IPPG raises concerns over 3% HCDT fund, attributes increased project costs to multiple levies

Oredola Adeola

The Independent Petroleum Producers Group (IPPG) has raised concerns over the Nigerian Oil and Gas Industry Content Development Act (NOGICD) of 2010, which mandates oil and gas production companies operating in Nigeria to set aside 3% of project cost (for projects above $1 million) for Human Capital Development training requirements, stating that this requirement is an additional levy on top of the existing 1% NCD levy, leading to a significant increase in the overall cost of delivering projects in Nigeria.

Mr. Abdulrazaq Isa, Chairman of the IPPG, stated this disclosure during his opening address delivered at the 12th edition of the Practical Nigerian Content (PNC) Forum, on Tuesday held in Bayelsa State.

The Chairman of the association of twenty-nine indigenous exploration and production companies stated that despite the laudable benefit of Human Capital Development training, the requirement has translated to a multiplication of levies after the industry participants are already equally required to
contribute a separate 1% of total costs as an NCD levy.

He said, “This invariably leads to higher project costs especially as the training is not allowed to be provided directly to company staff and service providers.

“Due to this and other contractual or administrative reasons, the process of complying with local content requirements has, on many occasions, proven to significantly increase the overall cost of delivering projects in Nigeria.

The IPPG Chairman therefore emphasised that the unintended outcome of setting 3% of project cost for training requires some detailed review to ensure that we are not losing new investments to emerging investment destinations in the process of driving our local content agenda.

Isa stated that Nigeria has, because of the strict local content requirements, gradually seen a reduction in the presence of leading international oil & gas service providers, many of whom are leaving Nigeria in droves.

He said, “Unfortunately, while we continue to prioritize local content development, we must recognize that these international players have a key role to play in ensuring technology transfer and knowledge sharing that our local players can benefit from.

“Our local players still lack the requisite skills to adequately support our deep offshore operations and other specialised operations,” the IPPG Chairman stated.

The Association therefore recommended that ways should be sought to modify local content requirements to ensure that the oil and gas industry in Nigeria, remains globally competitive and sustainable.

Isa said, “Group, we remain optimistic that with the vigor with which the local content policy has been implemented, we can get it right for the long-term growth of our industry.”

Engr Simbi Wabote, the Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB), in his response, clarified that the Board has never requested the HCDT money from the oil and gas companies, apart from the percentage of total costs as Nigerian Content Development levy.

According to him, the HCDT fund is supposed to be used by companies to build human capacity.

The NCDMB’s boss also expressed concern over the poor human capacity index of Nigeria, which he described as perhaps the poorest in the world.

He noted that most of the facilities and assets acquired from the divestment of the International Oil Companies (IOCs) will require capacity to be developed.

Wabote said, “When the IOCs divested, they also moved on with the existing human capacity, which is presently aging, and these few individuals with industry requisite capacity are being used to bleed and sweat the divested asset.

He has therefore warned that somewhere along the line, these people will fade away, and Nigeria will be battling with the search for human capacity to replace the experienced oil workers.

Engr Wabote therefore emphasized that the HCDT is for the oil companies in Nigeria to think and set aside money required to be used specifically for human capacity development.

He said, “For instance, the NCDMB has collaborated with the Petroleum Technology Development Fund (PTDF) to inaugurate a skill center in Port Harcourt. The IPPG was invited to use its HCDT money to develop the center to build capacity for the industry for the future.”

The NCDMB’s boss has therefore charged the oil companies to objectively and creatively use the HCDT fund to fill the entire oil industry with the best human resources needed in the sector.