It will be recalled that on 28 November 2018, we published a blog post on the commencement of the first bid round for flare gas sites. Read our report here http://www.acas-law.com/resource/blog/Re:_FGN_Commences_Implementation_of_the_Nigerian_Gas_Flare_Commercialization_Programme_%E2%80%93_Flare_Gas_Sites_Bid_Round. In this blog post, we consider the need for bidders to comply with the requirements of the Nigerian Oil and Gas Industry Content Development Act, 2010 (the “NOGICD Act”).
Section 2 of the NOGICD Act mandates regulatory authorities, operators, contractors, subcontractors, alliance partners and other entities involved in any project, operation, activity or transaction in the Nigerian oil and gas industry (the “Industry”) to consider “Nigerian content” as an important element of their overall project development and management philosophy for project execution. Section 3 of the NOGICD Act further provides that Nigerian independent operators shall be given first consideration in the award of oil blocks, oil field licences and oil lifting licences and compliance with the provisions of the NOGICD Act and promotion of “Nigerian content” development shall be a major criterion for award of licences, permits and any other interest in bidding for oil exploration, production, transportation and development or any other operations in the Industry. “Nigerian content” is defined as the quantum of composite value added to or created in the Nigerian economy by a systematic development of capacity and capabilities through the deliberate utilisation of Nigerian human, material resources and services in the Industry.
From the foregoing, the Proposals Evaluation Committee to be appointed by the Minister of Petroleum Resources to evaluate bids submitted for flare gas sites is statutorily required to consider the Nigeria content component of each bid and accord first consideration to Nigerian independent operators. Therefore to be optimally positioned to be awarded flare gas sites, bidders must ensure that their bids conform with the requirements of the NOGICD Act.
One key concept of the NOGICD Act, as has been subsequently explained through guidelines issued by the Nigerian Content Development Monitoring Board – "NCDMB" (the local content regulator), is the requirement to act through a “Nigerian company”. “Nigerian company” is defined as a company formed and registered in Nigeria with not less than 51% (fifty-one percent) equity shares held by Nigerians. The NCDMB has consistently emphasized that companies wishing to operate in the Industry are required to have a minimum of 51% (fifty-one percent) Nigerian shareholding in compliance with the definition of a Nigerian company. It is therefore important for foreign bidders/investors to consider the corporate structure of their bid/investment vehicles and ensure that their vehicles comply with the “Nigerian company” requirement of the NOGICD Act, while at the same time ensuring the security of their investment through appropriate structuring of corporate mechanisms in the bid/investment vehicle.
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