Nigerian National Petroleum Company Limited (NNPCL) and Nigerian Content Development & Monitoring Board (NCDMB), yesterday, signed a Memorandum of Understanding with international oil companies (IOCs) to reduce the contracting cycle to 180 days (about six months).
On paper, a contract cycle in the oil and gas sector in Nigeria takes about 10 months, and sometimes drags on for as long as 10 years.
The long-drawn cycle, a major contributor to high unit cost of production per barrel of crude oil in the country, is usually process induced, occasioned by bureaucracy.
NNPCL, in a statement, described the MoU executed in Abuja as demonstration of commitment to the efficiency mandate enshrined in the Petroleum Industry Act (PIA), which is hinged on developing an industry framework for optimised contracting cycle.
It said an optimised cycle is expected to improve ease of doing business, reduce cost, and drive efficiency. This will, consequently, translate to production growth, increased revenues and improved profitability.
The national oil company, which is pitching the move as leeway to the double-digit economic growth rate canvassed by the Federal Government, said the move would generate tremendous value for all stakeholders.
Key benefits of the framework in the MoU include reduction of the contracting cycle for open competitive tender, selective tender, and single sourcing tender to 180, 178, and 128 working days, compared to the current best effort performance of 327, 333, and 185 working days.
Speaking during the event, NNPCL’s Group Chief Executive Officer, Mele Kyari, said the agreement heralds exciting times for the nation’s oil and gas industry and stands as a bold testimony that the firm is plunging into a future of hope, productivity and success.
Kyari, who was represented by Executive Vice President (Upstream), Oritsemeyiwa Eyesan, said with oil and gas as bedrock of Nigeria’s economy, there is the need to get the industry’s contracting process right, to boost the economy.
NCDMB’s Executive Secretary, Simbi Wabote, described the MoU as a critical step towards enhancing the nation’s crude oil production. In their various remarks, the IOCs, represented by the MDs/Country Chairs of Shell, ExxonMobil, Chevron, TotalEnergies and ENI, all pledged their commitment and support towards implementation of the MoU for the benefit of all parties.
The framework is in line with the Nigerian Upstream Cost Optimisation Programme and in consonance with Mr. President’s directive for NNPCL and NCDMB to engage the petroleum industry with a view to improving performance.
The development is also in line with key mandates of NNPCL under the PIA’s Article 53 (7), which empowers it to operate as a profitable and efficient commercial entity.