(http://www.thenationonlineng.net/2011/thumbnail.php?file=petan_874457873.jpg&size=article_medium) The Petroleum Technology Association of Nigeria (PETAN) The Petroleum Tech[/size]nology Association of [/font][/size]Nigeria (PETAN) has identified inadequate access to finance as the major challenge to increasing local capacity in the oil and gas sector. It insisted that the problem was not lack of technical know-how as some stakeholders believe.
[/size] The Chairman of the association, Mr Emeka Ene, during an interactive session with the reporters at the ongoing Offshore Technology Conference in Houston, United States, said the challenge in not meeting the expected growth in local capacity lies in capitalisation of the industry and not lack of skills.[/font][/size]
He said there has been gross inadequate capital inflow. "The truth is that there has been the absence of the required capital to build the capacity needed in-country. The capital to build the infrastructure that is needed is absent. That is the bottom-line. The Nigerian companies have been playing a losing game. Global finance the world over for companies engaged in oil and gas activities is one or two per cent interest rate and it is usually in the long term – five years, 10 years, 15 years, 25 years period. In Nigeria, what local companies get is 20 or 25 per cent interest rate on two-year capital," Ene said. [/font][/font][/size]
He said it is very difficult for indigeneous players in the industry to compete, stressing that the advantage of getting bankable projects with the Local Content Act comes with the Nigerian content development fund next year. He said if this is properly managed, it would create the link to boost the capacity of local companies. [/font]
[/size]On access to the Local Content Fund, Ene said the scheme (fund) is at its pilot stage. "I know that PETAN has been very closely involved with the Nigerian Content Development and Monitoring Board to try and build the criteria for developing such projects. There are lots of challenges. Even the challenge of not getting interest rates lower is a big challenge to the industry. But right now, there has been a ray of hope," he added.
[/size]The PETAN chair said local banks have short term funds that can’t cope with the huge finance required in the oil and gas industry. "You can’t compare what we do in Nigeria to a country like China that has a 50 to 100-year plan. So, we can’t be talking about funding arrangements of two to three years for projects and then we want to compete with countries with far longer term project plans. That is why Nigerian companies have not grown because they are not getting the right capital and the right framework to do projects from creditors.
[/size]On the Petroleum Industry Bill (PIB), he explained that the bill creates a set of rules on how operators can play the game in the oil and gas industry. And without the PIB becoming law, the Local Content Act will be like someone standing on one leg, rather than two, he explained.
[/size]The PIB, he said, is going to free up the international oil companies such as Shell, ExxonMobil, Chevron and the likes to invest more in local capacity building for the long term. "Indeed, the oil and gas industry investments are usually in the very long term of 10 to 20 years. So if you don’t have the rule to govern such long period of time you don’t get it right. So we think the PIB is very crucial for the growth of Nigerian companies. The PIB needs to be simplified so that everybody understands the rule. And in fact, the local content that is embedded in the PIB will create the kind of stimulus that we see in countries such as Japan, China, Brazil and Malaysia where government policies had helped to stimulate long term growth," he said.
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