Local Content Era and Its Impacts on Offshore Development Economics: Lessons from Nigeria

摘要

Nigeria targets a 10% growth by the year 2020 and be among the top twenty economies in the world. However, access to affordable, secure and clean energy remains very abysmal. There is the need to stimulate other sectors of the economy like manufacturing and mining, by leveraging on its oil and gas sector. Since 1956, foreign investments have been very high and rewarding as the oil and gas sector accounted for 95% of Federally Collected Revenue in 2014. Much dependence on this sector however, leaves much to be desired as the sector alone seems not to have induced economic development, meaningfully. Thus, the aspiration of the government does not lie in the accumulation of economic rent alone but also in the development of manpower, technology, employment and access to energy. These objectives brought industry restructuring and fiscal reform proposals to condition the IOCs to add significant value to the economy per dollar expended for developing petroleum resources. The purpose of the oil and gas local content act of 2010 is to actualize real industrialization of Nigeria, through encouraging indigenous ownership of assets in the oil and gas industry. The introduction of the oil and gas local content act of 2010 became inevitable. The Act and the marginal field operation program of 2004 have encouraged the participation of indigenous operators in the petroleum sector. The jettisoned 2008 PIB had provisions intended to support the 2010 ACT with 80% foreign spending limit for cost recovery and tax computation. Considering free and competitive global market economy, this appears to be a disincentive to foreign investment. Similarly, reforms in the gas sector were coined towards encouraging local utilization of natural gas through the domestic supply obligation. This paper evaluates the impact of the reforms on offshore petroleum development in Nigeria; implementations on offshore fields like Erha/Erha north, Agbami and Bonga, operated by IOCs; the successes as well as challenges of the local content policy on offshore economics.