Oil and Gas Contracting Firms Compliance to Nigerian Local Content on Industrial Growth Using a Study of Saipem Contracting Nigeria Limited ()
1. Introduction and the Problem
Human resource management (HRM) practices are vital performance indicators for organisational growth of firms. In this article, organisational growth is taken from Saipem ability to complete the specific at client satisfaction. This will foster the organization getting more projects. Despite the presence of Nigerian Content Development and Monitoring Board (NCDMB) in Saipem as law to regulate HRM practices in the industry, it still seems that there is inadequate progress in the organizational growth of Saipem since most employees in the organisation are expatriates. This could be as a result of non-compliance to meeting Nigerian Quota with expatriate quota in employment systems, inadequate project completion and meeting of clients’ set target. There also may be cases of unfairness or bias in Saipem meeting local contest requirements in terms of doing their fabrication works in Nigeria and in the use of Nigerian employees in executing the project. These no doubt arouse employees’ perception of non-compliance to Nigerian local content acts, which in turn affects meeting client requirement and project completion.
In response to these problems, this research investigated significant relationship between the level of compliance to local content act in terms of employment quota between Nigerians and expatriates resulting in employee retention, project completion and meeting client set target in Saipem, ensuring that employees’ training and development programmes conducted by Saipem bring about technological transfer to Nigerian employees in Saipem. This work is aimed at examining if the level of compliance to local content act has contributed to project completion and meeting client set target in Saipem. The research question is on how the level of compliance to local content act does suggestive of timely project completion and meeting client set target in Saipem. It is argued that over 5% of expatriates occupy managerial positions in Saipem, which is not in compliance with the local content requirement [1] . This affects speedy project completion as requirement by client. Getting the right personnel into the organization, implementation of enacted local content act by Saipem, and Saipem having policy that promotes organizational growth of the local economy, meeting client requirement and project completion are the areas this research investigated.
Saipem Contracting Nigeria Ltd (SCNL) is an Italian oil and gas construction company. The company has been in oil and gas related business for over 50 years in Nigeria. Saipem came into Nigeria in 1967 with headquarters located at the Ark towers building, plot 17, Ligali Ayorinde Street, Victoria Island Lagos, Nigeria. Saipem Operational Base is located at Rumuolumeni, a community about 10 km from Port Harcourt main town in Obio/Akpor L.G.A. of Rivers State, Nigeria.
Saipem started its pioneer oil and gas Project of 68 km Ebocha-Rumuekpe pipeline in 1967 to the Drilling activities in Kwale and Okpai in 1969 (during the civil war), the construction of the Warri Refinery in 1976 and the 342 km Escravos-Lagos gas line of 1983. Gbaran-Ubie integrated Oil and Gas Pipeline between 2007-2010, Afam Open Circle Power Plant Project between 2010 to 2014, EGINA UFR Project between 2014 to Date and Okpai 2 IPP Project between 2018 to date. Its key projects include Oil, Gas and Water Pipelines, Industrial Plants, Infrastructures. HRM indices for achieving these projects are in compliance with Nigerian local content act.
2. Literature Review: HRM and Organizational Growth
Human resource management practices and organisational growth have been extensively studied in the recent past. These studies have found a positive association between HRM practices and Organisational growth [2] . Recently there was widespread feeling that HRM has become more strategic, aligned with organisational values, missions and visions. Consequently, employers have started to place increased levels of focus on the methods they use to assess and improve the organisational performance of an employee. These methods often take the form of initiatives such as equal employment opportunities and affirmative action policies aimed at creating a diverse workforce within which all employees feel appreciated and valued. They have also developed modernized training and development plan that enhances Organisational growth in terms of employees’ retention, Technological transfers to trained employees. The oil and gas construction sector is one of the most complex and problematic sectors within which to manage people. As a result, the applicability of much mainstream (normal) human resource management (HRM) practices to this organisation is limited. Indeed, the operational realities faced by construction organisations mean that all too often the needs of employees are subjugated to performance concerns. This has potentially dire consequences for those who work in the organisation, for the firms that employ them and ultimately, for meeting client requirements and set target of the organisation as a whole.
It is argued that one needs to bear in mind that people (managers), not the firm, are the adaptive mechanism in determining how the industries will respond to the competitive environment [3] . Several scholars have noted that managing people is more difficult than managing technology [4] . However, those industries that have learnt how to manage their human resource well would have an edge over others for a long time to come because acquiring and deploying human resource effectively is cumbersome and takes much longer [5] .
HRM practices can help industries improve organisational behaviour in such areas as staff commitment, competency and flexibility, which in turn leads to improved staff performance, employee retention and growth [6] . The effect of HRM practices on organisational growth such as training and development, teamwork, HR planning, and employee security help improve firms’ business performance including employee’s retention and the firm’s flexibility [7] .
2.1. Nigerian Local Content in Saipem
Nigerian Content law was passed 2010 to regulate and coordinate Local content in all Oil and Gas operations in Nigeria. The law establishes the Nigerian Content Development and Monitoring Board (NCDMB). Major responsibility of the board is to guide, monitor, coordinate and implement the provisions of the law. The board is to implement the law in order to achieve measurable and continuous growth of Nigerian Content in all oil and gas operations. To ensure that operators adhere to recruiting and training of Nigerians in line with the stipulated quotas in the act. Also approve expatriate quotas are given to all oil and gas companies operating in Nigeria [8] . Only the areas needed for this research are applied in relation to how it works in Saipem.
In letter dated February 28, 2014, the NCDMB had suspended Saipem from participation in Nigerian oil and gas projects for “abuse of expatriate quota and procurement processes” after the agency had issued several caution notices to the Italian company in a bid to steer it into compliance to the NOGICD Act but the notices were ignored. The letter had listed Saipem’s violations of the NOGICD Act to include “preponderance of expatriates on EGINA project team without provisions for Nigerian understudies; discriminatory use of Nigerian Content Equipment Certificate (NCEC) to the detriment of Nigerian companies with in-country facilities”.
NCDMB had listed other acts of violations which include that Saipem planned to execute 2900 tonnes of fabrication outside Nigeria, while only 700 tonnes shall be executed in-country; Saipem planned to source for all 31 Cladded and SS Pressure vessels from China contrary to the requirements of the schedule of the Act and Saipem also planned to source for Globe Control Valves and Panametric Analysers on SPDC SSAGS Project despite in-country capacity for such services. Saipem was also accused by the NCDMB of procuring goods and services directly from abroad whereas some Nigerian companies had the necessary capacities for the jobs. The company was also said to be dealing directly with foreign Original Equipment Manufacturers even when those companies had Nigerian partners and representatives. The company’s action was said to be against the federal government’s Equipment Components Manufacturing Initiative, (ECMI) which was geared towards promoting local manufacturing of oil and gas components [9] .
2.2. Federal Government Lifts Ban on Saipem over Violation of Local Content Act
But in another letter dated April 7, 2014, with reference number NCDMB/MED/69/14/002, which was signed by the then Executive Secretary of NCDMB, Mr. Ernest Nwapa, the agency lifted the ban on Saipem, saying it had reviewed the company’s actions, commitments and introduction of new practices. The letter read thus: “In consideration of the foregoing, the Board hereby lifts the suspension placed on SAIPEM from participating in tenders in the oil and gas industry effective from May 7, 2014. Kindly ensure that you submit periodic reports to the Board on progress milestones in respect of approved CDI milestones,” the letter added.
On Tuesday the 26th of July, 2016 the House of Representative Committee on Local Content visited Saipem Base in Rumuolumeni, Port Harcourt as part of its oversight function to assess the local content compliance level of the company. The team was led by the Chairman of the Committee Honorable Emmanuel Ekon who said thus “I think our expression today is waooo!!! This is because what we are seeing here in Saipem is unbelievable, this is massive. The level of fabrication work we saw at the fabrication workshop is unbelievable”. “This is massive. This is very appreciable by the committee. I lack better words to explain what Saipem is doing in Nigeria. But I want to commend them. This is another success story of the Local Content Act”.
2.3. Local Content Application in Employment and Training of Nigerians in Saipem
The Local Content Act states that Nigerians to be given first consideration for employment and training. Nigerians not employed for lack of training, are to be provided with training in Nigeria or elsewhere. Only Nigerians are to be employed in all junior and intermediate cadres. All projects in excess of 100 Million USD to have a labour clause requiring the usage of a minimum percentage of Nigerian labour [10] .
➢ Expatriate Quota
The Act states that operators to retain only 5% of management position. Applications for expatriate quotas to be made to the board and approval received before any other made to any other government agency [11] .
In Saipem, expatriate at management positions are above 5%. Evidence is seen from that fact only one Nigerian is a project manager out of 5 on-going projects in Saipem at the time of this work. None as deputy project Manager, One Nigerian as site manager, and two Nigerians as construction managers, none as deputy construction manager. Only in HSE department that Nigerians are project HSE managers while the company HSE manager remains Italian (expatriate). Expatriate quota system in Saipem according to the Local Content Act is not working effectively.
➢ Fabrication and welding. The Act holds that all fabrication and welding to be carried out in-country [12] .
Saipem is specialist in fabrication and welding activities as part of the oil and gas construction jobs. Most of their fabrication and welding jobs are done in Nigeria. However, majority of welders and fitters in this company are expatriates. The Nigerian local content Act of 2010 also states that the operators to submit their annual Nigerian content performance report within 60 days to the board; Nigerian Content Development and Monitoring Board (NCDMB). The operator will also submit the following to the board every six months:
・ Employment and Training Plan
・ Research and Development Plan.
There is no evidence from the company (Saipem) during this work that they submit these plans to the board. The researcher decided not to ask more on these because of anonymity. However, there is evidence of good training and development carried out by Saipem mostly on the areas of welding, fitting, safety, and quality management system.
2.4. Local Content Maximization in Saipem as Organisational Growth
Saipem has a long tradition in effective local engagement, thanks to Nigerian Local Content Act. The maximization of Local Content in terms of employment and supplies is one of the main features of Saipem’s business philosophy towards growth. The Local Content strategy provides considerable social benefits to the host communities in Nigeria in terms of investments, employment, development of subcontractors and other factors. From Saipem’s perspective, maximizing Local Content means also developing continuing relationships with Nigeria as a host country and with local clients and suppliers. This has often beneficial effects on project costs and, most importantly, reduces the overall risk profile of the project in question and enhanced organisational growth for Saipem. Saipem Contracting Nigeria Limited has always applied a comprehensive Local Content approach, aware that this is the key to the success of its activities and organisational growth.
In 2016, over 77% of Saipem Nigerian personnel came from the communities where it was operating. Another aspect of local employment is the growing utilization of talents from within the country on corporate projects beyond their original home bases. Saipem has shown commitment to Local Content in Nigeria through its local content strategy in terms of local employment, training of its employees and privilege to local vendor. Total Saipem employees are 4580 in September, 2016. Percentage of Nigerian employees is 81% and percentage of Nigerian Vendors is 84% [13] .
For Saipem Local Content means the development of local skills and know-how transfer, strengthening of local manpower and local entrepreneurship through its business. Another aspect of availing of local employment is enriching the diversity of Saipem workforce, providing young talents from around the world with the opportunity to grow professionally within our Company’s projects at home and overseas. Saipem invests substantially in local facilities, ranging from engineering centres and support yards for maintenance and storage of construction equipment to fully-fledged fabrication yards, where sections of major projects are assembled for onshore field construction or offshore installation. Following the gradual expansion of existing fabrication facilities and well established engineering and project management centres in Port Harcourt; Nigeria. SELCE (Saipem Externalities Local Content Evaluation) Model and cases.
Measuring the real benefits of a Local Content strategy is the key to demonstrate a sustainable business approach and improve stakeholder relationships at local level. SELCE (Saipem Externalities Local Content Evaluation) Model has been developed by Saipem to achieve this goal; its output is a quantitative evaluation in monetary terms of socio-economic effects produced by the local content strategy. The tool aims to analyse and measure direct, indirect and induced socio-economic impacts the “externalities” generated by Saipem Operating Companies in the socio-economic context of Nigeria.
3. Methodology
This work adopts descriptive type of survey research design. The relationship between HRM practices variables, here observed as composite independent variables as against a composite of organisational growth variables in Saipem. This design helps in seeing how the HRM Variables (independent variables) significantly affect organisational growth (dependent variables) of Saipem in terms of compliance with Nigeria Local content act of 2010. It helped in gathering quantifiable information on the study that is used for statistical inference on the target population through data analysis. Descriptive/diagnostic studies summarised data such as measures of central tendency including the deviance from the mean, variation, percentage, and regression between variables.
The population size comprised Management and staff of Saipem contracting Nigeria. The population size of Saipem is 4580. Sampling is done by choosing 10% of the total Saipem population of 4580 [14] . In this study, a total of 458 employees were selected with the objective of gaining completion of at least 400 to 450 copies of the questionnaire. The sampling technique that was used in this research is the probability sampling technique. The probability sampling technique used is limited to only Proportionate Stratified Random Sampling. It gave ample opportunity to every worker in Saipem of being selected in the study. The workers were grouped into management and Inter-mediate management strata, senior staff, Junior staff, pipe welders, pipe fitters, grinders and steel carpenters, Scaffolders, erectors, Iron Benders, Auto Mechanics, Auto Electricians, Crane operators, Forklift operators, Car Drivers, Gardeners and Cleaners. A sample frame was made for each stratum from where the researcher used the table of random numbers and selected the target sample for the study.
Primary Sources and Secondary sources of data collection
The researcher used both primary and secondary sources to collect data. Data collected from secondary data population sample of saipem using Saipem sustainability magazine; July, 2017: 21). Both primary and secondary dates are integrated by seeing the total number of projects completed with meeting client set targets. This enhanced organisational growth of Saipem.
Primary Sources
The primary sources of data collection here comprised: Questionnaire, semi-structured interviews and Focus Group Discussion (FGD). Justification on why these methods were used is that they helped in seeing the level of compliance Saipem has with Nigerian Local content acts.
Questionnaire
Structured questions were used in the questionnaire to determine the construct of the research by asking general questions like age, gender, and occupation. Multiple choice questions were employed with Likert scales so respondents could indicate the “intensity” of their knowledge towards each aspect of their job, compliance with the local content and how the HR variables could significantly contribute to Saipem compliance with Nigeria local content act.
4. Data Analysis
In analysing the responses from the questionnaire, descriptive statistics was used (frequency distribution and percentage methods). Packages for Social Sciences (SPSS) software Version 22 was used to run tests on collated data. The data analyses involve the following: Measures of central tendency-frequency distribution and percentages was used to analyze responses from the questionnaire such as socio-demographic data. One sample t-test analysis of SPSS version 22 was used to analyse the questions on Compliance to local content. Percentage method was used to analyse socio-demographic data.
Hypotheses tested: H1: There is a significant relationship between Compliance to Local Content Act as a HRM practice and organisational growth of Saipem in terms of project completion and meeting client set target.
RESULT: Using the SPSS software for the student T-test to assess the level of acceptance or otherwise of the null hypotheses of the study at 95% probability level (confidence interval of the difference); it was evident that the table value is 1.81 at n − 1 (11 − 1) = 10 degree of freedom. However, the various calculated values of T ?test range from 11.9446 to 195.0472. These are located outside the critical region of acceptance which is ±1.81. This means the null hypotheses which states the there is no significant relationship between compliance to local content act as a HRM practice and organisational growth of Saipem in terms of project completion and meeting client set target is rejected and the alternate hypotheses becomes the explanation that there is a significant relationship between compliance to local content act as HRM practice and organisational growth of Saipem Contracting Nigeria.
The percentage response rate shows that 34.1% strongly agree that there are succession plans for positions not held by Nigerians in Saipem. 27.8% agree while 23.1% disagree and 14.9 strongly disagree.
Based on the above date, it is found that there are succession plans for positions not held by Nigerians in Saipem. It is therefore decided that since there is succession plans for positions not held by Nigerians in Saipem, there is evidence in Saipem compliance to Nigeria local content requirements thereby meeting client requirement to achieve project completion. This is in line with the research object to investigate the significant relationship between the level of compliance to local content act in terms of employment quota between Nigerians and expatriates resulting in employee retention, project completion and meeting client set target in Saipem, ensuring that employees’ training and development programmes conducted by Saipem bring about technological transfer to Nigerian employees in Saipem.
The percentage response rate used in measuring the company compliance in maintaining maximum of 5% of management position for expatriates in Nigeria shows that 33.6% strongly agree that Saipem maintains maximum of 5% of management position for expatriates in Nigeria. 28.8% agree while 22.4 disagree and 15.1 strongly disagree.
Based on the above date, it is found that Saipem maintains maximum of 5% of management position for expatriates in Nigeria. It is therefore decided that from the above analysis show that Saipem maintenance of maximum of 5% of management position for expatriates in Nigeria as a HR practice enhance compliance and meeting client requirement in Saipem.
5. Findings
1) The researcher found that Saipem level of compliance with the local contact act is ascertained, however, the company needs improvement in the areas that they still make use of few expatriates who are welders, fitters, and mechanics. It was also found that Saipem in compliance with Nigeria Local Content has been supporting Mudiame in the developments of its mechanical and civil engineering laboratories to international standards. Today, Mudiame is a fully capable company in the Oil and Gas service industry and still in collaboration with Saipem in its project activities. Saipem has shown commitment to Local content Act in Nigeria through its local content strategy in terms of Nigerian employment, training of its employees and privilege to Nigerian vendor. Total Saipem employees is 4580 (September, 2017) percentage of Nigerian employees is 81% and percentage of Nigerian Vendors is 84%. Saipem has moved from an expression of its “vision and commitment” to Local Content to providing a measurable, supportive evidence of its impact in the Nigerian socio-economic context and human capital development. Its presence and future investments have a multiplier effect that could help the country to support and contribute to face its economic and social challenges.
2) It is found that in Saipem, expatriate at management positions are above 5%. Evidence is seen from that fact only one Nigerian is a project manager out of 5 on-going projects in Saipem at the time of this work. None as deputy project Manager, One Nigerian as site manager, and two Nigerians as construction managers, none as deputy construction manager. Only in HSE department that Nigerians are project HSE managers while the company HSE manager remains Italian (expatriate). Expatriate quota system in Saipem according to the Local Content Act is not working effectively.
3) It is found that in 2016, over 77% of Saipem Nigerian personnel came from the communities where it was operating. Another aspect of local employment is the growing utilization of talents from within the country on corporate projects beyond their original home bases.
4) It is found that Local Content initiatives were not listed in the training plan, because their costs are to be charged on cost center specifically created for Local Content Projects. Every six months the Operating Companies HR Manager fulfils a report on the training activities supplied and the balance sheet of the related costs. This information is conveyed to the Corporate Training Department, which prepares the Saipem Group Training Activities Report.
5) Saipem as part of the Nigerian industry structure, leading investments, developing human resource, contractors, technologies and partners, today Saipem has the biggest, safest and most technologically advanced yard in Nigeria with a total area of almost 1 million Sqm. From a project site office, it has grown to a million square meters operational base in Port Harcourt, fully equipped to serve the oil and gas industry.
6) It was also found that every work that Saipem take is done and delivered in their yard at Rumuolumini in Port Harcourt Rivers State and they can never accept any project they cannot do. Saipem has no reason to export any fabrication work.
From FGD, some participants revealed that “the local content policy has not yet achieved significant success in enhancing higher indigenous participation, use of local technology, higher contract awards to indigenous firms by Saipem” Some of the participants also stated.
Findings on associating project completion and meeting client requirements as organizational growth in Saipem based on the interview.
This work found that Saipem has completed many projects and met client requirement without LTI. The milestone achievement has been the bedrock for Saipem in being winner in oil and gas business in Nigeria. The employees’ health and safety is Saipem priority and no LTI was recorded in all Saipem projects for the past six years. This finding is based on evidence provided by interviewees such as interviewees 5 and 7. Saipem is aimed at achieving Project completion at the client set target, however, there are some undertones in the achievement. This is seen from the areas of achieving the set target without LTI (Lost Time Injury). If Saipem systematically adopts High Performance Work Practices, then contemporaneous estimates of the impact of these practices on project completion to serve as organizational growth will be overstated. This work has it that project accomplishment without any lost time injury or fatality can be associated with organizational growth as the health and safety of the employees are enhanced.
6. Conclusions
HRM practice has enhanced organisational growth of Saipem in the areas of compliance to local content act, thereby meeting client requirements. The study has shown that there is significant relationship between local content compliance of Saipem and meeting client requirement, thereby enhancing project completion as organisational growth.
However, implementation of the local content act as it relates to Nigerians occupying certain positions and fabrication of oil and gas materials within Saipem contracting Nigeria limited, together with effective utilisation of local vendors/contractors, needs to be made fully suitable and workable in Saipem. Saipem management needs to look into the various factors that influence employee retention in this organisation. The key among them is the leadership style of top managers, top management commitment, fairness in the treatment accorded to employees by their supervisors, a clear understanding of what is expected of them, and being made to feel good about their work. All these findings help in concluding that organisational growth is evident in Saipem through HRM practice variables used in this work.
7. Recommendations
Firstly, the researcher found that Saipem level of compliance with the local contact act is ascertained, however, the company needs improvement in the areas that they still make use of few expatriates who are welders, fitters, and mechanics. This work recommends that many Nigerian employees of Saipem can be qualified welders, fitters, mechanic and other none technical skill without the use of expatriate in such less skill profession. It is therefore recommended that all expatriates in such departments be replaced with Nigerians.
Secondly, it is recommended in this work that the area for future research is ascription of project completion as organizational growth. Underlying factors in completing a project based on client requirement need to be looked into such as level of accident occurrence that was not investigated, because the client needs their project to be accomplished in good time and Saipem fulfilling the demands of Nigerian content act.