Judiciary to bring sanity into Nigerian content execution?

By Ubong Nelson

 IT is looking brighter, becoming hopeful for truly Nigerian companies in the oil and gas industry, if feelers from the Federal High Court, Ikoyi, Lagos, presided by Justice Buba, becomes the yardstick to be used in measuring contractual relationships between international and local practitioners in the number one industry in Nigeria. For several weeks, OFSERVE Nigeria Limited, a fully Nigerian owned oil and gas services company, with core competences in drilling services and facilities maintenance and Weatherford International with their Nigerian subsidiary, Weatherford Nigeria Limited, the former, being a Texas based international oil and gas servicing company, have been at the FHC, Ikoyi, pursuing technicalities on who is legally liable and who is not, until the judge stopped the legal representatives of Weatherford Nigeria Limited by setting a date to hear the prayers of OFSERV Nigeria Limited. Background: In their statement of claims, OFSERVE Limited aver that, in May 2014, it submitted a technical tender to provide measurement while drilling (MWD), logging while drilling (LWD), and directional drilling (DD) services for Shell Nigeria Exploration and Production Company (SNEPCO). During a subsequent facility inspection in November 2014, representatives from SNEPCO and the National Petroleum Investment Management Services (NAPIMS – a corporate unit of the national oil & gas regulatory company) strongly suggested that OFSERV form a partnership with one of the large international oil and gas services companies to boost its chances of progressing on the tender. In its Statement of Claims, OFSERV averred that, Weatherford had been operating in Nigeria since 1975, but its local operations and accompanying revenues had been marginal when compared to its main competitors. This is primarily due to its absence in the Nigerian drilling services and wireline markets, which together is estimated to be worth a combined value of $1 billion per year. When OFSERV approached Weatherford about the SNEPCO opportunity, it seemed like a perfect opportunity Weatherford would be willing to take and the company seemed to immediately get on board. The multinational oil firm showed high interest in the offer by preparing a letter of intent within 48 hours through its Nigerian subsidiary. Continuing, the statement proffered that, having done exchanges, Weatherford induced OFSERV to believe that they were interested in a substantive partnership with OFSERV and in the process got OFSERV to commit significant man-hours and resources to advance their quest to enter the Nigerian drilling services market. At Weatherford’s request, OFSERV initiated discussions with their drilling services contacts at over 10 operating companies to introduce the OFSERV/Weatherford alliance. Discussions with one of the oil companies; Sterling Oil, rapidly progressed to the point where Sterling requested for a commercial proposal. Unprofessionalism: Speaking further, Soyinka Sowoolu, OFSERV Business Development Executive, said, “We shared price intelligence with Weatherford to help them in submitting a competitive commercial offer. Although, Weatherford had done business with Sterling before, they were not in the directional drilling business; they did not have the service in Nigeria. Draft agreement “OFSERV also facilitated meetings to introduce the OFSERV / Weatherford alliance to Shell Petroleum Development Company, both at SPDC offices in Port Harcourt and at Weatherford facilities in Houston, Texas.’’ “Following the introductions to SPDC by OFSERV, Weatherford emailed SPDC, confirming a presentation initiated by OFSERV (which they discouraged OFSERV about) was going to hold, and sent details about their capabilities. OFSERV was not copied in any of the emails. Before this, a draft agreement had been sent to OFSERV by the company but, Soyinka Sowoolu said to OFSERV’s surprise, the content was different from their earlier gentleman’s agreement. According to him, Weatherford, at some point, sent an email to OFSERV, saying they would prefer the partners focused on Sterling Oil since there was no subsisting contract with SPDC. “Little did we know that they had gone behind our back to contact SPDC. Friends from SPDC Drilling department, confounded, intimated us of the development.” The OFSERVs statement claimed the draft agreement sent by Weatherford suggested that OFSERV would only be paid certain dismal percentages on contracts won and would not have the opportunity to execute any part of the work scope. The multinational said it wouldn’t like to compromise on quality by working with OFSERV, an insult the Nigerian company took exception to. Weatherford did not push further. It just continued its plan of sidetracking OFSERV and contacted SPDC. When OFSERV picked up the issue of unprofessionalism with Weatherford, asking for talks to be held before they continued their partnership, Alaa Abusiam, the Regional Drilling Services Manager, conveniently called off the partnership by an email he sent to OFSERV, right on the verge of the Sterling contract award. Weatherford then tried to get the contract from Sterling using another local partner, a business opportunity created and developed by OFSERV. Soyinka Sowoolu lamented further, “Sterling being what Sterling is, told Weatherford not to bother about a local partner, agreeing to deal directly with Weatherford,” “As I speak, Sterling has given Weatherford the contract directly and this is obviously unlawful given that the operation is on land, a terrain exclusively reserved for local service providers.” According to Sowoolu, contacts at NAPIMS had warned OFSERV to be wary of Weatherford, which the agency said has had issues with local partners in the past. To Sowoolu, Weatherford used OFSERV to develop its drilling business in Nigeria and now wants to dump it. Prayers The plaintiff, though scandalized by Weatherford’s attitude, is hoping for, besides the financial losses to be recouped, hopes the decision of the court of law, will put an end to the arbitrary actions of international companies, who “use” local companies to satisfy the rules on one hand, while “dumping” them once the contract is in their kitty. It could be recalled that, a similar scenario played out at the same FHC in 2013, when LADOL, a leading maritime service provider, dragged Samsung Heavy Industries, the South Korean ship/vessel makers, who were partners in the $3.8 billion EGINA FPSO project on the behalf of TOTAL/NNPC. The Korean company had attempted to do away with the Nigerian company, who were their local content partner, as required by the Nigerian regulations. Until wisdom prevailed and both companies withdrew from court and progressed to form a JV, LADOL’s counsel, Fidelis Odita, SAN, laid the blame for international servicing companies attitude on the government and its agencies. He took a swipe at government wielding unnecessary influence over the regulatory arms. Speaking on LADOL/SHI, Odita said, “they used LADOL to obtain what they wanted, and as soon as they thought LADOL was no longer necessary for their operations, they tried to kick them out, which is entirely improper and indeed disgraceful”. In fact, going by the media statements of Femi Arakiri, Country Manager of Weatherford Nigeria, he believes that, OFSERV Nigeria do not have a case, in his words, “we will have our day in court”. Until the judge set a date to listen to the plaintiff, Weatherford’s counsel had told the judge that one of the respondents, Weatherford International, cannot be sued. Patriotic intention The Nigerian Oil and Gas Industry Content Development Bill, 2010, provides for the development of Nigerian content in the Nigerian oil and gas industry. Part [1] 3 [2] states, “There shall be exclusive consideration to Nigerian Indigenous Service companies which demonstrate ownership of equipment, Nigerian personnel and capacity to execute such work to bid on land and swamp operating areas of the Nigerian oil and gas industry for contracts and services contained in the schedule to this Act”. If the executive arm of government has consistently rendered a patriotic law toothless, about time, the judiciary, as the opportunity beckons, give ‘teeth’ to this noble cause, and dissuade foreign businesses from “disrespecting” our laws.

Read more at: http://www.vanguardngr.com/2016/07/judiciary-bring-sanity-nigerian-content-execution/