With the passage of the local content law in the oil and gas industry, Francis Ugwoke reports on the optimism and fears being expressed by shipping industry stakeholders to participate in the affreightment of wet cargoes and other vessel supply contracts in view of the discrimination they have suffered over the decades
The local content law passed recently as it affects the oil and gas industry presents a unique opportunity for the local shipping community. It came at a time when cabotage shipping law is adjudged to have failed because of the discrimination which indigenous firms have been facing in the oil and gas sector of the nation’s economy.
Under the cabotage law passed in 2003, indigenous firms are empowered to take over coastal shipping trade. But it has not been so as the trade is dominated by foreign shipping firms with the support from both oil majors and surprisingly the Nigerian National Petroleum Corporation (NNPC). The two have made it almost impossible for the local firms to get contract of affreightment for wet cargoes. These include refined petroleum products and other oil servicing jobs involving movement of cargoes on ships by oil and gas companies.
Part of the case against Nigerian shipping companies is that many of them do not have capacity for the carriage of crude oil or even refined products on international waters. Although, they have argued that they own tankers that can be involved in transshipment of these cargoes within the coastal waters but still discriminated against. Indigenous Shipowners Association of Nigeria (ISAN) has been lamenting that its members have been denied of such jobs in preference for foreign vessels even with the cabotage law. Many of them who have tankers have had to remain sub-contractors to the oil companies and NNPC to survive.
In 2003, it was estimated that the country was losing at least $500m annually as revenue accruing from carriage of goods in the shipping sector enjoyed only by multinational shipping lines. This figure may have doubled with the cargo and ship traffic doubling since then. The vessels used in trading are highly capitalized and this explains why it is difficult for the indigenous shipping operators to acquire them. Many of the firms apparently for the high cost of acquiring vessels have had to settle for the status of agents, or charterers as the case may be. The other obstacle which the operators face is that international shipping generally is controlled by a cartel that would make it difficult for local firms to penetrate. So, for any vessel to take part in such trade, it must be of high international standard.
Nigerian banks that have so far ventured into financing ship acquisition only do so for vessels that have no strong international status, either by their capacity or they are fairly used, that they can hardly survive international regulations to operate without incessant arrest. This was what happened to ships belonging to the liquidated Nigerian National Shipping Line (NNSL), when they failed seaworthy tests. And later few Nigerian private vessels had series of court cases while on international waters that led to their demise. Right now, there are not many big tankers that can be involved in wet cargo outside the shores of the country. It is the same for bulk cargo or container vessels.
However, following the passage of the local content law, indigenous shipping operators believe that this is another opportunity for the local firms. Since the law provides that local firms which have capacity should not be denied jobs, industry operators who spoke to THISDAY expressed hope that this will compel the NNPC and oil majors not to discriminate against them in contracts involving carriage of goods. What this means is that the shipping firms will also have to work hard to meet the necessary capacity or standard for the business.. Stakeholders who spoke to THISDAY while welcoming the law said it is an opportunity for the local firms to take part in providing services in the oil and gas sector using their own vessels.
Chairman of the Indigenous Shipowners Association of Nigeria (ISAN) said that the local operators are happy about the new law. He said, “it is a good omen, looking up for industry operators. It will open the frontiers for local participation. At least, there is a law now backing it”. But to Jolapomo, it is still with some reservations, waiting to see that the contracts come, apparently because of what happened to the cabotage law.
“Every member is ready to take advantage of the new law, but we have first to get the contract. We take advantage when the contracts are open for us”, he said.
On whether indigenous shipping companies will enter into partnership to form a stronger muscle for business, the ISAN chairman said this cannot be ruled out. “We are gearing up towards that, at the onset of cabotage, there was overture from foreign concerns but because they saw some loopholes in the cabotage, they withdrew. And of course, this is another opportunity. Every member of ISAN will be prepared to form joint venture and partnership since the guideline said what and what could be done.”
National President, Institute of Transport Administration of Nigeria (IOTA), Mr Lucky Amiwero who equally welcomed the new law said it is a challenge to both indigenous shipping companies and the Nigerian Maritime Administration and Safety Agency (NIMASA). According to Amiwero, the apex regulatory body, which is at the helm of indigenous shipping development initiative should live up to its billing.
He argued that the problem is not in coming together to form a giant company, but that there should be a deliberate effort on the part of government to develop shipping.
Citing example of developed countries where indigenous shipping companies are given subsidy, Amiwero said that government should do the same here if it wants to promote indigenous shipping. “It is done in USA and other developed shipping countries and Nigeria should not be an exception”, he told THISDAY on phone.
A maritime expert and Honourary Secretary, Institute of Marine Engineering , Science and Technology (IMAREST), Engr. Alexander Peters, who joined in commending the federal government for the law said there has been a lot of euphoria about the local content law. “It is a welcome development, and we are hoping that the spirit and letter of the law will be enforced and implemented in all respects. As a patriotic person, I personally welcome the law very much because it has been long in coming to have Nigerians control their own economy, control their own future and destiny as it were,” he said.
Peters argued that as far as he is concerned, the country in the past 50 years has only had political independence, not economic independence. “So, the law is a very welcome development. The law is different from cabotage law.
So far as maritime is concerned, this law will be applicable mainly to the oil and gas industry. The sector is highly dominated by foreigners. We have foreigners involved in supply vessels. We have FPSO as the same. So, the oil content law will apply to this. Aspect of shipping will be the oil service supply vessel. The services supplied to the oil services, to the rigs – otherwise the oil content law should not relate to the maritime. The shipping sector has been taken care by the cabotage law which is faulty – that is why we have been calling for a review of the law to make it bite and actually empower Nigerians. As I have said earlier, those parading themselves as shipping companies here are just dependent on oil, transshipping refined products along the coast. That is not real shipping, the cabotage law is meant to make us very dominant in our own coastal waters, fan us out into international shipping. So, there is no international shipping in Nigeria . There is none that is handling general cargo, or bulk cargo, you find Nigerian cargoes like cars being brought in by Grimaldi, Maersk and so no indigenous company is competing with them. And in bringing the refined products that we are now importing, 50,000 metric tones (mt), it is still the foreigners that do this”.
On the idea of forming a partnership to be able to participate in international shipping, Peters expressed reservation, saying that while it is good, the problem would be mistrust among the partners.
He told THISDAY, “it is a beautiful one for them to come together, that will mean pooling very little skill and knowledge to make it a big one. Also pooling their financial power because like I said, there are no real capitalists in Nigeria who can muster the financial power to go private in a big way. So by coming together, they should pool their resources generally and make something big. But you know the penchant of Nigerians.
“There is a lot of mistrust in the air, there is a lot of inordinate ambition in the air. Everybody wants to be an MD , Chairman. It is very difficult to bring Nigerians together, example is the African Ocean Line. You had Bamanga Tukur there, Dr. Raymond Dokpesi, who was a part owner but made MD of the company, then the late Musa Yar’adua, and late MKO Abiola. Part of the things that made them collapse was that there was a dispute among the four men owners of the company. This one accusing this one of taking too much money and before you know it…. of course ‘when the maggot is in the air, the whole body will die’… can you imagine these rich people, but they could not stay together. That is the penchant example of how Nigerians cannot come together, So if we are waiting for that, it will take a very long time to come into being”, he said.
He however said that the only way Nigerians can come together is if they are already established individually like what is happening in the airline industry abroad. He added, “The BA is negotiating with Iberia , and in USA they are trying to form mega airline – United Airline, but these are major airlines in themselves – so they talk business, this is how finance could be handled – they reach a concrete agreement. But if you have a partner who is weak, or perceived to be weak by the other partners, you know the thing will not work because very soon, feeling of cheating will be there, but if they are big, this one recognizes that this is big, the other recognizes also. They will bring experts and work out the agreement and then there will be personal integrity. Because if those in Europe and America have not got personal integrity, they will soon make a mess of that business”.
He said that one thing Nigerians should do to make partnership work is to learn to keep agreement. He also opined that those who stand a big chance to float a shipping company that can compete with foreigners are those in government or who have been in government. He regretted that such people instead of investing in the country chose to go and build palaces outside the country. On whether he has other form of advice to Nigerians to come together this time around, he said, “I don’t want to advise Nigerian shipping companies to come together because that will be an advice in futility”. Peters however called on the President of the Dangote Group, Alhaji Aliko Dangote to consider going into shipping. “Dangote is in a position to float a credible shipping company, perhaps, he should consider something like that”.
It will be recalled that shortly after the local content law was passed, the newly-appointed Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Alhaji Shehu Ladan, said that he was ready to support indigenous shipping companies in the country to participate in crude oil affreightment. This was when the shipping community held a reception for the new Transport and Interior Ministers, Alhaji Yusuf Sulieman and Capt Emmanuel Iheanacho respectively.
He said he will assist members of ISAN to get technical support for their vessels. Although, this was welcomed by industry stakeholders, they doubted the promise, apparently considering that successive managements of NNPC had made such promises, and at the end found it extremely difficult to involve indigenous shipping firms in the carriage of refined petroleum products within the coastal waters even with the passage of cabotage law. As one of the operators put it, “in the past it was that our vessels were substandard, but now we have witnessed several brand new tankers acquired by local firms, we are watching to see what excuse the NNPC management or oil majors will give now if they deny us of wet cargo transportation within the coastal waters, we want to start locally, before dreaming of crude oil transportation outside the shores of this country”.