The Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, says no Nigerian company currently has the technical capacity to drill in deep offshore fields. He warned that misapplying the Local Content Act will only hurt the industry and raise production costs.
Speaking at the Practical Nigerian Content Forum organised by the Nigerian Content Development and Monitoring Board (NCDMB) in Yenagoa, Lokpobiri said strengthening local capacity must not be confused with replacing international oil companies.
“Local capacity building doesn’t mean substituting IOCs. Nigeria’s oil space is large enough for everyone,” he said.
He explained that many domestic companies awarded offshore contracts and subcontract the work to foreign operators. According to him, this middleman structure makes Nigerian production more expensive and uncompetitive.
“No Nigerian service company can drill deep offshore today. If we give such jobs to them, they still return to foreign firms. The final cost becomes too high,” he stated.
Minister Defends Waivers, Says Middlemen Drive Up Costs
Lokpobiri said this is why the NCDMB issues waivers to foreign firms for specific high-capacity work. Awarding deep offshore drilling to unqualified domestic companies, he said, only increases total project cost.
“Rather than giving a Nigerian company a job, it will still outsource; I give it directly to the foreign company. It keeps our pricing competitive,” he said.
He insisted there is enough domestic work in land, swamp, and shallow-water terrains. The minister added that some members of the Petroleum Technology Association of Nigeria (PETAN) oppose his stance because he refuses to award contracts they lack the competence to deliver.
“We can’t give PETAN members what they cannot do. They will add 20 percent and still outsource to the ‘big boys, ’” he said.
Lokpobiri recalled being embarrassed when a foreign minister remarked that Nigeria’s production cost was higher than that of countries engaged in war.
“I was embarrassed. We must address these concerns,” he said.
He added that the number of rigs in Nigeria had expanded significantly under the current administration, from about 14 rigs to more than 60, with over 40 active. Continuous drilling, he said, is necessary to address the natural decline in output.
PETAN Counters: Nigeria Has the Lowest CAPEX in Africa
PETAN President and CEO of Geoplex Drillteq Limited, Wole Ogunsanya, disagreed with the minister. He said Nigeria’s service costs remain among the lowest in Africa. He emphasized the importance of distinguishing between capital expenditures and operating costs.
Ogunsanya argued that the major drivers of high production costs are evacuation challenges, security expenses, and the activities of portfolio companies that manipulate pricing.
“Evacuation is the biggest cost driver. Pipelines are vandalised. Some companies now move crude with vessels and barges at $12 per barrel, including security costs,” he said.
He added that land rig contracts cost about $60,000 per day in India but as low as $30,000 per day in Nigeria. Local content policy, he said, already subsidises industry operations in ways many analysts overlook.
He criticised portfolio firms with no operational assets for inflating costs and distorting the market.
Balancing Local Content, Cost Efficiency, and Production Growth
Lokpobiri stated that Nigeria must increase production to meet both domestic and export needs. “We have abundant oil and gas resources. Unless we scale up production, we cannot meet national or international obligations,” he said.
The debate over deep offshore capacity, waivers, and the proper application of local content continues to shape Nigeria’s oil and gas strategy.