LEVERAGING NIGERIAN CONTENT FOR GREATER OPPORTUNITIES

1. LEVERAGING NIGERIAN CONTENT FOR GREATER OPPORTUNITIES Presentation at the PETAN OTC 2012 Panel Session by Engr. E.C. Nwapa (FNSE), Executive Secretary, NCDMB May 2012

2. NATIONAL REVENUE PROFILEOver Dependence on Oil • A Threat to Oil will threaten National Survival • Oil & Gas Industry is repositioning to Promote Utilization of Local goods & Services • Building capacity on the back of mega Projects and Operations • Other Linkage sectors need to be mobilized

3. Snapshot of reserves: • Oil-36.22 billion barrels (2.92% of world reserves) • Gas- 178 TCF • (2.98% of the world reserves) • 6 Majors • Addax, Chevron, Eni-Agip, Exxon Mobil, Shell and Total • Control 98% of reserves and production assets • Indigenous companies • Over 30 operators (Afren, Oando, Seplat etc) • Over 30 independents and local operators ( Summit, Conoil etc) • Own 2% of reserves Distribution of Oil and Gas Assets. Foreign Vs Indigenous • Indigenous players positioned to be in the league of High Performance Energy Companies (HPEC) • More fields ready for indigenous players - OML 26,30,34, 40 & 42 • Majors allocating oil fields for Full Field Development using local capabilities as part of R&D program DPR: Oil blocks in Nigeria NDPR • Combined daily production capacity of 80,000 bpd • With aggressive equity participation indigenous players will increase market share • NPDC making significant progress , hitting the 100 barrels per day equivalent mark. • Full Field Development by indigenous companies being promoted

4. Over 65% of industry spend domiciled Over 95% of industry spend Abroad 30yrs 10yrs Changing the Pre – NOGICD Act Footprint Bringing Nigerian Jobs Back $14b $78b $20b $20b $9b $39b $7b $39b $107b $214b Pre-Nigerian Content Implementation Buying rather than selling. Exporting Nigerian Jobs Estimated capital flight $380 billion Estimated lost job opportunities 2 million 2006- 2020 Nigerian Content Implementation Bringing Nigerian Jobs Back Hub for oil and gas services Estimated $191 billion could be retained 300,000 new direct job opportunities -(Engineering, Sciences, Technicians etc) Defining the Roadmap for Change Technical Services Fabrication Engineering Procurement Research & Development

5. Introduction of the Nigerian Content Act Signed into law by Mr. President in April 22 2010 Established the Nig Content Devt and Monitoring Board Inaugurated Governing Council for the Board August 2010 NCDMB commenced operations in Yenagoa in June 2010 NCDMB has steered non-disruptive implementation for 2 years

6. 5 3 2 1 • Promote establishment of support industries that will sustain oil and gas industry operations • Enhance multiplier effect of oil and gas investments in economy • Develop pool of competitive supply chain rooted in oil bearing communities • Create customized training and sustainable employment opportunities • structured awareness and enlightment campaigns • Develop local capacity in key areas such as manufacturing fabrication, engineering etc • Promote indigenous ownership of assets and utilization of indigenous assets in oil and gas operations • Develop indigenous skills pool across oil and gas value chain • Provides mandatory training requirements on the back of projects • Creates JQS to manage and track available skills 4 Thrust of the NOGIC Act 2010 Nigerian Content aspiration derived from the thrust of the NOGIC Act are focused on ensuring that companies benefitting from our natural resources also contribute to economic development of Nigeria . Maximize utilization of Nigerian made goods Maximize utilization of Nigerian human resources Link the oil and gas industry with other sectors of the Economy Focus on community participation in the supply chain • Institutionalize inter-agency collaboration on local content development • Integrate NCDMB into planning and contracting process to ensure Nigerian Content COUNTS • Dedicated NCDF for capacity building Foster institutional collaboration

7. HMPRs Medium Term Targets - 2010 to 2015 Retain $10 billion out of $20 Billion average annual industry spend Create over 30000 direct employment and training opportunities Establish 3 to 4 pipe mills to service industry demands Develop 1 or 2 dockyards and maximize use of existing shipyards Increase indegenous ownership of marine assets to 60% minimum Integrate indigenes and businesses in the oil producing areas Capture 50 to 70 % of banking, insurance and legal services

8. Dry dock/shipyard Manufacturing/ Assy Rig/vessel owner Human Capital Dev Steel mills Facility / upgrades R&D Manufacturing/assembly NIGERIAN CONTENT ROAD MAP Realizing the Vision – Instrument for the industrialization of Nigeria Various Initiatives in:i) R&Dii) Human Capital developmentiii) Steel Pipemills and associated industriesiv) Manufacturing and Component Assemblyv) Marine Vessel and Rig Ownershipvi) New facilities and Upgrade of existing infrastructurevii) Dry Docks and Shipyards A MULTI LANE HIGHWAY TOWARDS INDUSTRIALISATION

9. Investment policy • Contracts approval • Bid rounds • NCDF • Capacity development • NC regulation • Interministerial Interface- RMRDC on R&D • Nigerian content scope on projects (NCCC) • Capacity development • 1% remittance to NCDF • Nigerian Content Consultative Forum (NCCF) • Capacity development • Nigerian Content Equipment Certificate (NCEC) • 1% remittance to NCDF • Foreign Direct Investment • Benchmark models (learning from others) Stakeholder Collaboration Implementation Model Government Oil companies Service providers International partners NCDMB act as facilitator, bringing together a broad array of stakeholders

10. Nigerian Content Roadmap developed to manage challenges , deepen capacity and maximise utilisation of Nigerian goods and services Implementation challenges • Strict compliance without disrupting industry activities – Capacity Gaps • Handling increased cost + schedule • Transparent effective model for NCDF Management • Ensuring Quality of delivery • Absence of manufacturing capability and confidence to use local goods- • Extending implementation to Downstream • Growing new organization to meet wide responsibility • Funding the Boards operations from appropriation • Interface • Exposure to frequent litigation

11. Nigerian Content Measurement Partial NC Real NC Based on proportion of value of contracts awarded to Nigerian Companies Based on proportion of contract sums spent on Nigerian made goods NC VALUE (70% - 85%) NC VALUE (12% - 18%) • There is marked increase in contract award to Nigerian companies • Spend proportion in Nigeria has peaked • Without manufacturing, no further NC Growth • No employment growth

12. 100 80 60 40 20 0 Current Performance levels 90% 50% 7% Engineering Fabrication Manufacturing

13. NCDMB adopts 3 pronged approach to promote utilization of locally Manufactured goods • Issued Research and Development guidelines to industry operators & service providers • Enforcing compliance with provisions and schedule of Act on material utilization on projects and operations • Promoting local manufacture of materials used in the industry

14. COST BENCHMARK TEMPLATE FOR LOCAL MANUFACTURING

15. Pre NOGIC Today 2+1yr Contracts Low Cost STRATEGIC INTERVENTIONSAsset Ownership…. Status of Marine Vessels Utilization • Indigenous players dominate category 1 vessels –retention of $1.8 billion • Structured intervention for more Nigerian ownership of category 2 vessels- potential for retention of >$1.5 billion • Domination of foreign crew men and rig operators • Ownership of vessels and rigs lies with foreigners ~$3 billion in capital flight Highest spend is on category 2 vessels – AHTs/LHTs, DP PSVs, DSVs, Pipe Lay Barges Operators have put in place robust plan to replace foreign owned with indigenous owned vessels. 26

16. SERVICE PROVIDERS (Services, equipmt) <1 million jobs OPERATOR (Opportunities and finance) ~25,000 jobs LINKAGE INDUSTRIES (Manufactrg) >2 million jobs STRATEGIC INTERVENTIONS Training & Employment PUBLIC SECTOR (Regulator) ~30,000 jobs Social Employment Compared to rising prices of oil, the capacity of operating companies to employ nationals has been on the decline since 2008 • INTERVENTIONS: • (NOGETTS) Project Based Training and Attachment - • Over 6,000 candidates captured on JQS Platform • Over 1,500 attached to O & G Projects • Developing geosciences Training • Developing environmental remediation training • Institutional Development - • Established OGTAN • Establish Engineering Academy with PPP • NIW Welding Technology Complex (NIW/NCDMB/Shell) • Establish Subsea Academy • Expatriate Quota Management - • EQ allocation supported by robust succession planning • Monitor utilisation of EQ slots Productive Employment

17. TYPICAL PROJECT SPIN-OFFS Subsea Equipment Manufacturing Capability FPSO topside Integration capability EPC PROJECT Subsea Training & Certifying Academy Heavy Industry Fabrication Yard - $ 250million

18. NLNG, BLNG focus • LNG carrier size Dockyard • Complete by 2015 • Cost of $250m • Generate 55000 Jobs • 20 000 training opportunities • Erha North/ Egina • Umbilical facility & Tree assy • Start Production by 2015 • Cost of $250m each • Generate 5000 Jobs • 2000 training opportunities Legacy Programs. EGINA/GAS MP/ BONGASW/ERHA NORTH/BRASS LNG Subsea Equipment Manufacturing Complex FPSO Topside Integration Facility Pipe Mills Dock Yards • Consolidate existing Mill • 3 new Pipe mills • Start Production by 2015 • Cost of $150m each • Generate 15000 Jobs • 3000 training opportunities • TUPNI committed to EGINA topside integration • Integration Facility set by 2014 • Cost of $150m to $200m • Generate 30000 jobs • Training opportunities

19. STRATEGIC INTERVENTIONS Indigenous Marine Vessels Utilization Category 1 • Marine Vessels Ownership • Issued guidelines for utilization and Categorization • Obtained commitments for replacement of foreign vessels extracted from operators. • Directed marine providers, to upload details of vessel fleet unto NOGIC JQS • Organized workshop with marine providers to establish opportunity • Mandate vessel providers to carryout maintenance in Nigerian yards • Economic and Technical Benefits • Impact on the economy • Retention of Nigerian jobs in marine crew • Growth of indigenous capacity and sustainability of services • Impact in linkage industries – merchant shipping, Ports development and Utilization Category 2 Category 3 27

20. STRATEGIC INTERVENTIONS Offshore Rig Acquisition Strategy • Indigenous Rig Acquisition • Mandate Use of Nigerian Operating Company for Contracting. • Domicile equipment and technology in the Company. • Phased increase in indigenous equity to meet Acts requirement of 50%. • Assistt with long term funding and equity Financing Land Rig Jack up Rigs Semi subs/ Drillships 28

21. STRATEGIC INTERVENTIONS Line Pipe Mill Pilot Scheme PILOT SCHEME DESCRIPTION Site Map 2500km of pipe Replacement of vandalised and aged pipelines Proposed Layout Water distribution projects Partnership roles NCDMB – Buy Land (SPV) Shell + Operators - (Jetty) Yulong - Equipment

22. STRATEGIC INTERVENTIONS Equipment Components Manufacturing Industry guideline mandates all OEMs to domicile manufacture of equipment components, parts, packages and systems in Nigeria Components and Frames Equipment Packages Equipment Parts Growth to 2011 2017 Year

23. STRATEGIC INTERVENTIONS Nigerian Content Equipment Certificate (NCEC) • The Board is issuing NCECs to companies that have met the requirements • About 52 applications being processed • IOCs are taking initiatives to support OEM presence in Nigeria • Guidelines issued to the industry making NCECs a requirement in tenders

24. NOGIC JQS STRATEGIC INTERVENTIONS Nigeria Oil & Gas Industry Content Joint Qualification System • Categorization of oil and gas service companies • Industry data base for skills verification. • Verification of available in-country capacity • Effective information exchange across stakeholders • Compliance Monitoring • Test data uploaded • Launch Q2 2012 • Expatriate Quota Utilization and Succession data • Marine Vessels data • Contract Processing data • Equipment Ownership • Nigerian Content Compliance Certificate Data • Skill Base Tracking • Training and Employment data • Nigerian Content Plans and reports repository

25. 30% Direct Intervention Lte 70% Guarantee Ltd NCDF 1% Upstream contract sums Fund Managers (BGL/UBA global) Other Participating Commercial Banks Industry Advisory Committee Nigerian Content Development Fund Model(Clause 104 of the Act) Letter on NCDF implementation Direct Capacity Development intervention by the Board Provide Guarantees for low interest lending Equity Participation to stimulate Investments in Critical facilities Industry Advisory committee & SPV to strengthen Governance Skills Development & Job Creation interventions Fund will not be depleted

26. Nigerian Content Governance on Monitoring ….COMES COMPLIANCE MONITORING & ENFORCEMENT STRATEGY ( COMES) THIRD PARTY INSPECTION TASK FORCE 35

27. NCDMB Interface with DPR On Regulatory Approvals 36

28. INSISTENCE ON COMPLIANCE HAS CREATED FACILITIES BK TUBULARS – OCTG THREADING FACILITY Before Today

29. INSISTENCE ON COMPLIANCE HAS CREATED FACILITIES TOTAL PREMIER – OCTG Welding/Threading Facility January 2012 April 2011

30. IT IS WORKING NIGERDOCK – Drydock and Fab Yard BEFORE TODAY

31. IT IS WORKING GLOBESTAR – invested in new fabrication capability SAIPEM FAB YARD New NC work scope required over $100 million jumbo yard TODAY BEFORE

32. IT IS WORKING ONNE FZ – Offshore Logistics Base Hub for logistics and industry services for Nigeria and GoG TODAY BEFORE LADOL – Offshore Logistics Base BEFORE TODAY Major service

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