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NIGERIA CAN MAKE MORE MONEY IN THE OIL AND GAS INDUSTRY, SAYS IZOMOR
He posts the image of an unassuming man. But he is loaded with great business ideas, essentially in the technical genre of engineering, which deals with pipeline, fabrication, construction and marine logistics, sub-sea engineering and construction. His name is Godwin Odokpa Izomor, the Managing Director of MG Vowgas Ltd.
The company is presently collaborating with one of the CFE Engineering of Singapore, the best engineering firms in Singapore which is reputed for not cutting corners. MG Vowgas is currently involved in the building of a fab yard in Port Harcourt, Nigeria which will be a significant milestone in the engineering and development quest of Nigeria, especially in the Oil and Gas sector.
In this interview with Ernest Chinwo, Izomor discusses the various challenges facing the Nigerian business man in the oil and gas sector, as well as the expectations Nigerians have from the Buhari-led administration. Excerpts:
What made you think of constructing such an elaborate fab yard in Nigeria?
We in MG Vowgas are pained daily when we see that for almost every little construction, other international companies take such jobs to their countries to fabricate and eventually ship it back to Nigeria. Apart from the loss of time and huge revenue, that system really depreciates Nigeria as it creates job for others in other countries and leaves our people even more unemployed. Unlike other countries that have operated in Nigeria: Samsung, Hyundai, other foreign companies, none of them has developed a good fabrication yard, like ship building fabrication yard, that can compete anywhere in the world. They are all renting and seeking companies. They come here, collect multi-billion dollars and they don’t develop the economy. They collect the whole big contracts, $4billion, $5billion and they don’t have anything to show for their having operated in this country. They go to their countries fabricate these things and bring them to Nigeria. This must stop. That is why we expect the government of Buhari to look into how to strengthen the local content.
Now when you talk about fabrication yard, what are you talking about, what does it entail?Fabrication yard is a yard where most of the big, skilled projects – gas, pipeline and the rest of them – are being constructed. No nation can develop without a fabrication yard. You are hearing of China today because they are able to produce their steel, they are able to fabricate everything they need in their industry. Fabrication yard is a key to the development of Nigerian economy.
How long have you been in this business?
I have experience in the oil and gas industry up to 15 years.
How has the Nigerian Local Content Act assisted entrepreneurs like you?
We are here, where we are right now, we are looking forward to building a fab yard, all because the local content act has supported us this far but they need to do more. The local content has to do more, Buhari has to strengthen the local content agency, the local content commission so that most of these projects we are doing outside should be done here in Nigeria. We should encourage more local companies to build more fab yards so that most of the FPSO’s and the rest of them which are being built in South Korea, can be built here. It is welding. And the government of Buhari should look into the cost of those FPSOs.
Are you suggesting that the Jonathan government did not do enough in support of local content?
No, the government of President Jonathan was the one that developed local content to this level but what we are saying is that, we haven’t got there yet. We haven’t got to the extent that everything that is done in the oil industry should be fabricated here in Nigeria because most of the big work, design and fabrication if you completely do the design and fabrication work in Nigeria, most of the money they spend, the foreign exchange spent in the oil and gas industry will remain in Nigeria. If we have more con-genuine fabrication owned by Nigerians, not a mere yard, it will be better for the economy. Okay, ALCON has been in Woji, Port Harcourt but look at their yard, there is nothing there. But they collect big projects, do minor jobs here then collect the money and go away. They have been in Woji for more than 15 years and they have not developed anything. It is the same thing we are talking about, all the oil companies, look at Southern, all the other companies, what are they doing, what have they done for Nigeria? They have been in Nigeria collecting multi-billion dollar contracts but none of them has built any good yard.
Now most big oil companies talk about their commitment to local content. Do you think they are serious?
They are paying lip service. That is why we will support Buhari’s government to make sure that some of these capital flights must be stopped. This economy can only develop when the spending in the oil industry is almost $30 to $40-billion annually. If the spending of that amount is domiciled in Nigeria, you know what it means to the Nigerian economy. But most of that amount is spent outside, they spend it outside, they tell you, local content, yes but they haven’t got there yet. Buhari has to strengthen the agency to make sure that they enforce some of those rules in the oil and gas industry. When you consider some companies, you wonder if they have met the local content requirements because how many of them have fab yard? Look at Daewoo, where is their fab yard, where is Samsung’s fab yard in Nigeria? We are not talking about South Korea.
Are you saying in effect that there should be a mechanism to ensure that all foreign companies operating in Nigeria have yards?
All fabrications in the industry should be done in Nigeria, whether FPSO, whether skilled or anything, let them do it in Nigeria. We must stop it. Nestoil is one of the local companies that is trying in Nigeria. They have their yard and we are coming up to build our own. This is the agreement we have with CFE Engineering of Singapore.
When will the fab yard you are constructing come on stream?
Maybe before the end of the year we will complete the construction.
How many persons do you intend to employ there?
The fab yard alone without any construction going on can absorb almost 100 workers. When you have projects, it’s almost a thousand workers.
What are you doing about training?
The company has sponsored some international certification trainings including series of (BGC Council trainings for some of its employees. Our staff on the training schedules right now are about 30. What we do is safety for everybody, Every year all staff undergo HSE training and at the same time pursue more for their specific fields. Once every year, every accounting, engineering personnel go on tour of our technical partners’ companies in Singapore. They are presently in Singapore doing a tour of our technical partners and also doing some training.
Your core staff at the fabrication yard are engineers. What are you doing in terms of training of technicians?
Yea, almost everybody here is an engineer. But you can’t function without technicians. No engineering firm functions without those ones. The engineers are the people that supervise their work but most of these jobs are being carried out by technicians: welders and fitters. Those ones are very important. We are presently doing some jobs with AGIP: pipeline repairs, leakage repairs. So we use those technicians when we have major jobs.
What is your staff strength currently?
Currently we have 65.
The fab yard is going to cost you about N2-billion, how do you intend to raise that?
My bank, my bank is always in support, Heritage Bank.
Why Heritage, it so new in the industry and you are about the third person I spoke to who said they are good?
Yeah, they simplify banking, frankly speaking. If it is other banks, the process you can go before you get anything is long, but Heritage the process is short.
You said the amount is N2-billion?
Yes, that is the first phase, the first phase is N2-billion, to enable us start work because everything is costing us almost N118 million. Then we acquired a place almost N150million.
How many phases?
The first phase is to make sure that we get ready the fabrication yard and the machine shop in place and the pipe coating, painting and sand blasting shops. These are the three major shops we need for now. If we are able to build those ones, stores and the rest of them will come up in future. But these are the ones we need now so that we can start work.
Definitely if you have that place running you will have patronage from other local entrepreneurs who are into that.
Yes. The industry is growing in Nigeria and once they see your capacity to deliver they will patronise you.
Who are your major clients?We work with all the major International Oil Companies (IOCs), we work with all of them. We are their contractors. In short we just submitted a bid today to the Nigeria Liquefied Natural Gas (NLNG) one of the managers took it to LNG. We work with everybody. But you see over the years we will try to build up. The IOCs believe in names, they don’t believe in who can deliver. They believe in big names, Hyundai, the same Hyundai will give the job to Nigerians, the same Daewoo will sub-let the job to Nigerians to do. And they sublet it to Nigerian for peanuts. They collect the money without doing any job. So as I said earlier, Nigeria cannot develop without building our own institutions here that will employ Nigerians, that will keep the money here in Nigeria for other sectors to develop because if Nigerian company has $10-million or $10-billion in Nigeria economy, the banks in Nigeria cannot invest that money in one sector alone, they will give loans to other sectors of the economy which will develop the economy. But giving most of these big projects to international companies, they will go to South Korea and various countries to fabricate these things and bring to Nigeria; it has not helped our economy.
From what you have said, you have made a lot of progress in six year. There are very few companies that have gone to the extent of having their own fabrication yard like you are doing in six years. Now what have been the major constraints?
There are some major constraints, one we are being overtaxed. Because every kobo you make, before you collect your money they have already deducted all their taxes, then when you come out, the state will still come, the local governments will still come, different forms of taxes. Ok like VAT, after paying at source if you want to go and buy anything they will still collect VAT from you. Then the other constraint is the banks. The banking industry is not helping matters, you know the industry we work with, the profit margin is not more than 15-20 per cent. It depends on your ability to manage the project, but most often it is between 10-15 per cent. So in such a situation you always need the bank but the interest of 27 per cent, is killing. If you borrow at such interest rate, it is killing. The Buhari government should make sure they reduce to the barest minimum, the interest rates so that local entrepreneur can grow in Nigeria.
Then the other constraint is the communities. The communities, due to the past many years of neglect, there is anger in many of the communities where we work, you have to pay so much, sometimes work has to stop. Some times you spend more money on providing security for yourself, for personnel and for your equipment. So these are some of the constraints and challenges we have. The government has to do something to bring peace into the region. The oil and gas industry will grow but based on certain factors.
What are those factors?
One of those factors is the PIB. The PIB was stopped based on political sentiments. It’s not because the idea behind the bill is not genuine, it’s not good but because some people believe that the PIB gave so much powers to some people. These are minor sentiments compared to what Nigeria has lost in terms of capital flight, in terms of non-investment in the industry, in terms of employment. We have lost so much. There has not been investments in the Nigeria oil and gas industry for the past three or four years in which the PIB bill has been dragging because uncertainty has surrounded the whole industry.
There is another trend we are noticing in the oil and gas industry. The majors appear to be off-loading their assets, will it be part of the uncertainty caused by the delay in the passage of the PIB?
Yes, the delay in passing the PIB is a major factor because you have to go to where there is peace, where the policies are not changed every day. People go to invest where they are sure the policies are right and that in the next few years they will not change the policies. Then the fear of alarm of America that Nigeria will disintegrate by 2015. That alarm also contributed that nobody was sure of what Nigeria will look like after the elections. But thank God today there is peace everywhere and they will come back because there is peace now. Our oil is rich, we have enough of it, but the will to put some of the resources we have in the proper channel to develop Nigeria economy is the problem
Specifically, what are the things you want the Buhari government to do in order to boost the participation of local players in the oil and gas industry?Yea, one of the key things, the PIB is very important, then secondly the cost of funding in Nigeria is high. They should try to work with the CBN and the CBN work with the banks to reduce the cost of doing business. Then thirdly, the power because, let me show you (opens a file and displays a document). This is 10,000 litres of diesel and we can only use it for 5 days. Because we have one 500 KVA generator working in the day another 500 KVA working in the night. So at the end of the day you have nothing. You run on big generators, you run on diesel, when you were coming you noticed some policemen; you provide your own security, so you are spending part of your profit in running diesel and security.
You sound a very busy man, do you find time to relax?
I relax with my family because of the security situation in Port Harcourt, not based on the political situation, most times I try to close as early as 5pm and get to my house between 6 and 7pm and rest but you know man can rest when their is money.
But you should have some form of recreation, any hobbies?
I watch football, the other recreation I do is I go to church. Most times I give my personal time to do one or two things in the church.
How about your family?
We are just six-in-one, four children.
How many boys, how many girls?
Two boys, two girls.