OBG talks to Emeka Ene, Chairman, Petroleum Technology Association of Nigeria (PETAN)

Interview: Emeka Ene

To what extent do local content laws in the region inhibit international growth and trade?

EMEKA ENE: At first glance, local content laws can give the impression of trying to raise barriers. However, we see local content as a successful means to stimulating growth, investment and jobs. The local content drive across the region will encourage reciprocity in many countries, as people will always look for partners wherever they are. It is akin to a ripple effect: for example, in Ghana, where service companies are collaborating with Nigerian companies, or in the Middle East, where many Nigerians work in the technical service industry.

On the other hand, the danger of local content is that an industry can fall into rent collection. To avoid this outcome, the Nigerian Content Development and Monitoring Board (NCDMB) has led efforts to create a more level playing field for investors and attend to their priorities, namely security, property rights and contract sanctity. Therefore, regulating local content can create the stable environment that investors are looking for.

How can knowledge transfer that happens in technical partnerships be measured and enforced?

ENE: Research on entrepreneurship in developing countries has suggested that creative destruction can form new markets, products and industries. Local content can foster innovation, in turn leading to entrepreneurial ventures – and as a result, knowledge transfer.

This is most likely to happen when there is a sector with high levels of technical education as is the case with IT in Ireland or finance in Singapore. In Nigeria’s oil and gas sector it is possible to find technocrats with previous experience inside multinational companies. They are the ideal recipients of knowledge transfer.

By contrast, a traditional agency-based model, wherein the local partner is merely someone with political leverage, will only serve to push finished products. Economic growth in Nigeria needs a combination of local content regulation and knowledgeable professionals. Peer review and even competition are necessary to ensuring that there is knowledge transfer. Accountability is also integral in terms of modulating activity and upholding all relevant key performance indicators.

To what extent is training capacity keeping pace with the increase in activity by domestic firms?

ENE: When small service companies in the domestic energy sector transform into larger organisations, they always face the challenge of succession planning. On the one hand, we see a younger generation more willing to take risks and with more innovative skills than their older counterparts. At the same time, there is also potential for a disconnect between academia and the workplace, driving up human resource costs. This is why organisations such as PETAN, NCDMB and the Petroleum Technology Development Fund have coordinated their training and extended this collaboration to universities as well. Regardless of the regulatory gridlock, these projects are still ongoing owing to Nigeria’s natural advantages. It is precisely this demand for talent that fuels the training initiatives we see today.

What sort of scope do you foresee for encouraging clustering in the downstream sector?

ENE: We are currently pushing the concept of an energy corridor located in the Niger Delta which will spur infrastructure development and clusters of economic activity around that infrastructure. These clusters will also help increase security throughout the country by creating jobs in targeted regions and so play a role in encouraging collaboration and knowledge-sharing.

While of course the oil and gas sector cannot and does not on its own accord contribute significantly to job creation, it can give a certain degree of leverage to other industries such as agriculture and petrochemicals. After all, oil is not simply a commodity but also an enabler of economic activity. As a result, the development of activity centres for the energy sector can contribute to the development of economies of scale, not only in terms of industry output but also in job creation.