venture

An alliance between a Nigerian company (category „A‟) and a foreign company (category „E‟).

D Majority Foreign Shareholding Company

A company registered in Nigeria with minority Nigerian shareholding that has the establishment, expertise, assets and financial capability appropriate to the type and level of the work it claims to be able to perform.

E Foreign Company A foreign company, whether registered in Nigeria or not, with no Nigerian shareholding and whose assets belong to the offshore company.

Source: NNPC



Table 23: Local Content – Evaluation Criteria

S/NO EVALUATION CRITERIA LOCAL CONTENT

INDICATOR WEIGHTING (%)

SCALE OF 1-10

1 NIGERIAN OWNERSHIP 10 % NIGERIAN SHAREHOLDING

2 NIGERIAN MANAGEMENT IN COMPANY

7.5 RATIO OF NIGERIAN/ FOREIGN MGT

3 SKILLED NIGERIAN EMPLOYEES 5 RATIO OF SKILLED NIGERIAN EMPLOYEES/FOREIGN

4 UNSKILLED NIGERIAN EMPLOYEES

2.5 RATIO OF UNSKILLED/SKILLED NIGERIANS IN COMPANY

5 INFRASTRUCTURE INVESTMENT IN NIGERIA

20 VALUE OF ASSETS HELD IN NIGERIA INCLUDING MAILS AND

EQUIPMENT

6 ENGINEERING/STUDIES IN NIGERIA

5 RATIO OFMANHOURS CHARGED IN NIGERIA/OVERALL MANHOURS

7 SERVICES PROVICED BY NIGERIANS

10 VALUE OF SERVICES PROVIDED BY NIGERIANS

8 FOREIGN PROCUREMENT BY NIGERIANS

5 PERCENT PROCUREMENT BY NIGERIANS

9 FABRICATION IN NIGERIA 15 TONNAGE FABRICATED IN NIGERIA

10 NIGERIAN RAW MATERIALS USED

5 TONNAGE

11 EMPLOYMENT CREATED 5 TOTAL NEW EMOLUMENTS TO PAYROLL

12 TECHNOLOGY TRANSFER/ TRAINING PROGRAM

10 NO OF NEW COMPETENCIES CERTIFIED.

TOTAL 100

One of the ways to assess may well be to introduce an evaluation criteria based upon a number of categories and then apply a weighting indicator. Such a scheme is illustrated in Table 23, above.

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5. MARKETING ENTRY STRATEGY

5.1 A MARKET STRATEGY FOR SUPPLIERS

Initially focus marketing efforts on normal supply chain by supplying goods into an established purchasing/supply chain.

Consider visiting Nigeria to build relationships with the oil companies, major contractors and larger local companies.

A Trade Mission is an easy way to visit and access the market for the first time.

Ultimately consider appointing a technically qualified representative in-country or joining forces with another foreign supplier already in country.

Figure 27: A possible strategy in brief

Research the market potential. Understand your strengths and weaknesses, your competitors and the needs of your potential clients.

Target the larger contractors as main entry point.

Prepare for market visit.

Prioritise potential clients. Send marketing material by fax/courier.

Visit the market.

Interact with the contractors both in UK and Nigeria.

Follow up visits in writing and by phone/fax.

Review market potential based on market visits and your strengths and weaknesses.

Visit the country again to assess opportunities.

Continue building contacts.

Actively pursue leads.

In both cases it is better to focus on a few than fail to manage many.

Learn from others.

Appoint a representative.

Make frequent visits to market. ALWAYS follow up visits in writing.

Demonstrate long-term commitment through enhancing your product.

Update marketing material regularly to include most recent experiences and references.

Source: UKTI

Get ready

to dive in

Take the plunge

Go the distance

Groundwork Test the water



A Permanent Presence in Nigeria

If you have a strong market brand, or a good track record of your products in Nigeria, it will be much easier to build up your reputation and secure contracts. Often quality and reputation will win out over price. The end users, both the oil companies and NNPC appreciate the need for quality and reliability. However if the supply chain is long and convoluted, then many of the middleman and subcontractors can cloud the product delivery line and often give the wrong messages to the end users. The way around this issue is to establish some sort of relationship with the final client, and where possible have a permanent presence in Nigeria be it an agent, local representative or branch office. The better the ground support to the client the more likely it is to secure contracts.

To maintain your position in the market you will need to visit and make contact with your clients regularly. A Nigerian that has not heard from you for more than a couple of months will always ask „where have you been?‟. If you do not have the resources to visit regularly you may wish to consider appointing a technically competent representative using an established foreign company as an umbrella through which to promote your goods. Update your marketing material regularly as your experience in the market grows. Be particularly wary of representative who make untenable promised and raise your expectations, especially if they have non-exclusive contracts. If is common for agents to represent many companies, and play supplier against supplier. The better the agent the more control that needs to be applied. Avoid appointing an agent with too many agencies, 2 other foreign companies should be your maximum. Also check that neither is as new as yours and there is no conflicting product.

Contractor Registration

The list given below is typical of the procedures required by many of the major oil companies.

Initial documents required

Incorporated bodies

Memo and articles of association

Certificate of registration

Directorate of Petroleum Resources

Tax Clearance Certificate

Form C02/C07

Non-Incorporated bodies

Tax Clearance Certificate

Directorate of Petroleum Resources Permit

Permit Form C02/C06

Certificate of Registration

Additional Documents Required

VAT Certificate (if any)

Organisational chart

Letter of financial competence from the bank

Last audited accounts or statement of affairs (for newly registered companies)

Current workmen‟s compensation insurance certificate

Letter from L.G.A for all directors and photocopy of international passport for expatriate directors

2 passport pictures of at least 2 directors endorsed by a Nigerian Court of Law

Evidence of projects previously undertaken

Curriculum vitae of technical personnel

Proof of medical retainership

Cashes Policy

QA/QC manual

Nigerian Private Companies Are More Risky

Opportunities with the small number of larger Nigerian contractors are few and far between and bring many risks associated with non-payment and logistic issues. The same applies to the growing number of indigenous oil companies who have yet to establish a track record.



5.2 A MARKET STRATEGY FOR SERVICE PROVIDERS

Initially focus marketing efforts through a manager within one of the five main oil companies.

Local content will be particularly important for foreign companies providing services especially in the „low value‟ technical range.

Aim to establish a working partnership or with an existing foreign company in country or a local contractor so that you can work under their umbrella and avoid the lengthy registration process.

In parallel begin registering a branch / expanding in-country.



Identify potential joint venture partners in country and do background research on their suitability.

Investigate option of branch registration.


Prioritise potential clients. Make contact to gauge interest (target foreign companies.)

Visit the market.



Choose partner and identify potential local representatives for the longer term.

Set up joint venture for a fixed trial period.

Train partner employees where necessary.

Actively pursue leads and potential customers with them.

Review joint venture performance. Consider triggering branch registration in parallel.

Register with DPR.

Continue with the local partnership and/or appoint a representative to manage a branch registered in country.

Demonstrate long-term commitment through on the job training, employment etc.


Source: UKTI

Establishing A Market Presence in Country

In order to be a service provider operating in Nigeria it is advisable for you to be registered in Nigeria. Branch registration is a relatively straightforward process and although it can be a time-consuming process tulcina upwards of 6 months many companies choose to form a (temporary) partnership with a company already active in Nigeria (perhaps targeting the same clients and with complementary products) so that they can work under their umbrella. Even if the partner company is a very good fit it is recommended that a service provider sets in train company registration at a fairly early stage.

Get ready

to dive in

Take the plunge

Go the distance

Groundwork

Test the water



Priority Clients for Service Providers

Again foreign operators (such as Shell, ExxonMobil, ChevronTexaco, Agip and Total) offer a good first client to approach. In general they are prepared to try new service providers as compared to say the indigenous companies. This is particularly time wren when they are offering an improved service and increased competition. Generally the offices in Nigeria will make decisions about the service award unless the nature of the service is such that the foreign head office works to a world-wide standard. Decisions made by the Nigerian office of the foreign operator will almost always be made on the basis of a visit and in-country demonstration. Once established, future contracts will be easy to manage.

Additional Demands

If service providers do decide to establish a local alliance, then some or all of the work will need to be undertaken in Nigeria and although on paper conditions and infrastructure will appear compatible, in reality additional resources, both in terms of finance and personnel will be needed to complete the project on time. Some companies often apply a ratio such as 100% to quantify the extra resource required. This will itself add to the final cost or time dependency.

Local Companies

In many cases, local companies have established a good reputation in delivering certain services. This is particularly true of the HSSE sector, where many companies have established themselves as local providers.

Recently, we have observed interest from some British/Scottish Nigerians. They are UK citizens with naturalized parents and carry Nigerian passports. The company Gulflink Limited is located in Port Harcourt and is 100% Nigerian. It will be a perfect umbrella for UK companies entering the market. There website is www.gulflink-logistics.com.

http://www.gulflink-logistics.com/



5.3 A MARKET STRATEGY FOR SUB-CONTRACTORS

Initially focus marketing efforts on major international contractors who already have a presence in country.

In addition focus on those contracts that do not need in-country support.

Identify suitable joint venture partners with in-country presence and capability for specific projects.

Also ideally, identify those projects with payment terms and delivery outside Nigeria.

Set in train own branch registration

Consider appointing a local representative to identify ongoing opportunities in country.



Identify potential partners in country that can assist with in-country logistics and provide an „umbrella‟ under which you can work.

Target foreign contractors preferably those which you are familiar with.


Prioritise potential clients and potential partners based on projects in-country and existing client base.

Visit the market.

Visit foreign contractors based outside the country.

Target foreign contractors.

Meet with major oil companies.



Choose priority clients on which to focus.

Choose partners with which to work if in-country support is necessary.

Continue building contacts.

Actively pursue leads.

In both cases it is better to focus on a few than fail to manage many.

Register with DPR.

Form a JV in-country to improve in-country presence. Ultimately consider registering a branch in-country.

Make frequent visits to market. ALWAYS follow up visits in writing.


Source: UKTI

Get ready

to dive in

Take the plunge

Go the distance

Groundwork Test the water



Priority Targets

In the first instance target the big contractors who are well established in Nigeria, and have an understanding of the market, and more importantly your capability.

A Permanent Market Presence

For contracts that do not require in-country support you will NOT need to register a branch in Nigeria and the work can be conducted outside Nigeria. A good example will be numerous subcontractors who worked on the Bonga FPSO in Wallsend on behalf of AMEC, who was the EPC contractor.

For contracts with a local element legally you must be registered (in practice some companies continue to work from outside when carrying out short periods of activity such as commissioning). For regular or prolonged activity in country you will need to register a branch or team up with a local company that can provide the umbrella under which you work. There are a number of routes to take which have been detailed previously. In general the easiest route is to work in partnership with or under the umbrella of another company already active in country. It is recommended that you check the wording of their licence agreements since a licence usually covers a specified range of activities.

If you are going to be working in-country regularly it is recommended that you set a branch registration in train at an early stage, which will allow for chance of expansion in the future. This is particularly important if you see a long term future in Nigeria. Also, if your product/service falls the low technical specification there will be more pressure to increase „local content‟ by establishing a local presence.

You could consider appointing a local representative but exercise great caution with this. Nigeria and Nigeria subsidiaries expect to be able to talk with a technically competent manager in country and the wrong representative can do a great deal of damage to your reputation.

Local Content

It is becoming increasingly important that companies address the issue of local content when supplying goods into the supply chain. All major contractors will have to have a degree of local content, regardless of how sophisticated the technical work being undertaken. On the recent spate of FPSO tenders, the major EPC contractors were obliged to submit detailed plans within their degree of local content with NAPIMS/NNPC insisting on percentage values of 20-60%. Contractors therefore have to make a choice when picking subcontractors. Those with a strong local presence will be at an advantage over those who will perform the work entirely out of the country. If the service you provide has a high technical specification, as deemed by the DPR; such as subsea engineering and there is no local capability then you will probably be included along normal tendering/partnership agreements. If as becoming more common your product is not exclusively „foreign‟ then you will become under increasing pressure to have some degree of local content, either through an alliance arrangement, making arrangement where some degree of the products either assembly, maintenance, post sales support is done in country. In the best scenario your company will be registered as a category A or B company with a predominantly Nigerian shareholding and you will be perceived as a „local content‟ provider, and as such be a valuable commodity to the contractor. Your company will be elevated to the role of „preferred‟ supplier.



5.4 A MARKET STRATEGY FOR CONTRACTORS

Strong international competition.

Initially focus marketing efforts on minor projects in country, in order to build a track record.

Consider appointing a local representative to identify ongoing opportunities in country, or if possible appoint an expat country manager to identify opportunities.

Identify a suitable joint venture partner with in-country presence.

Set in train own branch registration.

Consider joint venture opportunities with Nigerian companies such as NETCO.

Identify suitable local sub-contractors.

Local content will be particularly important for foreign companies and local operating companies, around 60% of your work will have to be undertaken in Nigeria.



Identify potential consortia partners and research their suitability. A consortium leader and construction companies should be registered in Nigeria.

Start own branch registration.

Target major oil companies.


Prioritise potential clients. Make contact to gauge interest (target foreign companies.)

Visit the market.



Choose partner and identify potential local representatives for the longer term.

Set up joint venture for a fixed trial period.

Train partner employees where necessary.

Actively pursue leads and potential customers with them.

Review joint venture performance. Consider triggering branch registration in parallel.

Register with DPR.

Continue with the local partnership and/or appoint a representative to manage a branch registered in country.

Demonstrate long-term commitment through on the job training, employment etc.


Source: UKTI

Get ready

to dive in

Take the plunge

Go the distance

Groundwork

Test the water



Identifying Opportunities in Nigeria

It is essential to identify opportunities in Nigeria at an early enough stage and to identify those clients most likely to have projects. The number of projects in Nigeria is significant, and Shell estimate that they have over 367 major projects worth a total of over $3.5 billion being undertaken for the year 2003, alone. Companies should consider access in the various project lists available from commercial sources to keep current in the market. It is then necessary to proactively market your company as well as relying on the traditional approaches. Registering in advance and marketing your company with the oil companies and DPR/NAPIMS may add a significant advantage by allowing them to consider your company for inclusion on tender lists. Attendance and participation in conferences, exhibitions and seminars in Nigeria is also a good entry strategy.

Initially Focus on Smaller Projects

Winning a large project without experience in country will be very difficult and we recommend initially focusing marketing efforts on minor projects in country. This will inevitable require a high degree of market research. Targeting operations managers of foreign companies in country is a good start. Register with local operating companies such as NETCO in order to be considered for projects and to be included as an approved contractor for the smaller projects.

In the early stages it is better to maintain good relationships with a few key clients than to try to manage a passing acquaintance with all. A key task is to prioritise the potential clients and concentrate on building good personal relationships with them. When you have carried out projects in country you should update your marketing material to reflect this and build on the good foundations. The same best practices with respect to customer follow-up apply in Nigeria as anywhere else in the world. Because personal networks are very strong and news travels fast by word of mouth in Nigeria, a dissatisfied customer can be a serious problem.

It is difficult for a UK company to establish a new brand name in Nigeria because of the long history and legacy of the oil and gas industry. An old name sells better.

Establish a Permanent Market Presence

For larger contracts or to be considered as a lead contractor you should be registered in country. In the short term it is possible to team up with a local company that can provide the umbrella under which you work but you should set a branch registration in train in parallel as this is a very time consuming activity. One opinion you may wish to consider is forming an alliance or working in a joint venture with one of the larger indigenous contracting companies such as JAGAL (who built the Bonga Buoy at Niger Dock) or Pivot Engineering who have a long history in construction. Also, if you want to be considered for the bigger contracts, having a visible country manager would be considered essential.

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6. WHO’S WHO IN THE OIL AND GAS INDUSTRY IN NIGERIA

6.1 MAJOR OPERATORS

Nigerian government involved in all aspects of the oil and gas sector.

One main state organisation, which is NNPC but it has several subsidiaries.

Production is dominated by the 5 major oil companies: Shell, ExxonMobil, ChevronTexaco, Total and Agip.

Most of the major foreign oil companies have several subsidiaries and sister organisations and in particular, subsidiaries that operate the deepwater licenses under the new PSC agreements.

Most of these companies have been active since 1950‟s and have a long history, including a legacy of operating practices. Some of which are good, and some of which are bad.

Overview

There are only five major operators or entities within Nigeria, which essentially control 95% of the oil and gas reserves and production. These companies also dominate both the midstream and downstream projects from gas transmission, distribution and export via LNG. Inevitably they companies are also very visible in the oil refining and distribution business.

NNPC by virtue of its large JV equity stake and role as the Nigerian‟s government‟s state oil company makes it Nigeria‟s largest entity. It, however, is not a significant E&P operator, where Shell is the dominant force both onshore, offshore and deepwater, controlling around 50% of the operated production.

Department of Petroleum Resources (DPR)

The present Department of Petroleum Resources (DPR) originated as the Petroleum Division of the Federal Ministry of Mines and Power in 1970 and later became the DPR in 1988.

In this regard, the DPR is expected to perform and achieve the following:

o Supervising all Petroleum industry operations being carried out under licenses and leases in the country in order to ensure compliance with the applicable laws and regulations.

o Maintaining a database on petroleum industry operations particularly on matters relating to petroleum reserves, production, exports, licenses, and rendering regular report to the government. It oversees all activities of all the companies licensed to engage in any petroleum activity in the country to ensure compliance with the terms and regulations relating to the licence conditions.

o Enforcing safety and environmental regulations and ensuring that those operations conform to national and international industry practices and standards.

o Advising government and relevant agencies on technical matters and public policies which may have impact on the administration and control of petroleum.

o Processing all applications for licences to ensure compliance with laid down guidelines before making recommendations to the Government.

o Ensuring timely payments of all rents and royalties. Reviewing and monitoring crude oil and products facilities, projects and maintenance programmes to ensure compliance with statutory requirements and continued integrity Sustenance.

o Provide review of existing regulations to ensure compatibility with modern technology. o Undertake economic analysis of global developments as they affect the petroleum industry. o Carries out economic evaluation of domestic production, transportation and manufacturing. o Monitors and reviews short-term and long-term requirement prof1le for the country and

strategies for meeting such.



Department of Petroleum Resources 7 Kofo Abayomi Street Victoria Island PMB 12650, Lagos

Tel: (234) 1 2612320 Fax: (234) 1 2622529 Attn: Mac A Ofuhrie, Director [email protected]

Nigerian National Petroleum Corporation

NNPC is a commercial international corporation engaged in petroleum activities and was originally set up in 1971as the Nigerian National Oil Corporation (NNOC), but was merged in 1977 with the Ministry of Petroleum Resources and the former name, NNOC was thus changed to NNPC.

In addition to its precursor original exploration activities, the corporation was given powers and operational interest, in refining, petrochemicals and products transportation as well as marketing. Between 1978 and 1989, NNPC constructed refineries in Warri, Kaduna and Port Harcourt and took over the Nigerian Petroleum Refining Company Limited (NPRC). In addition, the corporation constructed several kilometres of pipelines, pump stations and depots for distribution of petroleum products throughout the country and pioneered exploration activities in the Chad Basin around Maiduguri. In 1982, products retail, which hitherto was mainly in the hands of major multinational oil companies, was deregulated to accommodate nine indigenous independent marketers. NNPC main function is to oversee the Government interest in the oil and gas sector in Nigeria. In addition to the main organisation, NNPC has 12 main subsidiaries.

Subsidiary companies:

1. Duke Oil Limited 2. Eleme Petrochemicals Company Limited (EPCL) 3. Integrated Data Services Limited (IDSL) 4. Kaduna Refining and Petrochemicals Company Limited (KRPC) 5. National Engineering and Technical Company (NETCO) 6. Nigerian Gas Company Limited (NGC) 7. Nigerian Petroleum Development Company Limited (NPDC) 8. Pipelines & Products Marketing Company Ltd (PPMC) 9. Port Harcourt Refining Company Limited (PHRC) 10. Warri Refining and Petrochemicals Company Limited (WRPC) 11. Calson (Bermuda) Limited 12. Hydro-Carbon Services of Nigeria Limited (HYSON)

Associated Companies:

The following are 16 companies which are associated with the NNPC Group: 1. ACM Nigeria Limited 2. Baker Nigeria Limited 3. Baroid Drilling Chemical Products Nigeria Limited 4. Baroid Nigeria Limited 5. Dowell Schlumberger Nigeria Limited 6. Dresser Nigeria Limited 7. FSB International Bank 8. Flopetrol Nigeria Limited 9. Keydril (Nigeria) Limited 10. National Fertilizer Company of Nigeria Limited 11. Nigeria LNG Limited 12. Nigermed Petroleum S.A. 13. Schlumberger Limited 14. Sedco Forex of Nigeria Limited 15. Solus Schall Nigeria Limited 16. Stallion Properties Development Company Limited

NNPC Towers Herbert Macaulay Way Central Business District PMB 190, Garki, Abuja

Tel: (234) 9 2348237 Fax: (234) 9 2340029 www.nnpc-Nigeria.com


http://www.nnpc-nigeria.com/



Figure 31: NNPC Organogram as at January 2005.

Source: NNPC

Group Managing Director Funso M Kupolokun

Company Secretary S Anthony

Corp Planning & Dev Division J N Onwuama

Corp Audit A B Solarin

GM Public Affairs Dept L Ajuonuma

GED Exploration Dr O Ayoola

GED Ref & Petrochemicals Eng A Y’Ardua

GED Finance & Accounts Mr C O Harry

GED Corporate Services I Waziri

NAPIMS GGM P Chukwu

NPDC MD Ogiewoyin

PHRC MD O Ayanbgil

NRG MD S Fadayoni

IDSL MD S Ekiye

Crude Oil Marketing A Babakusa

KRPC MD A Mukhoro

WRPC MD B Idahosa

EPCL O Oniwon

R&D Dr F Amachre

NETCO Dr B Alibe

Environ- mental

Engineering Dr D

GM Material Manager

PPMC MD S Achimugu

Down- Stream Invest.

Upstream Invest.

Hyson A Barkindo

GGM Finance M Rufsi

GGM Treasury E Akhiamokhai

GGM APD V V Mowoe

GGM Medical Dr P Nmadu

GM Admin E Adegbite

GM London Office S Ulwechue



National Petroleum Management Services (NAPIMS)

The National Petroleum Investment Management Services (NAPIMS) is part of the E & P Directorate NNPC. NAPIMS is, therefore, set up to maximise the potential from investments in the JVCs, PSCs, SCs with the multinationals and also protect the nation's strategic interests. In addition, NAPIMS engages in frontier exploration services in remote areas like the Chad Basin.

Major Strategic Roles of NAPIMS: o To maximize Petroleum Profit Tax (PPT) and guarantee a higher Margin (Rate of Return) on

Investment, through efficient cost monitoring reduction mechanism. o To ensure that a reserve base is maintained and reserve addition targets are attained. These

are: 30 billion barrels by 2002 and 40 billion barrels by 2010; o To ensure increased production capacity from the current 2.5 million barrels of oil per day

(bopd) to 3 million bopd in year 2003 and 4 million bopd by year 2010; o To encourage gas utilization and commercialization. o To promote local content input in engineering and construction, supplies and materials

utilization through in country technological capability; o To enhance Nigerianisation in the industry and facilitate technology transfer; o To promote maximum co-operation in communities of oil and gas producing areas as well as

ensure that environmental protection standards are strictly maintained. Other Major Tasks: o Diversification of the nation's revenue base in the hydrocarbon sector by actively

commercializing natural gas and thereby ensuring gas flare-out by the year 2008. o Stimulating the (exploration) interest of indigenous and foreign companies in frontier areas. o Conducting operations in compliance with set environmental and safety standards in all

JV/PSC/SC upstream operations. o Managing Federation hydrocarbon resources efficiently as well as ensuring that JV operating

arrangements Joint Operating Agreement QOA), Production Sharing Contract (PSC) and Service Contract (SC) are efficient & effective.

NAPIMS 8/10 Bayo Kuku Road, Ikoyi, Lagos

Tel: 234 1 7901212 www.nnpc.com

Nigerian Petroleum Development Company Limited (NPDC)

The Nigerian Petroleum Development Company Limited (NPDC) is a wholly owned commercial subsidiary of the NNPC. The company was set up in 1988 to engage in the exploration and production business nationally and internationally.

NPDC currently operates five concessions in the Niger-Delta. They are OML 64, OML 65 OML 66, OML 111 and OML 119. The company commenced operation at Abura field (OML 65) when it took over operation from Mobil with a production of about 980 BOPD in 1988. NPDC currently has a production rate of 4,000 BOPD. Another producing field is the Oredo field (OML 111) which commenced production in 1996 and currently averages around 2,800 bopd. A third producing field, the Oziengbe South field (OML 111) has a mini flowstation. Production from the field commenced first quarter, 2002 with a take-off rate of 4,000 bopd.

NPDC'S newest production fields are Okono and Okpoho in OML 119 offshore. The company produced its first oil in Okono in partnership with AENR in December 2001. The field's production capacity per day is 20,000 bopd. NPDC and NAE succeeded in their joint application for OPL 244 deep water block in the 2000 open acreage round competitive bidding.

NPDC currently has another partnership arrangement on two of its onshore licenses, OMLs 64 and 65. NPDC will continue to seek such funding arrangements so as to enable it to exploit and produce its large oil and gas reserve holdings, and to attain its vision to become Nigeria's premier E & P company within the next few years.

Nigeria Petroleum Development Company Ltd 62/64, Sapele Road, PM.B. 1262, Benin City Edo State

Tel: 234-52-251907, 2518 Fax: 234-52-259514, 255498

http://www.nnpc.com/



Nigerian Gas Company Limited (NGC)

The Nigerian Gas Company Limited (NGC) was established in 1988 as one of the first subsidiaries of NNPC. It is charged with the development of gas industry to fully serve Nigeria's energy and industrial feedstock needs through an integrated gas pipeline network and also to export natural gas and its derivatives to the West African Sub-region. The NGC currently operates eight (8) supply systems namely: the Sapele Gas Supply System, which supplies gas to NEPA Power Station at Ogorode, Sapele, the Aladja system, which supplies the Delta Steel Company, Aladja and the Sapele -Oben-Ajaokuta Steel Company and will form the back-bone of a future Northern Pipeline System and the Imo River-Aba system for gas supply to the International Glass Industry Limited, PZ, Aba Textile Mills and Aba Equitable Industry.

The other systems are Obigbo North-Afam system which caters for NEPA Power Station at Afam, the Alakiri to Onne Gas Pipeline system for supply of gas to the National Fertiliser Company (NAFCON) for fertiliser production; the Alakiri-Afam-Ikot Abasi system for gas supply to the Aluminium Smelting Plant (ALSCON) and the Escravos-Lagos Pipeline (ELP), which supplies gas to NEPA's Egbin Power Plant near Lagos. Subsequent spur lines from the ELP supply the West African Portland Cement (WAPCO) Plants at Sagamu and Ewekoro, PZ Industries at Ikorodu, City Gate in Ikeja Lagos, NEPA Delta IV at Ughelli, and Warri Refining and Petrochemicals Company at Warri. All these facilities comprise 1,100 km of pipelines ranging from 4" to 36" in diameter with an overall design capacity of more than 2 billion scfd, 14 compressor stations and 13 metering stations. The facilities represent a current asset base of more than 12 billion Naira for the NGC.

Nigerian Gas Company Limited Odin Road, Ekpan, PM.B. 1288 Warri Delta State, Nigeria

Tel: 234-53-254262

National Engineering and Technical Company Limited (NETCO)

NETCO is Nigeria's first national engineering company and is a wholly owned subsidiary of NNPC. NETCO was established in 1989 to provide an effective and reliable engineering base for the NNPC group and the entire oil and gas industry. Its services, which extend to the rest of the Nigerian economy and beyond, comprise: Feasibility Studies, Conceptual Design, Procurement, Construction Supervision and Project Management. The company is well equipped with the latest technology in Engineering Design, Project Controls, Procurement, Project Management, Administration, Public Affairs, Finance & Accounts and QA/QC.

NETCO has executed several engineering projects in Nigeria including the detailed engineering design of the onshore portion of the NNPC/Chevron Nigeria Limited Escravos Gas Development Project Phase. Detailed engineering of part of Elf's Amenam/Kpono offshore platform AMPI; detailed engineering of parts of SNEPCO's Bonga FPSO project on behalf of AMEC; participation in the FEEDS for Chevron‟s Escravos Gas Project Phase 3 (onshore & offshore).

Detailed Engineering of the Condensate Stabilisation Unit of the Nigeria LNG plant at Bonny Island for the consortium of Contractors- TSKJ; Conceptual Design of Cawthorne Channel Gas Injection/Supply Project in association with Technique Geoproduction.

Stallion House (11th & 12th Floors) 2, Ajose Adeogun Street PO. Box 74173 Victoria Island Annex, Lagos

Tel: 234-2611232, 234-1-2647301 Fax: 234-1-2611230 E-mail: [email protected] Web-site: www.netco.com.ng


http://www.netco.com.ng/



Integrated Data Services Limited (IDSL)

The Integrated Data Services Limited (IDSL) was incorporated in 1988 as one of the eleven Subsidiary Companies of the Nigerian National Petroleum Corporation (NNPC) to offer Geophysical and Petroleum Engineering Services in the Upstream Sector of the oil industry.

IDSL was set up to offer services in the upstream sector of the oil and gas industry. These services include: Seismic Data Acquisition; Seismic Data Processing; Reservoir Engineering Services; Data Storage and Management Services.

Integrated Data Services Limited 36, Ogba Road, P.M.B. 1003, Oko Village, Benin City IDSL Data Processing Centre No 7 Woji Road, Off Old Aba Road, Port Harcourt

Tel: 052-253114 Fax: 052-253325 Tel: 084-612890-3

Port Harcourt Refining Company

The Port Harcourt refinery, which is incorporated as Port Harcourt Refinery Company (PHRC) is made up of two refineries. The old refinery was commissioned in 1965 with current nameplate capacity of 60,000 bopd and the new refinery commissioned in 1989 with an installed capacity of 150,000 bopd. The total combined crude processing capacity of the Port Harcourt refinery is 210,000 bopd. The refinery is self sufficient in power, with the utilities generated from a captive power plant with a capacity of 14MW. PHRC produces the following products – LPG, PMS, Kerosene, AGO, LPFO, HPFO, these emanate from five separate process areas. The refineries have something of a chequered history and have had a poor output record, with long periods of disruption. There have been several upgrades and bouts of maintenance, but even today both only operate at around 40%-60%. As a result this has severe implications for the refining output of the country and the need to import white products.

PHRC has an organisational capacity of around 1450 people, with a managerial capability of 39 managers. The organization of the company is shown in Figure 31.

PHRC Eleme, Rivers State, PO Box 585, Port Harcourt, Nigeria

Tel: 234 84 830480 Fax: 234 84 830479



Figure 32: PHRC Organogram

Source: PHRC

Shell

The Shell Petroleum Development Company of Nigeria Limited (SPDC) is the largest private sector oil and gas company in Nigeria. It is the operator of a JV involving the NNPC, which holds 55%, Shell (30%), Total (10%) and Agip (5%). The partners fund the operations and share the oil produced in proportion to their participation. The company‟s operations are concentrated in the Niger Delta and the adjoining shallow water offshore, with an oil mining lease area of about 31,000 sq km. There are over 6,000 km of pipelines and flow-lines, about 90 oil fields, 87 flow-stations, eight gas plants and over 1,000 producing wells operated by the JV. In 2002, the JV accounted for about 40% of Nigeria‟s oil production and about 55% of the country‟s crude oil reserve base. SPDC was incorporated in 1937 and is the pioneer hydrocarbon exploration and production company in the country. With the currently production capacity of over 1 million bopd of crude oil and more than 700 million scfd of gas from its fields, it remains the highest produced of oil and in gas in Nigeria.

Managing Director (6)

Manager MMD (97)

Dep Manager Internal Audit

(15)

Dep Manager TQM (5)

Manager PBMD

(7)

Comp Secretary Legal Advisor

(6)

Executive Director Services

(6)

Manager APD (184)

Manager FAD (56)

Dep Manager Security

(142)

Manager MPD (11)

Dep Manager PAD (10)

Executive Director Operations

(19)

Manager Maintenance

(346)

Manager Production

(213)

Manager FS&E (94)

Manager ESTD (76)

Manager PPU (78)

Manager PPQC (79)



Shell Nigeria Exploration and Production Company Limited (SNEPCO): SNEPCO was established in 1993 to manage Shell exploration and development interests in Nigeria‟s deep water offshore acreage. SNEPCO made the first major deep-water discovery (Bonga) in Nigeria in 1995. A second major discovery, with similar reserves potential to Bonga, Bonga SW was made in 2001. The Bonga FPSO, which is almost completed, is capable of producing 225,000 bbls of oil per day and will have an export capacity of 150 million scfd of associated gas. First oil at Bonga is expected in the second quarter of 2005. The project is initially expected to develop 600-700 million bbls of reserves, out of a reserve base of 1200 million bbls.

Shell Nigeria Gas Limited (SNG): This company was incorporated in March 1998 to promote gas utilisation as a cheaper, cleaner and more reliable source of fuel and feedstock for industry. Over $33 million has so been committed to building a gas distribution infrastructure around the country. SNG has signed 30 Gas Sales and Purchase Agreements with potential industrial consumers in Aba, East Nigeria and in Agbara/Ota gas in West Nigeria. Construction work on the Agbara. Ota gas transmission and distribution project started in July 2000.

Shell Nigeria Oil Products Limited (SNOP): SNOP was incorporated in Nigeria during the last quarter of 2000. The company‟s vision is to become the largest supplier of refined petroleum products in the country; to develop and market Shell branded products and services in Nigeria.

Figure 33: Shell Organogram

Source: Shell

Shell Petroleum Development Company of Nigeria Ltd. (SPDC) PO Box 263 Port Harcourt River State

Tel: (234) 844 21171 Fax: (234) 844 24223 www.shell.com

Shell Nigeria Exploration and Production Co. Ltd. (SNEPCO) NAL Towers, 20 Marina, Lagos State

Tel: (234) 1260 1600 Fax: (234) 1263 6681

Shell Nigeria Gas Limited - As above

Kisito Okpere Technical

Director

Mutui Sunmonu Corporate Affairs

Director

Precious Omuku External Affairs

Director

Chris Morgan Corporate

Services Manager

Cees Uijlenhoed Commercial/

Finance Director

Mark Corner DMD & Production

Director

Don Boham Corporate Affairs

Manager

Pascal Egwim Corporate

Logistics Manager

Maarten Wink General Manager

Warri

Basil Omiyi Managing Director

http://www.shell.com/



ExxonMobil

ExxonMobil Corporation has three major subsidiary companies in Nigeria: Esso Exploration and Production Nigeria Limited (EEPNL); Mobil Oil Nigeria (MON) and Mobil Producing Nigeria Unlimited (MPN). EEPNL and MIPN operate in the upstream sector while MON operates in the downstream sector. Three companies together have about 2,000 employees. MPN is the operator of a joint venture with the Government represented by NNPC, which has 60% participating interest and MPN 40%. EEPNL is in PSCs with NNPC.

Mobil Producing Nigeria (MPN): In 1969, Mobil Producing Nigeria (MPN) was incorporated to take over the business of MENI. Production of crude oil commenced in 1970 from the Idoho field located offshore the coast of Akwa Ibom State. All MPN‟s production is offshore. MPN has maintained a steady production growth since commencement of production in 1970. Currently MPN has a production capability of over 700,000 bopd of crude, plus condensate and NGL per day. MPN has progressed the development of the Yoho Field using a Floating Production Storage Offloading (FSPO). Production began in late 2002 using a temporary FPSO and full field development is scheduled for completion in the first quarter of 2005. At full field development, Yoho is expected to boost MPN‟s production volume by 150,000 bopd from a reserve base of 400 million bbl.

Esso Exploration and Production Nigeria Limited (EEPNL): Esso Exploration and Production Nigeria Limited (EEPNL) was established in 1993 as an affiliate of Exxon Corporation. EEPNL is the operator of deepwater block 209 and 214 and holds the second largest deepwater acreage position offshore Nigeria. In December 1999, EEPNL announced confirmation of a major deepwater oil and gas discovery named Erha.

The Erha Development Project by EEPNL is located in approximately 1200 metres of water and is the first ExxonMobil operated deepwater development offshore Nigeria. Recoverable reserves are estimated at between 700-1100 million bbl of oil, while production rate are expected to peak at about 150,000 bopd and 340 million scfd. First oil is to be achieved by first quarter 2005. The Erha development concept is a Floating Production Storage and Offloading (FPSO) with subsea wells.

MPN currently flares about 20% of its produced gas and utilizes about 80%, while the average percentage of flared gas by industry is 50%.This is made possible through MPN‟s aggressive programme of effective gas utilisation which includes injection compression, electricity generation and natural gas liquid production. The company‟s existing gas utilization projects include Asabo Gas Injection, completed in 1977, Oso Gas Injection Project (GIP) commissioned in 1993 as well as Edop/Ekpe Gas Compression Platform (GCP) and the Oso Natural Gas Liquid (NGL). These plants were commissioned between 1996-1998. Potential gas utilisation opportunities by the company include the East Area Project, Natural Gas Liquid, Liquefied Natural Gas and Gas-To-Liquid Projects.

Figure 34: ExxonMobil Organogram

Source: ExxonMobil

Mobil Producing Nigeria Ltd Mobil House, Lekki Expressway, PMB 12054, Lagos

Tel: (234) 1 262 1680 Fax: (234) 1 262 1600 www.exxonmobil.com

Esso Exploration and Production Nigeria Ltd. – As above

Edozlem Chikre Geosciences

Manager

Babojide Aqbabiaka General Manager

O & M

Steve Rose General Manager

JV Projects

EEPNL

Willie A Belonwu

CFO

Ian F. Edwards Executive Director

Production

Denise O’Neal General Manager

Development

Ian Fischer General Manager

Exploration

John P. Chaplin, Managing Director

http://www.exxonmobil.com/



ChevronTexaco

ChevronTexaco operates in the upstream sector of the Nigerian oil industry through its three major subsidiaries. – Chevron Nigeria Limited (CNL), Texaco Overseas (Nigeria) Petroleum Company Unlimited (TOPCON) and StarDeep Water Petroleum Limited (STAR). ChevronTexaco through these companies has a current combined liquids production of about 520,000 bopd and about 285 million scfd. Its prospects include deepwater blocks estimated to hold several billion bbl of recoverable crude oil, swamp and near-shore concessions spanning over 3 million acres and an integrated gas project that would significantly increase the current level of processed gas production

Chevron Nigeria Limited (CNL): In 1963, the company became the first successful offshore operator through the development of the Okan Field in the western Niger Delta. In 1997 it commissioned the Escravos Gas Project which is, Nigeria‟s first major gas utilisation scheme. As of today, Chevron Nigeria Limited (CNL) is the operator of the NNPC/Chevron JV in which NNPC hold 60% interest, and Chevron retaining the balance of 40%.

In December 200, the Government awarded some deepwater concessions, by open competitive tenders to prospective bidders. Chevron won OPL 250 in the Nigerian segment of the West African deepwater fairway. Through the same open bid process, ChevronTexaco won a stake in two other leases – OPL 214 and 318.

Texaco Overseas (Nigeria) Petroleum Company Unlimited (TOPCON): Texaco has grown from its small beginnings to become a major player in the exploration and production of crude oil in Nigeria. It is the operator and owner of a 20% interest in six Oil Mining Leases (OML 83-88) that covers about 606,000 acres offshore the Niger Delta in Nigeria. The other participants in the JV are the NNPC and Chevron with a 60% and 20% equity respectively. TOPCON‟s producing fields (North Apoi, Funiwa, Pennington, Middleton and Okubie) have jointly produced over 505 million bbls of oil as at the end of 2003.

Texaco currently holds interest in five deep water blocks offshore Nigeria. It acquired 100% interest in OPL 213; 46.15% in OPL 17 with Statoil (53.85%) and 46.15% in OPL 218 with Statoil (53.85%). In OPL 25, the company also has a 50% equal share with ExxonMobil. Texaco has the largest net acreage in Nigeria‟s deepwater offshore.

Star Deepwater Petroleum Limited (STAR): Texaco is involved in deep water activities in Nigeria in OPL 216 through its wholly owned subsidiary Star Deep Water Petroleum Limited (“Star”). Star and Famfa Oil Limited an indigenous Nigerian oil company, were granted exploration rights to the 617,000 acre Block 216 in late 1996. In July 1988, the first wildcat well, Agbami-1 was spudded in 4,700 feet of water, approximately 70 miles offshore and 135 miles from Port Harcourt in the central Niger Delta. The testing of the Agbami-2 appraisal well confirmed that the Agbami structure is a giant discovery with potential recoverable reserves in excess of one billion oil equivalent barrels. The field, which ranks among the largest single finds to date in deepwater West Africa and spans an area of 45,000 sq km.

Figure 35: ChevronTexaco Organogram

Source: ChevronTexaco

ChevronTexaco Nigeria Ltd. 2 Chevron Drive Lekki Pennisula, Lagos

Tel: (234) 1 2600600 Fax: (234) 1 2600395 www.chevron.com

General Manager Asset Management

C. A. Taylor

General Manager HR & Security E. O. Imalidan

General Manager Executive Staff S. G. Udoma

General Manager Finance & IT

T. G. Hoffman

General Manager Deepwater

J. G. Pearea

Chairman & Managing Director Jay R. Prior

http://www.chevron.com/



AGIP

Agip commenced activities in Nigeria in 1962 through a wholly subsidiary Nigerian Agip Oil Company Limited (NAOC). Activities of Agip have grown rapidly over the years resulting in establishment of other companies. These include Agip Energy and Natural Resources (Nigeria) Limited (AENR), which operated in the shallow waters offshore and the Nigerian Agip Exploration Limited (NAE) which concentrates on the nation‟s deep water frontier region.

Nigerian Agip Oil Company Limited (NAOC): Nigerian Agip Oil Company (NAOC) operates in the land and swamp of the Nigel Delta with concessions lying within Bayelsa, Delta, Imo and Rivers States. The concession covers a total areas of 5,313 sq km comprising four blocks – OML 60, 61, 62 and 63, operated under a JV arrangement with NNPC, (60%), NAOC (20%) and Phillips Oil (20%). The number of wells drilled is 364, out of which 102 were exploratory, and which have a 55% success rate. So far, 46 fields have been discovered, with 26 of them put into production. Production is currently about 200,000 bopd.

NAOC‟s production asset includes eight flow stations, two gas plants and one export terminal of 3,558,000 barrels storage capacity with 2 single point mooring buoys loading tankers. The flow stations and gas plants are connected to the terminal in Brass through a 406km pipeline network, while an additional 180km pipeline carried NGL and field gas to Eleme Petrochemical Company.

NAOC has also begun construction of the first upstream IPP (450MW) in Kwale, Delta State. The power plant, is to promote sustainable development of the nation‟s economy through the provision of a stable electricity supply. To further expand its activities in Nigeria, NAOC has begun a feasibility study of a LNG Project to be sited offshore Brass, Bayelsa State. A Memorandum of Understanding (MOU) for the feasibility of the LNG plant was signed with the Federal Government in September 2001. The proposed 5 million tonnes per year LNG plant is expected to start production in 2008.

Agip Energy and Natural Resources Limited (AENR): Agip Energy and Natural Resources (AENR) is executing a Service Contract with NNPC on OML 116 located in shallow waters offshore Niger Delta. AENR signed another service contract with NPDC (an NNPC subsidiary) in December 2000 to finance and jointly work on the development of Okono and Okpoho fields in OML 119.

Nigerian Agip Exploration Limited (NAE): Nigerian Agip Exploration Limited (NAE) was incorporated in 1996 to focus mainly on deep offshore opportunities. It operated a production sharing contract with the NNPC on deep offshore blocks OPL 211 and 316, with SNEPCO as its partner. NAE also manages all other Agip participating interests in deep offshore including the Bonga field in OML 118.

Construction of the FPSO for the production, treatment, storage and offloading of crude oil from the field was completed in November 2002, as part of the project development. The FPSO arrive in Nigeria in January 2003.First oil from the field was produced through the FPSO in February 2003. With it, NAE has set the record of being the first company to produce oil from the nation‟s deep offshore.

Nigerian Agip Oil Company Limited Agip House, Plot PC23 Engineering Close Victoria Island, Lagos

Tel: (234) 1 2600100 Fax: (234) 1 2621600 Attn: D. Bertorelli, Managing Director



Total

The Total group results from the merger between the former TOTAL, PETROFINA and ELF Aquitaine Groups which was completed in 2000 but subsequently known simply as TOTAL. In Nigeria, the upstream activities of the Group are carried out by two subsidiaries, Elf Petroleum Nigeria Limited (EPNL) and Total Upstream Nigeria Limited (TUPNI).

Elf Petroleum Nigeria Limited (EPNL): Elf Petroleum Nigerian Limited (EPNL) was incorporated as Safrap, owned 100% by the then Elf Aquitaine Group. The imminent production start-up from the offshore field Amenam/Kpono which straddles EPNL‟s OML 99 and ExxonMobil‟s OML 70 (with Total as operator), shall almost doubt their present production capacity. This project which is the first unitised field to be developed in Nigeria came with an innovative offshore financing strategy. The project is planned with no gas flaring. Prelude to the production start-up is the acquisition of a giant floating storage and offloading (FSO) vessel, aptly christened the FSO Unity. It is capable of holding over 2 million barrels of crude oil at a time. The Amenam/Kpono project is being expanded to become an oil and gas production and export project with an investment of about $2 billion US dollars of new funds into the Nigerian economy.

From a single venture partnership with the Nigerian National Petroleum Corporation (NNPC), Elf Petroleum Nigeria Limited now has several Partnerships and Associations. EPNL is operator with 40% JV ownership of three onshore blocks (OMLs 56 to 58) and four offshore blocks (OMLs 99 to 102). It is also the operator with 20% PSC ownership with Chevron (30%), Exxon (30%) and Nexen (20%) in a deep offshore block (OPL 222). In 2003, EPNL acquired another deep offshore concession (OPL 221). Since 1994, it also holds 12.5% participations interests in Deep Offshore OML 118 (Bonga) field and OPL 219, operated by Shell. EPNL production averages 189,000 bopd.

Total Upstream Nigeria Limited (TUPNI): On the deep offshore side, its sister company TUPNI is technical advisor on the deep offshore block OPL246 where it is in partnership with South Atlantic Petroleum and Braspetro. Significant Akpo field is located on this block. Operations of TUPNI are mainly in the deep offshore.

Figure 36: TOTAL Organogram

Source: Total

Total Elf Petroleum Nigeria Limited Plot 25, Trans Amadi Industrial Layout PMB 5160 and PO Box 696 Port Harcourt

Tel: (234) 84 236310 Fax: (234) 84 238955

Emmanuel Chiejina

Deputy Managing Director

Adekunle Ali Executive

Director Business

Strategy

Patrick Ngene General Manager

HSE

Olutoun Candide-Johnson

Legal Manager &

Company Secretary

Therry Bourgeois Deputy Managing

Director -

Technical

Charles Ngoka

General Manager JV Assets

Jacques Marraud des Grottes

Managing Director



NLNG

Nigeria Liquified Natural Gas Limited (NLNG) is the largest single processing investment in Nigeria. A joint venture company incorporated in 1989 to construct and operate a multi-train LNG export facility on Bonny Island in Rivers State. Partners are NNPC, Shell, Total and Agip.

Figure 37: NLNG Organogram

Source: Agip

Nigerian LNG Ltd C&C Towers, Plot 1684 Sanusi Fatunwa Street Victoria Island, Lagos

Tel: (234) 1 262 4190 Fax: (234) 1 261 7146

Other Companies

In addition to the five major oil companies, a number of international oil companies entered the sector in the 1990‟s following reform in the licensing policy, especially the introduction of PSCs. The most notable entrants were companies link Statoil, Petrobras and Addax. Examples of a couple of these companies are illustrated below as a reference.

Addax: Addax was created in 1994, as an E&P subsidiary of its petroleum trading parent. In 1988, the company signed two PSCs with NNPC to formalise the interest in OPL 90, 98, 111 and 235. Current production is around 18,000 bopd from eight onshore and offshore fields.

Addax Petroleum 10, Bishop Aboyade Cole Street, PO Box 70419, Victoria Island, Lagos

Tel: 234 1 4613980 Fax: 234 1 2616816

Statoil: Statoil commenced operations in Nigeria in 1992 when the company was awarded three deepwater PSCs, block 213, 217 and 218. Statoil has subsequently drilled seven exploration wells in these blocks, makes a discovery in block 218 in 1999.

Statoil Nigeria 1, Oyinkan Abayomi Drive, Ikoyi, Lagos

Tel: 234 1 2603250 Fax: 234 1 6808333

AMNI: AMNI was incorporated as an oil and gas company in 1993 and operates two concessions in the Niger Delta, OPL 469 and OPL 237 (previously OML 112 and 117). After drilling 8 wells, the fields went into production in 1996,and are currently producing around 20,000 bopd.

AMNI Plot 1377, Savage Street, Tiamiyu, Victoria Island, Lagos

Tel: 234 1 2621522 Fax: 234 1 2621526 www.amni-international.com

Deputy Managing

Director

Samaila Kawa

General Manager Bonny Transport

Yan La Roy

Legal Manager

Edith Unwigbe

General Manager

Finance Dan Amarchree

General Manager

Production Brian Buckley

Managing Director

Chris Haynas

http://www.amni-international.com/



DUBRI: DUBRI was Nigeria‟s first petroleum producing company, and acquired OML 96 in 1987 from Phillips. The company has established production from two fields which currently average over 1,000 bopd.

DUBRI 8, Gabaru Close, Victoria Island, Lagos

Tel: 234 1 6173899 Fax: 234 1 2647225

Also, as a result of a change in Government policy many Nigerian oil companies were established and secured both oil exploration licenses and marginal fields. Table 24 below lists the current indigenous companies who hold exploration licenses in an operating capacity. From 1987 onwards there has also seen additional 2 dozen indigenous companies enter the market with interest, usually in a non operating role with a minor equity percentage.

Table 24: List of Indigenous License Holders

S/NO. NAME OF COMPANY LICENCE/BLOCK NO AWARD DATE

1. Alfred James Petroleum Co. OPL 302 May/June 1991

2. Allied Energy Resources OPL 210 June 1992

3. Amni Petroleum Development Co., OML 112, OML 117 1993

4. Atlas International Petroleum OML.I09 February 1991

5. Cavedish Petroleum OML 103 November 1990

6. Conoil Producing OPL458 1996

7. Dubri Oil OML 96 August 1987

8. Emerald Petroleum OPL229 2001

9. Express Petroleum Oil & Gas OML 108 November 1990

10. Famfa Oil Limited OPL 216 1993

11. Moni Pulo Ltd. OML 114 1993

12. Optimum Petroleum OPL 310 1993

13. Peak Petroleum Industries OML 112 1993

14. Summit Oil Int'l OPL 205 & 206 November 1990

15. Solgas Nig. Ltd OPL 226 February 1991

16. South Atlantic Petroleum Ltd OPL 201 1993

17. Yinka Folawiyo Petroleum OMLl13 May/June 1991

Source: DPR



6.2 MAJOR SERVICE COMPANIES

The oil industry in Nigeria is 50 years old and during that period most of the major oil field service companies have been present in Nigeria. These include Schlumberger, Halliburton, Baker Hughes and BJ Services. The period before 1989 saw the dominance of US contractors and service companies. The period after 1989 saw the first Nigerian owned and managed technical service companies energies and during the nineties there has been a considerable increase in the number and capability of those oilfield companies. In addition, most of the EPC contractors such as KBR, Bechtel, Technip and Daewoo have completed successful projects. Table 25 below illustrates the percentage share of all major service companies active in the Exploration sector in 2002.

Table 25: Exploration Market Share 2002

Service Category

Company

Market Share

Cementing and Pumping Dowell Schlumberger Halliburton BJ Services Nowcam; Remin Services Western Petroleum Services Weafri; Sowsco; Strasbourg

50% 25% 15%

<10% <10% <10%

Directional Drilling Anadrill Sclumberger Smith International Drillog Petrodynamics Sperry-Sun WOG,Eastern Teleco, Hydrosoil Services

40% 20% 20% 10% 10%

Mud Engineering Baroid of Nigeria MI Drilling Fluids Magcobar; Millpak; Century

42% 35%

<20%

Mud-Logging Services Sperry-Sun Adadril Sclumberger Petrolog Kogi Oil Services, Exclog; Petdrill

30% 29% 20%

<20%

Well Completion Baker Others

30% <50%

Well Testing Flopetrol Schlumberger Geoservices Otis of Nigeria Canuco; Baker; Petro-Expro

50% 30% 10%

Wireline Logging Schlumberger Nigeria Ltd Western Atlas Halliburton Gearhart BPB; Petro-Expro

80% 10%

7% <10%

Source: NAPIMS

The current trend is for service companies to establish a „local‟ presence and/or joint venture with indigenous companies. This has resulted in a number of companies having subsidiaries of alliance and establishing a local presence.

PETAN: The Petroleum Technology Association of Nigeria (PETAN) is the organisation whose members are independent indigenous Nigerian companies operating mainly in the upstream, providing a whole range of technical services. PETAN is the organisation that represents these indigenous companies and Appendix 9 lists the most active PETAN members.



6.3 LAWYERS AND CONSULTANTS

The following lawyers and consultants are known to have expertise in the Nigerian Oil and Gas Sector and / or Commercial Law and is a small selection from over 3 dozen firms active in this sector. This list is by no means exhaustive and is being updated regularly by the UK Trade and Investment team in Lagos, with whom you should check to obtain the latest list of all the registered participants.

Lawyers

Ajumogobia & Okeke Nal Towers 20 Marina PO Box 55109 Lagos

Tel: (234) 1 264 7460 Fax: (234) 1 263 0410 [email protected]

Perchstone and Graeys 6 Boyle Street Onikan, Lagos

Tel: (234) 1 263 1551 Fax: (234) 1 263 1337 [email protected]

Rock and Partners 3rd floor 25 Adeyemo Alakiya Street Victoria Island, Lagos

Tel: (234) 1 320 4531 Fax: (234) 1 320 4584 Email: [email protected] www.trp-ng.com

Solola & Akpana 12A Igbodo Street Old GRA Port Harcourt

Tel: (234) 84 231 403 Fax: (234) 84 235 595 [email protected] www.sololaakpana.com

Consultants and Tax Advisors

KPMG 22A Gerrard Road Ikoyi Lagos

Tel: (234) 1 269 4660 Attn: Wole Obayomi

PricewaterhouseCoopers 252E Muri Okunola Street Victoria Island Lagos

Tel: (234) 1 320 3100 Fax: (234) 1 320 3101 [email protected] www.pwc.com/ng/ [email protected]

UK Trade and Investment recommends that companies talk to several companies before selecting a firm to represent them. Recommendations from other companies in the sector are worth seeking and be aware that not all the buyers/consultants will be expert in all elements of the oil and gas sector. Third party advice should be sought when difficult issues are being considered, such as double taxation, memorandum of association and company law.




http://www.trp-ng.com/


http://www.sololaakpana.com/


http://www.pwc.com/ng/


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7. OPPORTUNITIES

7.1 FORTHCOMING EVENTS

A calendar of events for 2005 has been prepared and will include a number of annual events. In addition the various Nigerian Oil and Gas trade association hold a large number of seminars and conferences on a regular basis in Nigeria. Please check with the UK Trade & Investment team in Lagos and Port Harcourt for up-to-date information.

Calendar of Events

Offshore West Africa 14-19 March 2005 Abuja, Nigeria Conference and Exhibition

Annual conference extolling the virtue of the E&P sector within the West African area.

NOG Nigeria Oil and Gas 2005 18-20 April 2005 Abuja, Nigeria Conference and Exhibition www.thecwcgroup.com

Annual show devoted entirely to Nigeria, and presents a good insight into the E&P industry and access to local players.

OTC Offshore Technology Conference 2-5 May 2005 Houston, USA Conference and Exhibition www.otcnet.org

Major industry event held biannually. Often frequented by several Nigerian delegations and companies. Good venue – network opportunity.

NAICE 2005 1-3 August 2005 Abyja, Nigeria Conference and, Exhibition, Short Courses

Annual conference attracts players across the E&P section. Hosted by the SPE Nigeria and this year‟s theme „Nigeria‟s Petroleum Industry & Challenges in the 1st quarter of the 21st century

Nigerian International Oil, Gas, Petrochemical & Power Exhibition NOIL GAS – 2005 4-6 August 2005 Lagos, Nigeria www.wellspring.org

One of a number of large exhibitions which periodically focus on Nigeria. Need to investigate potential exhibitors, attendees to evaluate conference.

Offshore Europe 6-9 September 2005 Aberdeen, Scotland Conference and Exhibition www.offshore-europe.co.uk

Bi-annual event which attracts a large number of Nigerian delegates, both companies and individuals. This year‟s event will potentially have high level Nigerian delegation inc. MD-NNPC

NOF – Mission October 2005 Lagos, Port Harcourt, Oyo, Nigeria www.nof.co.uk

Trade Mission to look at opportunities within the Supply Chain and the potential for opening up a local operation.

BNBC Nigerian Downstream November – TBC London Seminar

Successful event held last year in UK, which attracted key players from the government and industry. More focused event planned for this.

http://www.thecwcgroup.com/

http://www.otcnet.org/

http://www.wellspring.org/

http://www.offshore-europe.co.uk/

http://www.nof.co.uk/

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7.2 OPPORTUNITIES AND PROJECT LISTING

One of the key to success in Nigeria is the ability to identify and monitor the various projects, both upstream and downstream which are believed to total well in excess of 500 at the present and will consume over $30 bn during the next five year period. In previous sections, a number of the key projects were identified, but it is crucial to maintain a current overview.

Detailed Project Sheets

The UK Trade and Investment team in Nigeria maintain and regularly update a more detailed overview of the projects mentioned in the form of „detailed project sheets‟. This is available for the „off the shelf‟ price of £50 and can be ordered via your business link. Companies who are resident in Nigeria or visit the market frequently should contact the team in Nigeria at the Commercial Section for more details.

Early Lead – Rumours about a project are going around. No budget is confirmed and the project plan is hazy. It is worth registering interest with the operator and potentially approaching those who may be lead contractors

Firm Project – A project plan is confirmed and a budget has been identified. The project has not yet gone to tender. An ideal time to get involved

Planning Phase – In the tendering process. Probably too late for lead contractors but there may be time for subcontractors or suppliers to get involved.

Ongoing – The project implementation is underway. Opportunities only for suppliers of small line items and standard materials. Even then difficult as some operators require suppliers to be on their preferred suppliers list.

Table 26: Example Project Listing

Company

Project Name

Area

Type

ADDAX Exploration

Offshore Delta

Drilling Services

AGIP Exploration

Onshore

Seismic

CHEVRON Agbami

Deepwater

Field Development

ELF Amenam

Deepwater

Field Development

MOBIL Yoho

Deepwater

Field Development

SNEPCO Bonga

Deepwater

Field Development

SPDC Afam

Onshore

Power Plant

Source: UKTI

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8. ASSISTANCE

8.1 UK Trade and Investment

The UK Trade and Investment team in Nigeria is happy to help with clarification, update and information to supplement this report by email, telephone or face to face during a market visit. For more information, please contact the team below on Monday – Friday between the office hours of 08.00 – 15.00 hrs. It is helpful if when planning a visit that an appointment is made first.

UK Trade and Investment Nigeria

Address British Deputy High Commission 11 Walter Carrington Crescent Victoria Island

Plot 300, Olu Obasanjo Road Port Harcourt, Rivers State

Telephone +234 1 2619531, 1 4613650 +234 84 237173, 231776

Fax number +234 1 2614021 +234 84 237172 Contacts John Williams

Deputy Director Trade & Investment [email protected] [email protected] [email protected]

Augusta Nwokafor [email protected] [email protected]

You can also contact the UK Trade and Investment team in the UK for Nigeria in London and the Oil and Gas Directorate in Glasgow.

UK Trade and Investment, UK Nigeria Desk Kingsgate House 66 – 74 Victoria Street London SW1E 6SW Tel: +44 20 7215 4947 Fax: +44 20 7215 4366 [email protected] [email protected]

UK Trade and Investment, UK Oil and Gas Directorate Tay House 300 Bath Street Glasgow G2 4DX Tel: +44 141 228 3697 Fax:+44 141 228 3627 [email protected] [email protected]

Overseas Market Introduction Service (OMIS)

The UK Trade and Investment team in Nigeria can source information tailor made for the client which can include a variety of the following elements: market prospects, market entry strategy recommendations, and information about competitors and current buying preferences. Details of potential client contacts can be included as a validated list if we actually visit or speak to potential representatives to ascertain suitability for and interest in the products or services under offer. The client can also ask for a status report to be compiled on a named contact in the market. In the absence of locally recognised credit rating agencies locally the UK Trade and Investment team will draw on their contacts in the business community to explore the reputation of and the claims made by the individual or company.

The charge for the OMIS reports depends on the number of man-hours and difficulty of obtaining the information, and normally ranges from £400 - £800 - £1600. The duration of compiling the report can take between a few days to 6 weeks depending on the availability of contacts and information. The timescale will be part of the quote.












Typical quote for a Tailored Market Information Report

1. Provided a generic overview of the market conditions in Nigeria. 2. Provided a ranked list of potential customers (all operating companies and the main relevant

national and international contractors) active in Nigeria with full address/telephone/fax details and contact names of Procurement, Process, Mechanical and Maintenance Engineers.

3. Contacted the top 8 potential customers to establish whether they have problems or are planning upgrades with respect to sand/solids, produced water, filtration, enhanced oil recovery and de-bottlenecking and reported back on the information they obtained. The UK Trade and Investment team investigated who is already in the market and gauged their interest in hearing from Company X .

4. Listed live/current projects by definition, status and planned date of execution. 5. Provided detailed project sheets. 6. Listed the main considerations when choosing an agent / distributor of the type Company X were

looking for. 7. Provided a brief assessment of the likely market for Company X‟s products in Nigeria and made

recommendations for market entry approach.

Programme Arranging Services (PAS)

When UK exporters visit new markets such as Nigeria, they sometimes appreciate help in making appointments, or other assistance in order to make the most of their trip. The team in Nigeria can help by planning programmes, making appointments, accompanying the visitor to meetings and giving further advice and briefings on activities in the local market.

This service in the oil and gas sector would normally cost £80 for which the team would be able to make 8 – 10 appointments in Nigeria, give directions for finding the meeting locations and meet with the business visitor during the programme to offer advice and answer questions. It is important to note when commissioning this service that the programme would not normally be confirmed until very shortly before arrival and may change during the visit.

Off-the Shelf Information

For some off-the shelf information (such as the set of detailed project sheets and contacts lists) we make a small charge. This range from £50 for the detailed project sheets to £100-150 for an unverified contacts list depending on the amount of work involved (see below for verified contacts).



8.2 TRADE ASSOCIATIONS

There are a number of Trade Associations in the UK, where memberships are active in Nigeria and the Gulf of Guinea. They are very useful interlockers and can be contacted in regard to a variety of issues related to Nigeria and neighbouring countries such as Equatorial Guinea.

1. Britain Nigeria Business Council (BNBC) Organisation formed to promote bi-lateral trade between Nigeria and Britain. Useful source of information on the two countries. Imperial House 64 Willougby Lane London, N17 OSP Tel: +44 7005 942 760 Fax: +44 7005 801 541

2. Energy Industries Council (EIC) Nationwide organisation representing a cross section of energy industry. Several members active in Nigeria. Organises regular missions to Nigeria. Newcombe House 45 Notting Hill Gate London, W11 3LQ Tel: +44 (0)20 7221 2043 Fax: +44 (0)20 7221 8813 Email: [email protected] Website: www.the-eic.com

3. London Chamber of Commerce and Industry (LCC) Supports London based companies across a broad spectrum of industries. Active in West Africa and can be a useful in softer support industries, such as finance. 33 Queen Street London, EC4R 1AP Tel: +44 (0)20 7248 4444 Fax: +44 (0)20 7489 0391 Email: [email protected] Website: www.londonchamber.co.uk Email: [email protected] 4. Nigerian–British Chamber of Commerce & Industry (NBCC) Chapters in both London and Lagos may be able to provide lists of local contacts and advice. Contact details are as follows. Ebani House 149/153, Broad Street, P.O. Box 109, Lagos Tel: 01-2660298, 2641266 Fax: 01-2660298 Email: [email protected] President: Michael Olawale Cole 5. Northern Offshore Federation (NOF) Group based in Newcastle and supports engineering companies. Active in a variety of industries including oil and gas. Strong links with Nigeria. Pennine Avenue North Tees Industrial Estate Portrack Lane Stockton-on-Tees, TS18 2RJ Tel: +44 (0)1642 616 936 Fax: +44 (0)1642 612 431 Email: [email protected] Website: www.nof.co.uk



http://www.londonchamber.co.uk/







6. Pipeline Industries Guild (PIG) London based organisation responsible for promotion expertise in transmissions and distribution. 14/15 Belgrave Square London, SW1X 8PS Tel: +44(0) 20 7235 7938 Fax: +44(0) 20 7235 0074 E-mail: [email protected] Director General : Richard Glenister 7. Scottish Trade International (SDI) The division of Scottish Enterprise responsible for international trade and with the preponderance of Scottish based companies and vehicle for regional support. 150 Broomielaw 5 Atlantic Quay Glasgow, G2 8LU. Tel: +44 (0)141 248 2700. Fax: +44 (0)141 221 3217 Email: [email protected] 8. Society British Gas Industries (SBGI) Association responsible for promoting the British Gas industry overseas. Nigeria is an emerging market for them. 36 Holly Walk Leamington Spa Warwickshire, CV32 4LY Tel: +44 (0)1926 334357 Fax: +44 (0)1926 450459 Email: [email protected] 9. West Africa Action Group (WAAG) The UK West Africa Action Group (UK WAAG) is run under the auspices of Aberdeen and Grampian Chamber of Commerce since 1997. It is committed to assisting UK companies enter the Oil and Gas markets of West Africa. Unique „in country‟ services have been put in place both in Nigeria and Angola to assist companies in the early stages. These „in country‟ services complement the outstanding level of market knowledge and expertise offered to WAAG members. For more information contact [email protected] or read more at www.agcc.co.uk/tradegrowth Aberdeen and Grampian Chamber of Commerce 213 George Street Aberdeen, AB25 1XA Tel: +44 (0)1224 620621 Fax: +44 (0)1224 213221 email: [email protected]





http://www.agcc.co.uk/tradegrowth




8.3 OTHER SOURCES OF INFORMATION

In addition to all the sources of information list above, there are a number of other avenues which companies and individuals may want to pursue. A number of oil and gas related journals are published in Nigeria, in particular Nigeria Oil and Gas Monthly which details monthly activity.

In addition there are a number of Market Intelligence companies, offering expensive but comprehensive up-to-date information. The ones with specific market knowledge in Nigeria are IHS, Wood Mackenzie, CWC and Business Monitor.

Finally there are a number of website which can provide valuable information.

Nigerian National Petroleum Corporation: State-owned, commercially integrated international oil company; involved in various aspects of the industry, from exploration and production to refining and marketing, including petrochemicals and sales - www.nnpc-nigeria.com

Nigerian Shell Company: The company‟s oil and gas exploration and production activities in Nigeria – www.shellnigeria.com

Mbendi Profile: Nigeria: Oil & Gas Industry – Overview: www.mbendi.com

Nigerian Oil & Gas Online: a privately owned website, providing oil and gas news. Information and investment data – www.nigerianoil-gas.com

Department of Energy: Nigeria‟s role in oil production and export. Includes background info, maps and an index of related domestic companies – www.eia.doe.gov

Oil.Com: news and directory for the oil and gas industry – www.oil.com

NigeriaInfonet.com: An information depot about Nigeria and her people. This sizeable guide to Nigeria covers art literature, entertainment, health, education, nutrition, government, recreation, business and organisations – www.nigeriainfonet.com

Nigerian Government Online: Official website of the Federal Republic of Nigeria www.nopa.net

Ministry of Petroleum: Official website of embryonic ministry. www.petroinfonigeria.com

UK Trade & Investment: UK international trade website – www.uktradeinvest.gov.uk

Figure 38: A fun site worth looking at

www.oyibosonline.com

„Oyibo‟ is the colloquial term for white man in Nigeria and this website is designed to provide information to expats living in Port Harcourt and as such is a wealth of information regarding pubs, clubs, restaurants and things to do!


http://www.shellnigeria.com/

http://www.mbendi.com/

http://www.nigerianoil-gas.com/

http://www.eia.doe.gov/

http://www.oil.com/

http://www.nigeriainfonet.com/

http://www.nopa.net/

http://www.petroinfonigeria.com/

http://www.uktradeinvest.gov.uk/

http://www.oyibosonline.com/

AAAPPPPPPEEENNNDDDIIICCCEEESSS


APPENDICES

APPENDIX 1: COUNTRY DATA

Land Area 923, 768 sq km 31% of land is arable

Population 127 million Percentage under 15 - 45.0% Life expectancy – men - 51.1 years Adult literacy - 65.3%

Main Towns Lagos - 10.0 million Port Harcourt - 3.0 million Abuja - 2.0 million

Climate Equatorial

Weather in Lagos (altitude 3 metres)

Hottest month, March, 26-32oC; coolest month, August 23-28oC; driest month December, 25 mm average rainfall; wettest month June, 460 mm average rainfall

Languages English (official), Hausa, Yoruba and Ibo. Many other local languages are widely spoken

Measures Metric system

Currency Naira (N)=100 kobo. £1 = Naira 252.

Time One hour ahead of GMT

Economy

GDP - Naira 4,602 billion Annual growth - 2.5% GDP per head - $419 Agriculture - 46.2%

Employment

Agriculture - 3% of total Services - 75% of total Manufacturing - 22% of total Unemployment - 20%

Finance

Average annual inflation - 9.6% 2002 inflation - 12.9%

Trade

Exports - Oil $18.7 bn Non-oil $0.3 bn Imports - Goods $3.3 bn Machinery $2.7 bn

Health

Spending as part of GDP - 2.2% Doctors per 1000 pop - 0.2

Education

Spending as part of GDP - 0.7% Primary school enrolment - 98%

Households

Number - 22.6 million Number of people per household - 4

Cost of Living

New York (100) - Nigeria 78

Colour TVs

Per 100 households - 48.2

Telephone Lines

Fixed Lines - 4.0 million Mobile phones - 3.2 million



APPENDIX 2: TENDERING PROCEDURE

The vast majority of contracts go out to competitive tender. If the value of the contract is less than $500,000 or 10 million Naira, then the operating entity within the joint venture, such as Shell or ExxonMobil can award the contract provided they adhere to an agreed tendering procedures, without having to refer to the other joint venture companies, which always include NAPIMS. Contracts for amount less than $25,000 usually can be awarded without having to go out to tender. However the exact procedure for each contract may vary slightly dependent upon the partnership and type of agreement in place.

Each tender will be slightly different and may stipulate that a certain make of machinery is the only type technically acceptable to the operator. More frequently the contract will specify that only machinery/equipment of a certain type is acceptable. It is therefore crucial that UK companies maintain either directly or through their agents links with the contracting companies, and more preferably the end users.

The first stage in the tendering procedure is the PRE-QUALIFICATION (example tender at end of section).

In view of the large number of companies that exist with the apparent ability to provide products and services, most operators will have a system of pre-qualifying companies. Operators will invariably select companies which they believe can undertake the work and place them on the bidders list. For most work companies will have to pre-resister with the oil companies. To be considered at this stage, a new company or an existing company offering a new product or service should maintain a high profile with the operating oil company, and where possible frequently registering and re-registering. This is best achieved through office visits and technical presentations, as well as extending corporate hospitality to representatives of the operating oil company.

Any selected company will then be asked to pre-qualify by completing a technical and financial audit of their company, which may involve a physical inspection of the company‟s premises and offices. A company offering a new service or product will be invited to submit a presentation on the product or service, along with submitting CVs of key professional personnel. Preferences at this stage may well be given to companies who hold the safety standards e.g.: ISO 9000 and those companies with previous experience working in this arena. Companies from the same country as the operating oil company are likely to be asked to pre-qualify. The pre-qualification tests can take between 2 and 5 days to complete.

Importantly for contracts valued at more than $500,000, the list of companies which have pre-qualified will be submitted to NAPIMS for approval, and NAPIMS may also add companies to the bidding list, from companies who have contacted NAPIMS directly.

AN INVITATION TO TENDER WILL THEN BE SENT OUT TO ALL COMPANIES ON THE LIST.

It is crucial that a Nigerian agent or partner representing the company is experienced in dealing with NAPIMS, and can liaise with them on a regular basis. Key personnel in terms of contracts within NAPIMS are the General Manager Gas, General Manager Oil and General Manager Materials. These personnel can be an excellent source of general information on contracts, about to awarded to tender, as well as other industry information.



It is advantageous to register interest with NAPIMS as soon as feasible, and present your credentials, and seek to be included on the bid lists, which interest you. The decision by NAPIMS to add a company to the bid list, is dependent upon a number of factors, but the three main ones are:

1) Technical The company selected must be technically capable, but NAPIMS is generally less stringent than other operators, and tends to advocate using those which are new to market. It is fairly typical for NAPIM officials to be invited to the UK to inspect production or service facilities.

2) Local Content NAPIMS will actively promote the interest of local companies, especially where there is a high degree of local content. This may take the form of a large Nigerian involvement in terms of equity or employment.

3) Relationships A good personal relationship between the company or the company‟s agent,, and the key decision makers within NAPIMS. Often companies are added to the list once a degree of trust has been built up between the two parties.

Tendering Procedure Once the bid documents have been issued, the companies must indicate whether they wish to bid. Each company then submits a detailed tender within a specified time. This tender is generally submitted as two sealed, separate tender documents. The first is a technical tender, which specifies how the tendering company proposes to undertake the contracted task. The second is the commercial bid, which details the cost and price involved.

The tenders are evaluated initially. If any bids fails to meet the minimum acceptable technical and safety standards, as set out in the contract then the bid is rejected outright. Evaluation is undertaken by a committee of at least three people, and is likely to involve qualifying discussions which the tendering company over any opacity in the proposals.

At some stage later the tenders for the successful companies are then evaluated according to the following criteria.

1. Award Price Under most circumstances the award is normally made to the company who submits the lowest bid.

2. Naira Portion Most contracts stipulate that a portion of the contract will be paid in local currency, and a portion in dollars. Operators tend to favour contracts where there is a significant naira content (usually between 10 and 40 percent). Contract will normally stipulate that the naira portion of the contract will be paid at the autonomous central bank rate, at the time of the invoice.

3. Conditions of Payment Operators normally have standard terms for payment, and it is generally inadvisable for companies to stipulate any deviation from these conditions. Offshore payments should be requested in dollars rather than pounds sterling.

Often bids from competing companies differ in exactly what services are included in the price. At this stage in the procedures, the operating oil company will again initiate a clarification process to clear up any opacity in the bid. Companies will be invited to review their bid content and price, until all companies undertake to perform exactly the same services.



The content of each company‟s bid is known only to that company and the bid appraisal committee. However commercial intelligence gatherers and analysts are able to estimate the value and detail of the competing tenders with great accuracy. An experienced Nigerian agent or partner should be aware of the relevant intelligence sources and may wish to commission such a market report, prior to entering clarification and negotiation with the operator. If after the contract has been awarded, it is deemed by either party not to be all encompassing, reasonable price variations will usually be honoured.

Methods of Payment Operators will request that contractors deposit 10 percent of the value of the contract as a performance bond, before work commences. In practice an irrevocable letter of credit for the same amount is always acceptable.

Payments are usually linked to project milestones. Contracts usually stipulate that the operator should pay the contractor 45 or 60 days, after each stage is completed. Interest on late payments is usually set in the contract at 2 to 3 percent above the base rate.

One point to note is that NNPC inability to meet its financial commitment to the joint venture budgets has meant that some contractors having to wait 150 days for payment. However invoking punitive interest rates is unadvisable, as it may damage the working relationship between the two parties. To mitigate the effects of these payment delays, companies often mark up their contract prices. Often prices quoted can be fifty percent higher in Nigeria, than similar products and services in the UK. There is also the guarantee that international operating companies will guarantee eventual payment through offshore branches.



APPENDIX 3: IMPORTING THROUGH AN AGENT

Appointing an Agent Companies wishing to supply goods to the oil and gas sector, are not required to incorporate. The goods however must be imported through a Nigerian registered agent. The agent would be responsible for sourcing all contracts on behalf of the UK companies, which are probably registered offshore. The best agents should have contact with NAPIMS and the oil companies, and preferably a proven record of successfully representing offshore suppliers in a similar field.

It is beneficial if the agent has a good technical knowledge of the company he is representing and the products and/or services he is marketing and selling. It is also beneficial if he has good personal relationships with the key individuals in the oil companies, and larger contracting companies.

The agent should be paid on a commission basis, usually between 3 and 10 percent of the supply contract value. Payment is usually in US dollars, but UK pounds and Euros is becoming more common. Commission dues are usually made to coincide with the payment made by the recipient of the goods, to the supplier.

The most common client – agent relationship is through a sole representation agreement. The supply company undertakes not to supply goods to Nigeria through any other channels and the agent undertakes not to represent any other companies in direct competition with the contracting party. This agreement can generally be terminated by either party at three months notice.

Importation Procedure Most goods imported from the UK to Nigeria must undergo Pre-shipment Inspection. This is carried out by ITS Services, on behalf of ISC, and consists of the following:

1. Analysis of goods, to ascertain the correct, customs tariff code 2. Price Verification 3. Quality and quantity inspection 4. Review of invoices and documentation 5. Report of findings and import duty report issuance The process starts with the exporter supplying a proforma invoice to the importer detailing the quantity, description and price of the goods and all the other itemised costs involved in bringing the goods to the port of discharge. The importer completes a form M, available from the Nigerian banks and UK banks in partnership with them. This is delivered with a copy of the proforma invoice to an authorised dealer bank, at least 21 days before the expected date of shipment. The dealer banks delivers the documents to ISC Services Ltd, who pass them onto ITS. IITS then contact the exporter in writing, requesting information to carry out the inspection and perform the customs analysis. In response to this request , the exporter should make a written request for inspection, detailing the desired date and location of the inspection At this time the Exporter should provide a copy of the final invoice to ITS. The company will check the quantity and quality of the goods tallies with the invoice, before packaging can proceed. A completed invoice is valid for 90 days.

Price verification by ITS will seek to determine whether the price charged by the seller, as set forth in the final invoice, indicates the uniformity of pricing between goods exported to Nigeria and goods exported elsewhere, once transportation costs have been deducted. If exporters prices are significantly different to generally prevailing export prices for similar goods, the exporting company will be contacted for an explanation and may be required to reduce the values of the invoice.

Once price verification and a satisfactory quantity/quality inspection has been obtained, ISC will send a Clean Report of Findings to the exporter, determing the amount of foreign exchange to be released. An Import Duty Report will be sent to the importer, via their dealer bank, to assist in levying the correct amount of import duties. This document is required in order to clear the goods from custom.



Import Duties and Taxes Duty payable on imported goods is calculated on the basis of the invoice value of the goods, converted at the prevailing autonomous market rate. Importers are also required to pay VAT at 5% of cost (including import duty, transportation and other charges) and 7% surcharge (calculated on import duties).

Presently the assessed duty payable on goods for use in the oil and gas sector is:

Equipment Import Duty

Manufacturing Equipment 10-20%

Electrical Equipment 10-20%

Specialised Oil Drilling Equipment 40%

List of specific tariffs are published in full by the budget office every 5 years, and amended annually as required.

Commercial samples of products may be exempted from duty if they are imported under the conditions of temporary importation. Temporary importation may only be used for the Express purpose of soliciting orders and demonstrations and for a maximum of 6 months.

Import duty rebates are available for equipment which is used significantly for the training of Nigerians.

Compulsory Insurance of Imports The Nigerian Insurance Degree stipulates that the insurance of goods to be imported into Nigeria, must be on behalf of the importer by the insurer licensed to operate in Nigeria. Accordingly, letters of credit issued by a bank in Nigeria, in respect of such goods, are required to be on a cost and freight only basis. This does not prevent the UK company from insuring shipments to Nigeria, to protect his interest in the goods, pending delivery.

Clearance of Goods Although government guidelines stipulate that goods should be cleared from any port within 48 hours of arrival in Nigeria, bureaucratic delays are common. Working through a handling agent or a Nigerian Partner, who can establish a good working relationship with customs staff, can greatly facilitate the clearing process.



APPENDIX 4: ESTABLISHING A JOINT VENTURE

Technical Partnership Once a UK company starts investigating the market they may identify a suitable Nigerian company with sufficient knowledge of the market and often with good connections. The company may also have a reasonable track record and a degree of financial stability. However the main obstacle to the company winning contracts within the oil and gas sector, is normally a lack of technical ability. The remedy is often for the Nigerian company to enter into some sort on joint venture with the UK company providing the technical part. This may either be done through a local subsidiary of the UK company or through an offshore entity.

The Nigerian partner would normally be the frontal end of the partnership, with responsibility for sourcing the contracts locally. They would also be responsible for providing office facilities/accommodation and services. In addition they should be able to source work permits for the UK company‟s technical personnel. To some degree they would also be responsible for providing a degree of maintenance and service to the client, without referral back to the UK company.

The UK company would be responsible for providing the bulk of the technical element, which in many cases would include manufacturing of the product.

These partnerships can either take the form of a short term relationship, or a more formal long term agreement. These types of agreement allow for complete financial independence from the two parties with each conducting their own internal affairs. The relationship may last for a single contract or a number of contracts, or for a specific time. Whilst the agreement is in effect the two companies will share both the costs and profits accruing from the contract. The cost/profit split; payment procedures: severance procedures should be clearly set out in a written agreement.

There have been several examples where proper procedures were not adhered to, and one party ended up in dispute. A recent case ending up with the companies disputing who had legal control over the goods and products at the warehouse in Nigeria. Listed below are some points the UK company should consider, before entering into these agreements.

o Conduct a search on the proposed joint venture partner. o Draw up a legally binding joint venture agreement. o Ensure there is a shareholders agreement in place. o The lawyers of both parties should review the management contract. o Ensure that the obligation of the parties in the joint venture (including the nature of management

assistance, technology transfer, expatriate secondment, equipment/capital transfer, profit sharing and other commitments of the parties) are clearly stated in the joint venture agreement.

o Incorporate the joint venture company under the Nigerian Companies and Allied Matters Act 1990 and obtain a certificate of incorporation.

o For secondment of an expatriate, ensure that the expatriate quota certificate was obtained. o Obtain the certificate of capital importation for the financial/capital assets brought into the

country under the joint venture. o Register the joint venture agreements and the shareholders agreement and ensure they are

admissible in the law court. Over a period of time if the UK company wishes to enhance this relationship, then there are two principal methods. The UK company may purchase an equity stake in the Nigerian partner, or other potential Nigerian company, or set up a subsidiary with Nigerian stakeholders.

Other arrangements which are less joint ventures, but more a defined contract arrangement, and include licence and management contracts.

Licensing Agreement In this type of arrangement the UK company agrees to license a local Nigerian company to produce, manufacture a product in Nigeria under licence. These agreement are not very common because many local companies do not have the experience or capability to manufacture to the same standards. In the event that UK companies do embark on these type of agreement, they should be aware of the following.



o Conduct a search on the licensee in Nigeria. o The lawyers of both parties reviewed the licensing agreement/contract. o Ensure the obligations of both parties (including the financial commitment and cash remittance)

are clearly stated in the license agreement. o Register the license agreement and ensure that it is admissible in the law court in case of

default.

Management Contracts These apply in particular to services and consultancy rather than to products and services. Sometimes the service is used directly by the company for training, or product development, or more usually is a component part of a contract to an end users e.g. Shell has a technical management contract with NLNG to provide technical/management services. As with the other types of contracts, some items which need to be assessed.

o Conduct a search on the local company, agent or individual in Nigeria. o The lawyers of both parties should review the management contract. o Ensure that the obligations of both parties (including the nature of management assistance,

technology transfer, expatriate secondment, equipment/capital transfer, the rate of the management fee, basis of computation of the fee and cash remittance) are clearly stated in the management contract.

o For secondment of expatriate, ensure that expatriate quota certificate was obtained from the Nigerian authority.

o Obtain the certificate of capital importation for financial/capital assets brought into the country under the management contract.

o Register the license with the National Office of Technology Acquisition and Promotion (NOTAP) in Nigeria.



APPENDIX 5: ESTABLISHMENT OF A NIGERIAN SUBSIDARY BY A FOREIGN COMPANY

Nigerian company law requires the incorporation of a Nigerian company if a foreign company or person/s wish to engage in business activities in Nigeria. Unlike other jurisdictions of the world where representative or branch offices of foreign companies may operate in an unincorporated capacity, such companies must be registered in Nigeria as limited liability companies.

Procedure The under listed procedure is required to facilitate the establishment of a limited liability company in Nigeria:

Incorporation of the company. Pre-operational tax clearance certificate and VAT registration. Obtaining foreign investment approvals. Capital Importation and obtaining of certificate of capital importation from authorized bank. Immigration formalities for expatriate employees.

Incorporation The relevant legislation governing the registration and regulation of companies in Nigeria is the Companies and Allied Matters Act (CAMA). Under the CAMA, any foreign company wishing to establish and carry on business in Nigeria is required to be incorporated.

Incorporation Procedure The Corporate Affairs Commission (CAC), Abuja established by the CAMA is the authority responsible for the registration and regulation of companies. The process of incorporation will involve the following:

o Availability search at the CAC to determine that the proposed name of the company does not conflict with an existing name and reservation of the proposed name if there is no conflict;

o Preparation of the memorandum and articles of association of the company, a document detailing its business objects, subscribers and internal regulations;

o Execution of the memorandum and articles of association by the initial members who would be subscribers to the same; a minimum of two members and a maximum of 50 members are required;

o Preparation and execution of the following forms required to be filed at the CAC: o consent letters by the first directors of the company consenting to act in that capacity; a

minimum of two directors is required; o Form C07 - particulars of the first directors of the company including their names, addresses

and occupations; o Form C06 - notice of the registered address of the company; o Form CO2 - statement of the authorised share capital of the company; Nigerian company law

requires that a private limited liability company must have a minimum authorised share capital of

₦10, 000.00 of which 25% must be allotted to the subscribers. Where however the company intends to have foreign shareholders, the minimum paid up share capital for the grant of a business permit must be

o ₦10 million (see paragraph 2 on business permit); o Stamping of the memorandum and articles of association and statement of authorised share

capital form at the stamp duty office of the Federal Board of Inland Revenue (FBIR); o Filing of the stamped memorandum and articles of association and other required forms at the

CAC. At the conclusion of the process, a certificate of incorporation containing the company's registration number will be issued.

Pre-Operational Tax Clearance Certificate and VAT Registration After incorporation, a pre-operational tax clearance certificate will be obtained by the company and the company will also be registered with the Federal Inland Revenue Service (FIRS) for corporate tax and VAT purposes after which the pre-operational tax clearance certificate is obtained and a V AT certificate of registration is issued. The pre-operational tax clearance certificate and V AT certificate of registration will be used to process the company's business permit.



Foreign Investment Approvals Registration with the NIPC: Upon incorporation, the newly established company is required under S.20 of the Nigerian Investment Promotion Act [NIP A) to be registered with the Nigerian Investment Promotion Commission [NIPC).

Immigration Approvals: The following investment approvals are required by virtue of S.B of the Immigration Regulations:

Business Permit - to enable a foreign investor to hold shares in a company incorporated in Nigeria.

The minimum capital base for any company seeking approval for Business Permit is ₦10 million. A business permit application must be supported with the following:

A duly completed NIPC Form 1 providing the following information:

o The name and address of the proposed company including postal addresses; o The nature of business of the proposed company; o The names, addresses and nationalities of the proposed directors of the company; o Details of the proposed shareholding structure of the company; o The approximate amount of foreign exchange to be spent by the company over a five year

period; o The number of Nigerians and expatriates to be employed by the proposed company and the

specific positions to be held under such employment; o Ten copies of the memorandum and articles of association of the proposed company; o An acknowledgement from the CAC evidencing receipt of the incorporation documents of the

company; o Evidence of business premises; o A copy of Form CO2 [Return of Allotment of Shares); o A copy of Form COl (Particulars of Directors); o Evidence of capital importation; o Approval from the appropriate body depending on the nature of the business to be carried on by

the company.

Note however that, in practice, it is possible to incorporate the company first and then obtain a business permit later.

Expatriate Quota Positions - to enable the company to employ expatriate staff to fill certain key (usually management or technical) positions.

Note that multiple quota applications are more favourably considered in respect of highly capitalised companies.

The application must be supported by the following documents:

o One duly completed Form 1; o Evidence of business premises; o Copy of management and technical services agreement (if relevant) o Evidence of capital importation; o Tax clearance certificate of the company; o Particulars of the names, qualifications and positions relating to the expatriates to be employed

by the company; o Details of a proposed training programme for the Nigerian staff of the company and the

management succession schedule to be adopted by the company; o Copy of the feasibility report of the business in which the company will be engaged and a copy

of the project implementation programme it intends to adopt; o Information brochure on the shareholders of the company evidencing their international

expertise and credibility.



Residence permit - in respect of expatriates who are new to the country. After the expatriate quota positions have been obtained and the respective expatriates to fill the quota positions have been identified, the company must regularise their immigration status by formally applying to the Nigerian embassy in the country in which the expatriates reside, requesting that they be granted business visas subject to regularisation (STR) on their arrival in Nigeria. In the application the company undertakes to assume immigration and other responsibilities for the employees in Nigeria. As a follow up, the expatriate employee is expected to call at the Nigerian embassy with the following documents:

o A copy of the company's letter applying for the STR Visa on his behalf. o The company's letter of appointment to the employee reflecting his job title, designation and

other broad terms of employment. o A copy of the employee's letter of acceptance of the employment offer. o The NIPC or Federal Ministry of internal Affairs letter granting the company expatriate quota

positions (the NIPC letter must reflect the specific job title of the employee as one of the expatriate quota positions granted) .

o Original and certified true copies of the professional qualification certificate of the employee. o Certified translations of (e) above if they are not in English. o Certified copies of marriage documents/birth certificates in respect of any accompanying

spouse or children.

After the documents have been vetted and approved, an STR visa is granted. The expatriate is also given a package by the embassy officials containing authenticated documents. These are submitted to the immigrations department after arrival in Nigeria and will be used to process his residence permit. The residence permit must be obtained within 3 months of arrival in Nigeria. At the time the residence permit is being obtained, it is also possible and usual to apply for and process multiple entry visa, which is endorsed on the expatriates' passport.

Foreign Exchange and Capital Importation Under present Nigerian foreign exchange policy, investment inflows have been liberalised and any profits, dividends or interests arising there from may be freely repatriated. Foreign Capital may be imported into Nigeria through domiciliary accounts operated with any of the licensed banks in Nigeria, and may be repatriated through the same channels. Under the Foreign (Currencies and Capital Investment Monitoring) Decree, banks through which remittances are to be made must ensure that all necessary taxes have been deducted and paid and that amounts being repatriated are in respect of funds imported into Nigeria. All remittances will be at the autonomous exchange rate (market rate). Upon incorporation therefore, the proposed company may open a domiciliary account with any of the licensed banks in Nigeria, through which it would import its capital and through which it may repatriate proceeds arising from its investment in Nigeria. It should be noted that the company would be required to first import its foreign capital before it can be issued with the expatriate quota approvals. Such importation will be evidenced by a Certificate of Importation, which is issued by the bank through which the capital is imported.

Statutory Costs, Establishment Expenses and Timeframe:

The rate of exchange applied is ₦133 to $1.

Statutory Costs: Stamp Duties -are assessed ad valorem on share capital and payable to the Federal Board of Inland

Revenue (FBIR) at the rate of ₦1.50 on every ₦100.00 of the proposed share capital. Stamp duty on

a recommended share capital of ₦10 million is ₦150, 000 – $1,128.00

Registration fees - these are payable to the CAC at the rate of ₦10, 000 for every ₦1 million (or part

thereof) of the proposed company's share capital. Registration fees on a ₦10 million share capital will

accordingly be ₦100, 000.00 - $752.00

Expatriate quota positions - for a managing or technical director's quota position (which position would remain "permanent until reviewed" referred to as [P.U.R]) an application fee of $3,000 is payable.

Other quota positions attract an application fee of ₦25,000.00 - $188.00 and statutory fee of

₦10,000.00 - $76.00 per quota.



Business Permit - application for business permit attracts a fee of ₦25,000.00 $188.00 and statutory

fee of ₦60,000.00 - $452.00.

Establishment expenses - expenses including processing fees for stamp duties and filing fees, business permit and expatriate quota, air travel, transportation charges, name search and other miscellaneous costs are estimated at $2,000.00.

Time Frame - estimated time frame for the completion of each of the tasks is as follows:

Task 1 Name search and reservation 1 day

Task 2 Incorporation 2 Weeks

Task 3 Tax and V A T registration 2 Weeks

Task 4 Business Permit 1-2 Months

Task 5 Expatriate quota 1- 2 Months

Task 6 Certificate of Capital Importation 1 Week

Task 7 Immigration formalities 1 Week

Although there are general concerns over these types of agreement, provided the offshore company and the Nigerian company are the only shareholders, these arrangements are difficult to break. Typically the party wishing to sever the relationship must given written notice and offer the shares for sale to the second party at a mutually agreed rate. In the event that the second party declines to purchase the shares, it has a qualified right to veto sale of the shares to a third party. The company severing the arrangements is often prevented from setting up in direct competition with the aggrieved party, for a certain time.



APPENDIX 6: UK BRIBERY AND CORRUPTION LAW

Bribery is bad for business. A culture of corruption is a disincentive to trade and investment and payment of bribes is unacceptable behaviour for UK companies or nationals. By upholding the law and promoting transparency in business activities, British companies enhance their own reputations and staff morale.

The economic damage bribery can wreak on a society is well understood. Increasingly, justice systems throughout the world are willing and able to take action against acts of corruption.

Overall, the UK has a good reputation for openness and honesty. The UK government wants to build on that by stamping out those acts of bribery which may be committed by a minority of UK companies and nationals.

Part 12 of the Anti-terrorism, Crime and Security (ATCS) Act 2001 includes legislation on bribery and corruption. This came into force on 14 February 2002 to deter UK companies and nationals from committing acts of bribery overseas. These changes to the UK law on corruption and the full legalisation are available of the following website: www.hmso.go.uk/acts/acts2001/20010024.htm

Definition Bribery can be defined broadly as the receiving or offering of an undue reward by or to any holder of public office or a private employee designed to influence them in the exercise of their duty, and thus to incline them to act contrary to the known rules of honesty and integrity. (This is not a legal definition).

Civil Servants and locally engaged employees in British Diplomatic posts overseas who, in the course of their duties, become aware of, or received information relating to acts of bribery committed by UK national or legal persons (e.g. companies) should report the matters, so that the appropriate UK authorities can decide whether to pursue an investigation. The Civil Service Code can be viewed at: www.cabinet-office.gov.uk/central/1999/cscode.htm.

Frequently Asked Questions about Bribery and Corruption 1. What were the changes to UK law with effect from 14 February 2002?/ The ATCS Act makes two main changes to the law:

It puts beyond doubt that the pre-existing offences of corruption apply to the bribery of foreign public officials or office holders including foreign MPs, judges, Ministers and „agents‟ whether public or private as well as those who work in the UK public sector or for UK „principals‟. („Agent‟ and „principal‟ are used here in the sense given them by the Prevention of Corruption Act 1906: essentially an „agent‟ is any person who is employed by or performs functions for another and the „principal‟ is his employer or the person for whom he performs functions).

2. Does it apply to overseas subsidiaries? No, it does not. Like most countries through the world we do not think it appropriate to take jurisdiction over a foreign company for actions which take place entirely in a foreign country. To do so would well be regarded as interference in the internal affairs of another country.

3. Why doesn’t the UK law exclude ‘facilitation payments’? We do no think it is desirable for UK law to apply differently overseas to the way it applies in the UK. We do not tolerate „facilitation payments‟ to UK officials. However, it is difficult to envisage circumstances in which the making of a small „facilitation‟ payment, extorted by a foreign official in countries where this is normal practice, would of itself give rise to a prosecution in the UK. The making of such payments may well, however, be illegal under the law of the country concerned.

4. What are the criteria for prosecutions? When considering any potential prosecution, a two-stage test is applied: is there sufficient evidence to provide a realistic prospect of conviction and if so, is in the public interest to proceed to prosecution?

5. What is the maximum Penalty for this offence? An unlimited fine and/or 7 years in prison.

http://www.hmso.go.uk/acts/acts2001/20010024.htm

http://www.cabinet-office.gov.uk/central/1999/cscode.htm



6. Won’t UK business lose out to rival foreign companies who pay bribes in order to gain contracts?

UK companies may lose some business by taking this approach, but equally there will be those who choose to do business with UK companies precisely because we have a no-bribery reputation, and the costs and style or doing business are more transparent.

If you have concrete evidence of foreign rival company acting in a corrupt fashion, then you should alert local judicial authorities and/or the government where the company is registered.

7. I am forced to make corrupt payments and pay bribes in order to do business. What do I do?

Do not commit criminal offences. The whole issue of bribery and corruption is a difficult one, but we are determined to tackle it. We do not condone involvement in corrupt practices.

The legislative changes of the ATCS Act give UK companies and national a stronger defence against attempts to extort bribes from them. Explain that you are liable for prosecution in the UK under UK law; that your hands are tied; and that your company has a strict anti-corruption guidelines. We do not know of any country which does not criminalise the bribery of public officials‟ within its own borders. The penalties can be severe. If you are forced against your will to make a payment then if you report the payment afterwards (preferably to the law enforcement authorities of the country concerned) that may help, as an indication of your good faith.

8. Bribery and corruption are endemic in many parts of the world. What are you doing about the wider problem?

The UK is actively involved in international initiatives such as the OECD Convention on the bribery of Foreign Public Officials, which is part of the international effort to stamp our corruption in world trade. All eleven major exporting countries (USA, UK, Germany, France, Japan, Italy, Canada, Korea and the Benelux) now have legislation in place against bribery or foreign public officials which meets OECD Convention requirements, full details of which are available on www.oecd.org/subject/bribery . Also we are involved in GRECO (the Council of Europe anti-corruption body), who are helping their members develop effective anti-corruption systems (GRECO publishes country reports on its website: www.greco.coe.int ). United Nations global anti-corruption convention (UN convention against Corruption) was agreed at the end of 2004 and has been signed by around 100 countries, including the UK.

9. Where can I find out more about the UK law or corruption? Details of the main provisions of the UK law of corruption are available on: http://www.uktradeinvest.gov.uk

http://www.oecd.org/subject/bribery

http://www.greco.coe.int/




APPENDIX 7: NIGERIAN ORGANIZATIONS

The following contacts are provided as a guide only and they are by no means exhaustive of all possible sources of business information. Both lists of companies in the UK and Nigeria.

Name of Company Category of Service Contact Address

Central Bank of Nigeria

Deals with monetary, credit, foreign trade, and exchange rate policies and developments

The Director Department of Research Central Bank of Nigeria

Chartered Institute of Taxation of Nigeria (CITN)

Deals with tax laws and practices, tax incentives and tax matters in general.

CITN, Olabode House (4th floor) 215/217 Ikorodu Road, Lagos Tel: (234) 1 7741273 Fax: (234) 1 4935059 [email protected]

Corporate Affairs Commission

Corporate statutory filing and incorporation of businesses, annual filing of audited financial statements.

Area 11, PMB 198 Garki, Abuja Tel: (234) 9 3142917 Fax: (234) 9 3142669 www.company-reg.com

Federal Inland Revenue Service

Petroleum profit tax, corporate income tax and value-added tax (VAT) issues.

The Executive Chairman Revenue House, Plot 522, Sokode Crescent, Off Dalaba Street, off Michael Okpara Street, Wuse Zone 5, PMB 33, Garki, Abuja Tel: (234) 9 5236611 Fax: (234) 9 5236612

Federal Ministry of Industry Asset acquisition certificates. The Hon Minister Block C, Old Federal Secretariat Area 1, Garki, PMB 85, Garki, Abuja Tel: (234) 9 2341367 Fax: (234) 9 2341690

Federal Office of Statistics (FOS)

Supplies macro and micro economic, social, political, geographical statistics.

The Director-General/CEO Plot 205, Bacita Close, Off J S Tarka Road, Garki Area 2 PMB 127 Garki, Abuja Tel: (234) 9 2346760-2 Fax: (234) 9 2346761

Institute of Chartered Accountants of Nigeria (ICAN)

Details of accounting and auditing practices, company laws, accounting standards and investment incentives.

The Registrar/CEO Plot 16, Idowu Taylor Street, Victoria Island, Lagos Tel: (234) 1 2617638 Fax: (234) 1 2610304 www.ican.org.ng

Investment Information and Promotion Centre, Federal Ministry of Industry

Latest information on procedural matters and industrial climate; as well as guidance to investors on investment proposals.

The Director Block C, Old Federal Government Secretariat, PMB 85, Garki, Abuja Tel: (234) 9 2341367 Fax: (234) 9 2341690

Lagos Chamber of Commerce and Industry

Inward and outward trade missions, major suppliers, major buyers, business sector development, trade fairs.

Commerce House (1st Floor), 1 Idowu Taylor Street, Victoria Island, Lagos Tel: (234) 1 613917 Fax: (234) 1 610573 [email protected]

Manufacturers Association of Nigeria (MAN)

Inward and outward trade missions, major suppliers an major buyers of industrial products, industrial sector developments.

77 Obafemi Awolowo Way Ikeja, Lagos Tel: (234) 1 4974240-3 [email protected]


http://www.company-reg.com/

http://www.ican.org.ng/





BUSINESS INFORMATION SERVICES (cont)

Name of Company Category of Service Contact Address

Ministry of Internal Affairs Expatriate quota positions. Block F, Old Federal Secretariat Garki Area 1, PMB 16, Garki, Abuja Tel: (234) 9 2343369 Fax: (234) 9 23442029

National Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA)

Inward and outward trade missions, major suppliers, major buyers, business sector development, trade fairs.

15a, Ikorodu Road, Maryland, Lagos Tel: 234 1 4964727 Fax: (234) 1 4964737 [email protected]

Nigerian Customs Service Current tariff rates (imports and exports), import and export probation lists and other trade regulations.

Customs Headquarters, 3-7 Abiodun Street, Off Sultan Abubakar Way, Wuse Zone 3, PMB 26, Garki, Abuja Tel: (234) 9 5236394 Fax: (234) 9 5236394

Nigerian Employers‟ Consultative Association (NECA)

Labour issues and statistics. Elephant Cement House (6th Floor), ASSBIFI Road, Ikeja Central Business District Alausa, Ikeja, Lagos Tel: (234) 1 7742734

Nigerian Export Promotion Council (NEPC)

Information on export business in Nigeria – exportable products, export incentives, export processing zone activities.

Block 312 Kumba Street, Wuse Zone 2, Abuja Tel: (234) 9 5230930 Fax: (234) 9 5230931 Telex: 91510 EXXPORT NIG

Nigerian Export-Import (NEXIM) Bank

Financial and export services to investors, Export Credit Guarantee Facility (ECGF), Export Credit Insurance Facility (ECIF).

Plot 795, 8th Street, Off Impendence Avenue, PMB 276, Garki, Abuja Tel: (234) 9 2346141-7 Fax: (234) 9 2346151 [email protected]

Nigerian Immigration service Visas, work permit, passports and related matters.

Immigration Headquarters Block E, Old Federal Secretariat Area 1, Garki PO Box 38, Garki, Abuja Tel: (234) 9 2341875

Nigerian Investment Promotion Commission (NIPC)

Information about approvals for: commencement of new businesses, expatriate quota, registration of companies, imported capital, technology transfer agreements and filing of application for new businesses.

Plot 1181, Aguyi Ironsi Street, Maitama District PMB 381, Garki, Abuja Tel: (234) 9 4134380 Fax: (234) 9 4134306 [email protected] www.nipc-Nigeria.org

Nigerian Labour Congress (NLC)

Labour issues and statistics. 29 Olajuwon Street, Off Ojuelegba Road, Lagos Tel (234) 1 7743988




http://www.nipc-nigeria.org/



APPENDIX 8: OIL COMPANY LIST

Company Name Address

African Petroleum Plc AP House, 54/56, Broad Street, Lagos

Agip Energy & Natural Resources Limited 20, Adeyemo Alakija Street, Victoria Island, Lagos

Agip Nigeria Plc Agip House, 23, Engineering Close, Victoria Island, Lagos

Alfred James Petroleum Limited Yinka Folawiyo Plaza, (7th Floor), 38, Warehouse Road, Apapa, Lagos

Allied Energy Resources Limited Marble House, 1 Kingsway Road, Ikoyi

AMNI International Petroleum Development Co. Limited

Plot 1377B, tiamiyu Savage, Victoria Island, Lagos

Ashland Oil (Nig) Limited 10, Bishop Aboyade Cole Street, Victoria Island, Lagos

Atlas Petroleum Limited 1B, Ibiyinka Olorunnimbe Close, Off Amodu Ojikutu Street, Victoria Island, Lagos

Chevron Nigeria Limited KM 19, Epe Expressway, Lekki Penisula, Lagos

Dubri Oil Company Limited 8, Gabaro Close, Victoria Island, Lagos

Elf Oil (Nig.) Limited 33, Creek Road, Apapa, Lagos

Elf Petroleum Nigeria Limited 35, Kofo Abayomi Street, Victoria Island, Lagos

Esso Exploration & Production Company Limited

Plot 35, Idowu Taylor Street, Victoria Island, Lagos

Mobil Producing Nigeria Unlimited Mobil House, Likke Expressway, Victoria Island, Lagos

Nigerian Agip Oil Company Limited Agip House, Plot 23, Engineering Close, Victoria Island, Lagos

PanOcean Oil Corporation (Nig.) Limited 2/4 Adeola Odeku Street, Victoria Island, Lagos

Philip Oil Company Nig. Limited 19, Bishop Aboyade Cole Street, Victoria Island, Lagos

Shell Nigeria Exploration and Production Company Limited

c/o Shell Petroleum Dev. Company Nig. Ltd., 21/22 Marina, Lagos

Shell Petroleum Dev. Company Nig. Ltd 21/22 Marina, Lagos

Statoil/BPX Nig. Limited 1A, Bourdillon Road, Ikoyi, Lagos

Texaco Outer Shelf Nigeria Limited 8, Macarthy Street, Lagos

Texaco Overseas Nig Petroleum Co. Unltd 36, Gerrard Road, Ikoyi, Lagos

Total (Nig.) Exploration & Production Co. 4, Afribank Street, Victoria Island, Lagos



APPENDIX 9: DIRECTORY OF PETAN MEMBERS

Company Name Category of Service Contact Details Ana Industries Limited - Mud Supply & Engineering

- Drilling Fluid Services - Solid Mineral Processing

Reclamation Rd, PO Box 7884, Port Harcourt Tel: (234) 84 230159 Fax: (234) 84 230159 [email protected]

Ariboil Company Limited

- Fluids filtration & drilling - Drilling waste management - Cuttings boxes rentals - Drilling & Pet. Eng

Plot 219, Transamadi Industrial Layout, PMB 057, Port Harcourt Tel: (234) 84 238568 Fax: (234) 84 238568 [email protected]

BG Technical Ltd - Corrosion monitoring and control services - CP Installation & monitoring - Pigging supplies and services - Pipeline surveys

8, 29th Street, DDPA (Bendel Estate), Ugborikoko, Effurun, PO Box 1920 Warri Tel: (234) 84 236774 Fax: (234) 53 254492 [email protected]

Ciscon Nigeria Ltd - Casing & tubing services - Fishing & tool rentals - Eng & Maintenance Services, Compressors, pumps, etc) - Well completion services

Km 14, Aba/Port Harcourt , Expressway, Port Harcourt Tel: (234) 84 612081 Fax: (234) 84 613024 [email protected]

Drillog Petrodynamics Ltd

- Directional drilling & borehole surveys - Measurement while drilling (MWD)

Plot C, TransAmadi, Industrial Layout, PMB 047, Port Harcourt Tel: (234) 84 233719 Fax: (234) 84 232350 [email protected]

Dubi Nigeria Co Ltd - Fluids filtration & drilling, mud solids control - Drilling waste management

KM 16 Aba/PH Expressway, PO Box 8195, Port Harcourt Tel: (234) 84 612525 Fax: (234) 84 612525 [email protected]

Emval/Kanuco Nigeria Ltd

- Cementing & high pressure pumping - Mechanical Wireline/Completions - Drilling & Pet. Eng consultancy

5 Waico Road, PO Box 852, Warri

Kasolute Nigeria Ltd - Directional drilling & borehole surveys - Measurement while drilling (MWD)

Block B, Plot A-1, Trans Amadi Industrial Layout, Port Harcourt Tel: (234) 84 239605 Fax: (234) 84 230167 [email protected]

Lonestar Nigeria Ltd - Drilling/workover - Drilling & Petro Eng consultancy

37 Chechester Road, PMB 4104 Sapele

Oildata Wireline Services Ltd

- Cased hole electric line logging - Petrophysical & reservoir data services - Tubing conveyed perforating (TCP) services - Production Logging services - Horizontal logging services

Plot 282, Trans Amadi Industrial Layout, Port Harcourt

Oilscan Ltd - Cased hole electric line logging - Tubing conveyed Perforating (TCP) services

Mile 9, Airport Road, Rumuodomanya, PO Box 5325, Port Harcourt Tel: (234) 84 237024 Fax: (234) 84 237024 [email protected]

Oilserv Ltd - Pipeline construction/repair - Mechanical fabrication; flowline station works; electrical/ instrument work; process pipe work & facilities; - Flowline construction/repair; associated civil/structural

42 Nembe Road, Rumuibekwe Estate, Port Harcourt Tel: (234) 84 610739 Fax: (234) 1 261 0396 [email protected]












Company Name Category of Service Contact Details Oileast Services Limited

- Laboratory services - Mechanical completions - Production logging services - PVT services - Surface & bottom hole - Well analysis, testing

Plot 182, Trans Amadi Industrial Layout, PMB 5135, Port Harcourt Tel: (234) 84 239230 Fax: (234) 84 236942 [email protected]

Petrolog - Drilling services - Mud logging - Engineering services - Consultancy

2nd Floor, Suite 6/7, Plot 1225, Ahmadu Bello Way, Victoria Island, Lagos Tel: (234) 1 261 4030 Fax: (234) 1 613807 [email protected]

Reservoir Fluids Laboratory

- Laboratory services PVT services

Reclamation Road, PO Box 4347, Port Harcourt Tel: (234) 84 236645 Fax: (234) 84 236645 [email protected]

Sego Oilfield Services - Wireline (slickline) - Wellhead maintenance - Oilfield manpower supply

East-West Road, (Rumukwurushi Junction), PMB 052, Port Harcourt Tel: (234) 84 610905 [email protected]

SOWSCO Well Services

- Cementing & high pressure pumping - Brines Filtration - Pipeline pumping services

Plot 212, Trans Amadi Industrial, PO Box 6726, Port Harcourt Tel: (234) 84 238581 Fax; (234) 84 238581 [email protected]

Specialty Drilling Fluids Limited

- Drill cutting re-injection - Drilling waste management services - Pet. Machine shop services

Plot 184C Trans Amadi Industrial Layout, PO Box 3807, Port Harcourt Tel: (234) 84 235915 Fax: (234) 84 238786 [email protected]

Tecon Oil Services Limited

- Oilwell fishing - Completion tools & services - Engineering maintenance

47 Yeshayahu Lasode Cr, PO Box 74258, Victoria Island, Lagos Tel: (234) 1 261 8371 Fax: (234) 236846 [email protected]

Weafri Well Services Company Limited

- Cementing & high pressure pumping - Pipeline pumping services

58 Airport Road, PO Box 58, Warri Tel: (234) 53 257644 Fax: (234) 53 257644 [email protected]

Weltrek Limited - Manufacture or wellhead/ flowstation/compressor fail safe control panels - Engineering design and project management

Plot 35, Trans Amadi, Industrial Layout, PO Box 6585, Port Harcourt Tel: (234) 84 237902 Fax: (234) 84 237904 [email protected]

Wog Allied Services Nigeria Limited

- Directional drilling services - Oil well surveys - Instrument & tool rentals

4B Airport Road, PMB 1049, Effurun, Warri Tel: (234) 53 252630 [email protected]

Zukus Industries Ltd - High pressure pumping services - Portable multiphase well testing services - Marine services - Environmental services - Corrosion services

EVOC Yard, Off Enerhen Road, PO Box 1192, Warri Tel: (234) 53 250880 Fax: (234) 53 252392 [email protected]














APPENDIX 10: OTHER INDIGENEOUS TECHNICAL OIL FIELD SERVICE COMPANIES

Name of Service Company Category of Service Contact Details

Adamac Group of Companies - Cementing and high pressure pumping

Plot 20 East-West Road, Rumuodara, PO Box 4363, Port Harcourt Tel: (234) 84 332856 Fax: (234) 84 335578

Akenneth Pilling Foundation Nigeria Limited

- Piling Plot 217 Trans Amadi Industrial Layout, Port Harcourt

Arco Petrochemical Engineering Company Limited

- Supply/installation/maintenance of compressors, turbines & pressure vessels

42 Adetokunbo Adememola Street, Victoria Island, PO Box 50739, Ikoyi, Lagos Tel: (234) 1 261 6132 Fax: (234) 1 261 7096 [email protected]

Atlantic Waste Management Limited

- Oilfield waste management 11 Ademola Street, SW Ikoyi, PO Box 53988, Falomo, Lagos Tel: (234 1 686926 Fax: (234) 1 269 1749

Baker Marine Nigerian Limited - Wireline using lift barge 46 Raymond Njoku Street, SW Ikoyi, Lagos Tel: (234) 1 269 3147 Fax: (234) 1 269 3149

Baywood Continental Limited - Engineering - Construction - Oilfield procurement

92 Shyllon Street, Palmgroove, Lagos Tel: (234) 1 826100 Fax: (234) 1 496 8393

Cakasa Nigeria Company Limited - Engineering design & construction services

115 Palm Avenue, PO Box 871, Mushin, Lagos Tel: (234) 1 452 4349 Fax: (234) 1 452 2887

Global Energy Company Limited - Multiphase technology - Geological lab services

18B, Kofo Abayomi Street, PO Box 73531, Victoria Island, Lagos Tel: (234) 1 261 6949 Fax: (234) 1 262 1296 [email protected]

Guildpine Limited - Fishing services 27 Aba Road, PO Box 4452, Port Harcourt Tel: (234) 84 330872 Fax: (234) 84 330617

Ideas Nigeria Limited - Oilfield waste management services

17 Adeniyi Jones Avenue, Ikeja, Lagos Tel: (234) 1 493 6959 Fax: (234) 493 6959

Interdrill Nigeria Limited - Mud engineering services 17 St Mary‟s Hospital Road (Off Airport Road), PO Box 3273,Warri

Bristecom engineering Coy Ltd - Engineering & construction 28 Ashafa Tijani Street, Ifako, Gbagada, PO Box 54752, Ifako, Lagos Tel: 01 8043793 [email protected]

Contraco (Nigeria) Limited - Consultancy, agency, supplies engineering, fabrication, project management, shipping and handling services

Suites 8D Prince‟s Court, 37 Ahmed Obibudo Street, Victoria Island, Lagos Tel: (234) 2623526 Fax: (234) 1 7748001 [email protected]

Source: UKTI







APPENDIX 11: MAJOR SERVICE COMPANIES

Name of Service Company

Category of Service Contact Address

BJ Services Company Nigeria Ltd

- Cementing Plot 470 Trans Amadi Industrial Layout, PMB 11, Port Harcourt Tel: (234) 84 335428

Baker Nigeria Limited - Well test - Drilling mud

Plot 268 Trans Amadi Industrial Layout, PMB 5241, Port Harcourt Tel: (234) 84 332963 Fax: (234) 1 264 7178

Baroid of Nigeria Limited - Drilling mud Plot 18/19 PH/ Aba Expressway, PO Box 404, Port Harcourt Tel: (234) 84 235712 Fax: (234) 84 238329

Camcon Limited, Nigeria - Drill bits - Completions

18A Thompson Avenue, Ikoyi, PO Box 5009, Lagos

Cooper Camerounn Corporation

- Wellhead supply maintenance 18B Thompson Avenue, Ikoyi, Lagos Tel: (234) 1 269 2267 Fax: (234) 84 239112

Deutag Drilling Nigeria Limited

- Drilling Km 15 Ph/Aba Expressway, PO Box 3604, Port Harcourt Tel: (234) 84 237210

Ecodrill Nigeria Limited - Well test 1A Elelenwo Road, Rumukwurusi, PO Box 3604, Port Harcourt

Global Marine Nigeria Limited

- Drilling rigs Km 14 PH/Aba Expressway, Port Harcourt

Global Petroleum Resources Limited

- Engineering Project Management - Support services

299B Jide Oki Street, Nigeria Tel: (234) 84 7747982

Halliburton Energy Services Nigeria Limited

- Mud supply - Cementing - Well test

Plot 158 Trans Amadi Industrial Layout, Port Harcourt Tel: (234) 84 236342

Intel Services Limited - Integrated logistic services Plot 474 Trans Amadi Industrial Layout, PMB 6034, Port Harcourt Te; (234) 84 230019 Fax: (234) 84 234214

Mallard Bay Drilling Nigeria Limited

- Drilling rigs Plot 72/74 Nkpogu Road, Port Harcourt Tel/Fax: (234) 84 23730

NRB Drilling Services Limited

- Drilling rigs Plot 97 Rumuogba Estate, PO Box 8233, Port Harcourt Tel: (234) 84 237762

Nexus Drilling Services Limited

- Downhole dehydration technology - Secondary recovery technology - Production optimisation techniques

298B Corporation Drive, Dolphine Estate, Osborne Road, Ikoyi,. Lagos Tel: (234) 1 269 3507 Fax: (234) 1 269 3505

Noble Drilling Nigeria Limited

- Drilling rigs Km 14 PH/Aba Expressway, PMB 5218, Port Harcourt Tel: (234) 84 331238 Fax: (234) 1 269 3504

Skkor Services Limited - Print production - Public relations

172 Oworoshoki Expressway, Gbagada Phase 1, Lagos Tel: (234) 1 4704701

Remm Oil Services Limited

- Coring - Machine shop services - Drilling bits

Plot 52 Trans Amadi Industrial Layout, Port Harcourt Tel: (234) 84 239703 Fax: (234) 84 239703

Schlumberger Oilfield Services

- Reservoir evaluation seismic - Drilling and measurement - Reservoir evaluation wireline - Cementing and stimulation

17/19 Idowu Taylor Street, Victoria Island, PO Box 1625, Lagos Tel: (234) 1 2619200 Fax: (234) 1 2617869

Source: UKTI



APPENDIX 12: KEY INDUSTRY CONTACTS IN UK

Name of Service Company

Category of Service Contact Address

Association of British Offshore Industries (ABOI)

ABOI represents UK companies involved in the offshore/ onshore oil, gas and petrochemical industries.

Tel: +44 (0)20 7928 9199 www.bmec.org.uk

British Chemical Engineering Contractors Association (BCECA)

Comprises principal UK-based process and utilities engineering and construction contractors serving worldwide.

Tel: +44 (0)20 7839 6514 www.bceca.org.uk

British Pipeline Agency (BPA)

BPA provides consultancy services to the onshore oil & gas pipeline market.

Tel: +44 (0)1422 242200 www.bpa.co.uk

Cogent SSC (formerly OPITO)

Sector Skills Council for UK oil and gas upstream and downstream petrochemical and chemical industries.

Tel: +44 (0)1224 787800 www.cogent-ssc.com

Department of Trade & Industry Oil & Gas Directorate

Key source of UK onshore and offshore oil and gas information.

Tel: +44 (0)20 7215 5000 www.og.dti.gov.uk

Energy Industries Council (EIC)

Represents UK companies supplying goods and services to energy industries, with a major database of suppliers and individual market reports.

Tel: +44 (0)20 7221 2043 www.the-eic.com

Energy Institute

Leading professional body for the UK energy industries, created by the merger of the Institute of Petroleum and the Institute of Energy.

Tel: +44 (0)20 7467 7100 www.energyinst.org.uk

Energy & Utility Sector Skills Council

Develops industry skills in gas storage, metering, transmission, distribution, installation and LPG.

Tel: +44 (0)845 0779922

Environmental Industries Sector Unit (EISU)

EISU is part of UK Trade & Investment, promoting UK environmental industries overseas.

Tel: +44 (0)20 7215 4372 www.eisu.org.uk

GAMBICA Represents UK companies involved in instrumentation, control and process automation.

Tel: +44 (0)20 7642 8080 www.gambica.org.uk

Global Training & Education Partnership (GTEP)

Delivers training and education solutions in the oil, gas and petrochemicals industries.

Tel: +44 (0)141 427 0735 www.gtep.org.uk

Industry Technology Forum (ITF)

Fosters new technology development for the oil and gas industry.

Tel: +44 (0)1224 853400 www.oil-itf.com

Institution of Gas Engineers & Managers (IGEM)

Professional organisation representing UK and international gas engineers and managers.

Tel: +44 (0)1509 282728 www.igaseng.com

LP Gas Association (LPGA)

Represents equipment and fuel suppliers for the LPG industry.

Tel: +44 (0)1425 461612 www.lpga.co.uk

Natural Gas Vehicle Association (NGVA)

Represents a wide range of companies with commercial interest in the NGV market.

Tel: +44 (0)1926 462900 www.ngva.co.uk

Northern Offshore Federation (NOF)

Represents offshore oil and gas suppliers in national and international markets.

Tel: +44 (0)191 417 4254 www.nof.co.uk

Pipeline Industries Guild (PIG)

Represents operators, suppliers, contractors and service providers in the UK pipeline industries.

Tel: +44 (0)20 7235 7938 www.pipeguild.com

Society of British Gas Industries (SBGI)

Represents onshore gas industry for transmission, distribution and utilisation, including equipment, service suppliers and users-throughout supply chain.

Tel: +44 (0)1926 334357 www.sbgi.org.uk

http://www.bmec.org.uk/

http://www.bceca.org.uk/

http://www.bpa.co.uk/

http://www.cogent-ssc.com/

http://www.og.dti.gov.uk/

http://www.the-eic.com/

http://www.energyinst.org.uk/

http://www.eisu.org.uk/

http://www.gambica.org.uk/

http://www.gtep.org.uk/

http://www.oil-itf.com/

http://www.igaseng.com/

http://www.lpga.co.uk/

http://www.ngva.co.uk/


http://www.pipeguild.com/

http://www.sbgi.org.uk/



Society for Underwater Technology (SUT)

Learned society for study of underwater technology and offshore engineering

Tel: +44 (0)20 7382 2601 www.sut.org.uk

Subsea UK

Represents UK operators, contractors and suppliers exporting subsea products and services and developing new partnerships.

Tel: +44 (0)1224 355355 www.subseaUK.org

UK Combined Heat and Power Association (UKCHPA)

Represents developers of large-scale cogeneration systems and new micro- and domestic scale CHP systems and service providers.

Tel: +44 (0)20 7828 4077 www.chpa.cuk

UK Offshore Operators Association (UKOOA)

Comprises oil and gas operators on the UK Continental Shelf.

Tel: +44 (0)20 7802 2400 www.oilandgas.org.uk

UK Petroleum Industry Association (UKPIA)

Represents major oil refiners with operations in the UK.

Tel: +44 (0)20 7240 0289 www.ukpia.com

UK Trade & Investment International Oil & Gas Business and Engineering Directorate

UK Trade & Investment is a Government body which supports companies in the UK trading internationally and overseas entrepreneurs seeking to locate in the UK.

Tel: +44 (0)20 7215 8000 www.uktradeinvest.gov.uk

To find out more details about UK oil and gas industry suppliers, you can contact your local British Embassy, Consulate-General or High Commission. www.fco.gov.uk

http://www.sut.org.uk/

http://www.subseauk.org/

http://www.chpa.cuk/

http://www.oilandgas.org.uk/

http://www.ukpia.com/


http://www.fco.gov.uk/



APPENDIX 13: SELECTED WEBSITES

Web Address

Description of Site

www.bpeng.org Bureau of Public Enterprises (BPE), responsible for the country‟s privatisation programme

www.cenbank.org Central Bank of Nigeria;

www.dprrnigeria.com Department of Petroleum and Natural Resources

www.ecgd.gov.uk UK Export Credit Agency

www.eia.doe.gov US Department of Energy

www.expdisc.com Provides financial information on Nigeria

www.nape-nigeria.org Nigerian Association of Petroleum Explorationists

www.nigeriabusinessinfo.com Information portal on Nigeria

www.nigeriafirst.org Office of Public Communications, State House

www.nigeria-licenseround.com Information on forthcoming licensing rounds

www.nnpc-london.com NNPC‟s London office

www.nnpc-nigeria.com Nigeria‟s State oil company

www.nigeriannews.net Nigeria news organisation

www.nigerianoil-gas.com

Independent privately owned website providing information on Nigeria‟s oil & gas

www.nigeriainfonet.com Information portal

www.nigeriasatomejda.com Official website of the Sao Tome JDZ.

www.nig-gasassociation.org Nigerian Gas Association

www.ngex.com/snc Sovereign National Conference

www.ngrguardiannews.com A leading newspaper, The Guardian

www.nopa.net Official website of the Nigerian government

www.opec.oeg OPEC‟s official website

www.oil.com General information portal

www.petroinfonigeria.com

Official website of embryonic Ministry of Petroleum

www.shellnigeria.com Shell‟s Nigeria website

www.spenigeria.spe.org SPEs – Nigeria division

www.thisdayonline.com A leading newspaper, This Day

www.vanguardngr.com A leading newspaper, Vanguard

www.vemacular.co.uk UK based Nigerian news organisation.

http://www.bpeng.org/

http://www.cenbank.org/

http://www.clprnigeria.com/

http://www.ecgd.gov.uk/

http://www.eia.cloe.gov/

http://www.expdisc.com/

http://www.nape-nigeria.org/

http://www.nigeriabusinessinfo.com/

http://www.nigerfirst.org/

http://www.nigeria-licenseround.com/

http://www.nnpc-london.com/


http://www.nigeriannews.net/

http://www.nigerianoil-gas.com/

http://www.nigeriainfonet.com/

http://www.nigeriaatomejda.com/

http://www.nig-gasassociation.org/

http://www.ngex.com/snc

http://www.ngrguardiannews.com/

http://www.nopa.net/

http://www.opec.oeg/

http://www.oil.com/

http://www.petroinfonigeria.com/

http://www.shellnigeria.com/

http://www.spenigeria.spe.org/

http://www.thisdayonline.com/

http://www.vanguardngr.com/

http://www.vemacular.co.uk/



APPENDIX 14: GLOSSARY OF TERMS

Abbreviation Full Description

AENR Agip Energy & National Resources

API American Petroleum Institute

bbl Barrel

Bopd Barrels of oil per day

BPE Bureau for Public Enterprises

CNG Compressed Natural Gas

CNL Chevron Nigeria Limited

DPR Department of Petroleum Resources

ECGD Export Credit Guarantee Department

ECOWAS Economic Community of West African States

EEPNL Esso Exploration & Production Nigeria Ltd

EPC Engineering, Procurement & Construction

EPCL Eleme Petrochemicals Company Limited

EPNL Elf Petroleum Nigeria Limited

FEED Front End Engineering Design

FEPA Federal Environmental Protection Agency (FEPA)

FGN Federal Government of Nigeria

FMEnv Federal Ministry of the Environment

FPSO Floating Production Storage & Offloading

GTL Gas to Liquids

H/SON Hydro-Carbon Services of Nigeria Limited

IDCC Industrial Development Coordination Committee

IDSL Integrated Data Services Limited

IPP Independent Power Production

JDA Joint Development Authority

JV Joint Venture

KPPC Kaduna Refining and Petrochemicals Co Ltd

LNG Liquified Natural Gas

LPG Liquified Petroleum Gas

Mtpa Million tonnes per annum

MPN Mobil Production Nigeria

NAE Nigerian Agip Exploration Ltd

NAOC Nigerian Agip Oil Company Limited

NEPA National Electric Power Authority (NEPA)

NETCO National Engineering and Technical Company

PENGASSAN Natural Gas Senior

NUPENG Natural Union

NGC Nigerian Gas Company Limited

NLNG Nigerian LNG

NNPC Nigerian National Petroleum Corporation

NPDC Nigerian Petroleum Development Co. Ltd

PHRC Pat Harcourt Refining Company Limited

PPMC Pipelines & Products Marketing Company Ltd

PSC Production Sharing Contract

PTDF Petroleum Technology Development Fund (PTDF)

scfd Standard Cubic Feet Day

SNEPCO Shell Nigeria Exploration & Production Co Ltd

SNG Shell Nigeria Gas Limited (SNG)

SPDC Shell Petroleum Dev. Co. of Nigeria Ltd

SNOP Shell Nigeria Oil Products Limited

STAR Star Deep Water Petroleum Limited

TOPCON Texaco Overseas Petroleum Company

TUPNI Total Upstream Nigeria Limited

WAGP West African Gas Pipeline

WRPC Warri Refining and Petrochemicals Co Ltd



APPENDIX 15: ENERGY CONVERSION TABLE

To From

Billion cubic metres Gas bcm

Billion cubic Feet gas bcf

Million barrels oil equivalent mmboe

Million tonnes oil equivalent mmtoe

Million tonnes LNG

Trillion British thermal units

Multiply by Billion cubic metres gas bcm 1 35.31 6.10 0.83 0.7 36.7

Billion cubic feet gas bcf 0.28 1 0.17 0.024 0.020 1.04 Million barrels oil equivalent mmboe 0.166 6 1 0.14 0.116 6.02 Million tonnes oil equivalent mmtoe 1.20 42.55 7.35 1 0.86 44.21 Million tonnes LNG 1.41 49.74 8.59 1.17 1 51.69 Trillion British thermal units 0.27 0.96 0.17 0.023 0.019 1