The aim of this chapter is to relate the discussion on the accounting, accountability and governance to the study context that is, the Nigerian Oil and Gas Sector together with the responsibilities of the NCDMB and the IOCs as the two major accountors in the implementation of local content in petroleum contracts. This discussion is important because as the NCDMB is charged with the enforcement accountability, the IOCs as the investors, license-holders and awarders of oil contracts are charged with the compliance accountability. The IOCs’ main functions in the industry are conducted through joint ventures, production-sharing and service contracts. In chapter three the study introduced the classification of local content accountability into soft/voluntary
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4.2 The Structure and Political Economy of the Nigerian Petroleum Sector
The Nigerian economy and governance are supported by the petroleum sector centrally controlled by executive power (Gboyega et al., 2011). Created in the 1930s, the Nigerian oil and gas industry is the largest in Africa (EIA, 2015) which, as a major source of sustainability (Toudolo, 2009), becomes the nation’s live-wire that generates the largest GDP from a daily production of 2.46 million bbl/d (Atakpu, 2007; Omenikolo and Amadi, 2010; EIA, 2011). Nigeria’s estimated crude reserves as at 2011 totalled 37bn barrels and 5.29 trillion cubic meters of gas which are equivalent to 2.53% and 2.82% of the world oil and gas reserves respectively (International Energy Outlook, 2011, KPMG, 2014). On estimate, the industry annually consumes about $18bn in services ranging from construction, engineering procurements, Front-End Engineering Design (FEED), Seismic surveys, fabrications, etc (Omenikolo and Amadi, 2010). Investment inflows were estimated at $147 billion between 1990 and 2008 and annual return of $30 billion (Kupolokun, 2006). Kupolokun (2006: 12) also observed that …show more content…
In addition, the Nigeria’s Mineral Oils Act of 1959 and the Petroleum Act of 1969 required all operators to train Nigerians to become craftsmen, tradesmen, supervisors and senior managers within a specified period (Oguine, 2011). Although some local content provisions were attached to concessions the government significantly lacked control over exploration and production; IOCs were the owners as well as operators of the oilfields. This traditional arrangement had been taken over by a modern partnership-based system due to decolonization, the emergence of OPEC and the creation of the New International Economic Order (Smith et al., 2000; Likosky, 2009). This shift was unavoidable by host governments including Nigeria, who was financially at a disadvantage in the concession arrangements. The shift could also be supported by the strategic sectors argument discussed in section 2.7.4.
4.3.2 Joint Venture Contracts (JVCs)
These contracts occur when the host government acquires a participatory interest in concessions held by IOCs (Nlerum, 2010). Under the JVCs, IOCs conduct business with the host government through the national oil company (NOC). It is an avenue for technology is transferred to citizens (Oguine, 2011). JVCs are funded jointly through monthly ‘cash calls’ according
4.2 The Structure and Political Economy of the Nigerian Petroleum Sector
The Nigerian economy and governance are supported by the petroleum sector centrally controlled by executive power (Gboyega et al., 2011). Created in the 1930s, the Nigerian oil and gas industry is the largest in Africa (EIA, 2015) which, as a major source of sustainability (Toudolo, 2009), becomes the nation’s live-wire that generates the largest GDP from a daily production of 2.46 million bbl/d (Atakpu, 2007; Omenikolo and Amadi, 2010; EIA, 2011). Nigeria’s estimated crude reserves as at 2011 totalled 37bn barrels and 5.29 trillion cubic meters of gas which are equivalent to 2.53% and 2.82% of the world oil and gas reserves respectively (International Energy Outlook, 2011, KPMG, 2014). On estimate, the industry annually consumes about $18bn in services ranging from construction, engineering procurements, Front-End Engineering Design (FEED), Seismic surveys, fabrications, etc (Omenikolo and Amadi, 2010). Investment inflows were estimated at $147 billion between 1990 and 2008 and annual return of $30 billion (Kupolokun, 2006). Kupolokun (2006: 12) also observed that …show more content…
In addition, the Nigeria’s Mineral Oils Act of 1959 and the Petroleum Act of 1969 required all operators to train Nigerians to become craftsmen, tradesmen, supervisors and senior managers within a specified period (Oguine, 2011). Although some local content provisions were attached to concessions the government significantly lacked control over exploration and production; IOCs were the owners as well as operators of the oilfields. This traditional arrangement had been taken over by a modern partnership-based system due to decolonization, the emergence of OPEC and the creation of the New International Economic Order (Smith et al., 2000; Likosky, 2009). This shift was unavoidable by host governments including Nigeria, who was financially at a disadvantage in the concession arrangements. The shift could also be supported by the strategic sectors argument discussed in section 2.7.4.
4.3.2 Joint Venture Contracts (JVCs)
These contracts occur when the host government acquires a participatory interest in concessions held by IOCs (Nlerum, 2010). Under the JVCs, IOCs conduct business with the host government through the national oil company (NOC). It is an avenue for technology is transferred to citizens (Oguine, 2011). JVCs are funded jointly through monthly ‘cash calls’ according