VZCZCXRO1029
PP RUEHPA
DE RUEHOS #0034/01 0290700
ZNY CCCCC ZZH
P 290700Z JAN 10
FM AMCONSUL LAGOS
TO RUEHC/SECSTATE WASHDC PRIORITY 1189
INFO RUEHZK/ECOWAS COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 0007
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHMFISS/HQ USAFRICOM STUTTGART GE

C O N F I D E N T I A L SECTION 01 OF 03 LAGOS 000034 
 
SIPDIS 
 
COMMERCE FOR KBURRESS 
AFRICOM FOR CGAY 
TREASURY FOR DPETERS, RHALL, RABDULRAZAK 
STATE PASS USTR FOR LISER, AGAMA 
STATE PASS OPIC FOR ZHAN, MSTUCKART, JEDWARDS 
STATE PASS TDA FOR EEBONG, DSHUSTER 
STATE PASS EXIM FOR JRICHTER 
STATE PASS USAID FOR NFREEMAN, GBERTOLIN 
USDOC FOR 3130/USFC/OIO/ANESA/DHARRIS 
 
E.O. 12958: DECL: 12/31/2019 
TAGS: ETRD ECON PGOV WTRO USTR NI
SUBJECT: LOCAL CONTENT BILL STRATEGY 
 
Classified By: CG Donna Blair for reasons 1.4 (b & d) 
 
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SUMMARY 
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¶1.  (C) The Local Content Bill passed both the Senate and the 
House of Representatives.  The Senate and the House versions 
now need to be reconciled.  There will be a third and final 
reading scheduled once the reconciliation process has been 
completed.  Speculation is that it could happen as soon as 
the first week of February 2010 and be signed into law before 
the end of the first quarter 2010. The Local Content Bill 
requires oil companies to use a majority, if not 100 percent, 
Nigerian labor and materials in conducting their business. 
The Coalition of Service Industries plans to respond by 
coordinating with the U.S. Mission to formulate a position 
paper on why the Local Content Bill is bad for Nigeria and 
Nigerians.  The American Business Council will coordinate 
with the Nigerian-American Chamber of Commerce to organize a 
roundtable on the negative effects of the bill.  Results of 
the roundtable will be worked into 
a position paper to be presented to relevant committees in 
the National Assembly.  END SUMMARY 
 
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CURRENT STATUS OF LOCAL CONTENT BILL 
------------------------------------ 
 
¶2.  (SBU) The Local Content Bill (LCB) passed the Senate on 
April 17, 2008 and the House of Representatives on October 
22, 2009.  The Senate and the House versions now need to be 
reconciled.  The House has nominated members for the 
reconciliation, but the Senate has not designated its 
members.  Once the nomination process has been completed, 
there will be a formal reconciliation and a third and final 
reading scheduled.  Speculation is that it could happen as 
soon as the first week of February 2010 and be signed into 
law before the end of the first quarter 2010. One issue 
concerns retaining five percent of management positions as 
expatriate positions.  ExxonMobil has stated that this is 
unrealistic given that the average international oil company 
(IOC) joint venture (JV) interest is 40 percent.  The IOCs 
would like to see 15 to 25 percent expatriate managers. 
Another issue deals with operators who carry out a project 
contrary to the provisions of the LCB.  The current language 
states that the IOCs are liable to a fine of five percent of 
the project sum or cancellation of the project upon 
conviction.  The IOCs want to know who determines 
non-compliance and who convicts.  (NOTE:  The IOCs do not 
execute projects that are not approved by the Nigerian 
Content Division which is the industry regulator charged with 
implementation of the Nigerian content policy. END NOTE) 
 
---------------------------------------- 
CSI: LOCAL CONTENT BAD FOR U.S. INDUSTRY 
---------------------------------------- 
 
¶3.  (C) Members of the Coalition of Service Industries, (CSI) 
including Bob Vastine, Eric Toy, and Bob Moran from 
Halliburton, Brian Petty from International Association of 
Oil Drillers, and Tim Richards from GE, participated in a 
conference call with the Ambassador and other members of 
Mission Nigeria to discuss the recently passed Local Content 
Bill (LCB) on December 22.  The CSI members expressed their 
concern about the impact that the LCB will have on their 
businesses in Nigeria.  They specifically referred to the 
schedule attached to the bill that requires up to 100 percent 
local content for certain materials and labor covering most 
of the processes involved in drilling for oil in Nigeria. 
Moran also commented on the technology transfer requirements 
of the LCB and said that Halliburton would either leave 
Nigeria because of these requirements or would bring in 
inferior technology which would limit the company,s 
efficiency. 
 
 
LAGOS 00000034  002 OF 003 
 
 
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AMBASSADOR: SHOW WHY LOCAL CONTENT IS BAD FOR NIGERIA 
--------------------------------------------- -------- 
 
¶4.  (C) CSI stated that they had been in discussions with Dr. 
Egbogah, the Special Advisor to the President on Petroleum 
Matters.  The Ambassador pointed out that this was most 
likely the wrong point of contact since Egbogah would be most 
effective if the LCB had originated from the executive.  The 
Ambassador suspected that the LCB originated in the 
legislature, thereby limiting Egbogah,s potential impact. 
(NOTE: The LCB originated with the Obansanjo regime according 
to Nigeria Oil and Gas Monthly business editor Solomon 
Ugbodu.  END NOTE)  The Ambassador continued by stating that 
CSI should focus on why the LCB is bad for Nigeria and 
Nigerians.  Currently, CSI has a "side-by-side" analysis that 
explains why each section of the bill is bad for U.S. 
industry.  This "side-by-side" was created 18 months ago and 
was based on the Senate version of the LCB.  The Ambassador 
suggested that CSI update their analysis to include the more 
current House version and the potential impact of both bills, 
or a consolidated version of both bills, on Nigeria. 
Complaining about how the LCB impacts foreign companies will 
fall on deaf ears in the National Assembly.  The Ambassador 
committed the Mission to procure a copy of the latest copies 
of both the House and Senate versions of the LCB and to 
forward these to CSI. 
 
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STRATEGY TO ENGAGE NATIONAL ASSEMBLY 
------------------------------------ 
 
¶5.  (C) The Ambassador suggested that CSI team up with the 
American Business Council (ABC) in Nigeria as well as the 
Nigerian American Chamber of Commerce to form a team of both 
U.S. and Nigerian companies.  This team would produce 
analysis as to why the LCB is bad for Nigeria and Nigerians 
using the most current legislation.  The Ambassador 
identified three areas where this team could have an impact. 
The first area was in the harmonization committee. 
Currently, the House and Senate versions of the LCB have 
minor differences that must be resolved before the bill is 
signed into law.  The second area is the implementation 
committee.  As the LCB is implemented and regulations are 
formulated it is possible to influence how that is done.  The 
third area is to contact Dr. Egbogah in the hopes that he 
could have some influence on the process.  The Ambassador 
committed the U.S. Mission to contacting Dr. Egbogah. 
 
¶6.  (C) The Ambassador met with Nigerian-American Chamber of 
Commerce (NACC) President Laolu Akinkugbe on December 23. 
Akinkugbe stated that his SME members were in favor of the 
bill, but there was not much support beyond that.  The 
Ambassador followed up by asking what happens if the LCB 
comes out badly?  Akinkugbe responded that, in that case, 
joint advocacy would be required between the United States 
and the NACC.  The NACC would see what happens in the first 
quarter and would plan on explaining to members the impact of 
the bill, Akinkugbe continued.  A joint ABC-NACC position 
should be formulated at that time.  NACC has yet to begin 
working on this.  The Ambassador queried if Mission Nigeria 
could help the NACC 
in working on a position paper and Akinkugbe said yes. 
 
¶7. (C) All agreed on holding a roundtable during the first 
part of 2010.  After the roundtable, a group 
of ABC and NACC members would approach the appropriate 
committee jointly.  ConGen Lagos will contact ABC President 
Dick Kramer to seek for his assistance in this matter. 
 
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OIL COMPANIES NOT DOING THEMSELVES ANY FAVORS 
--------------------------------------------- 
 
¶8. (C) The Ambassador met with Citibank Managing Director 
Emeka Emuwa on December 29.  When asked how he felt about the 
 
LAGOS 00000034  003 OF 003 
 
 
LCB, Emuwa stated that it is not a "today issue."  The 
industry set itself up by not investing enough in the past. 
If things had been done right in the past, there would have 
been no problem today.  It was entirely possible that not "a 
dime" of contract monies flowed to Nigerians before the LCB. 
Emuwa saw no problem with letting more value creation be made 
in Nigeria.  The issue is "how far do you push?"  The 
Ambassador countered that the schedules are too aggressive. 
"Not surprising," Emuwa replied.  He continued that there is 
not much sympathy for Shell.  They were the first company to 
find oil and could have very easily spent a little bit more 
in the communities.  The attitude at Shell was that they paid 
their taxes and it was up to the GON to deal with the 
community.  Shell has been more involved in community 
relations in recent years but their activity has not been 
seen as genuine.  Exxon Mobil does not have the same problems 
in that they have managed their community relations better 
than Shell.  Chevron is somewhere between the two.  "When you 
see an advantage, you cannot take 100 percent," opined Emuwa. 
 
¶9.  (C) Oil services companies with a short history will 
leave Nigeria, predicted Emuwa.  The ones with a longer 
legacy will stick it out because there still is money to be 
made in Nigeria.  The case of the LCB is similar to the case 
of the PIB.  NNPC and Nigerians overall push hard in 
negotiations.  "The IOCs must not back down but see the 
process through," Emuwa insisted. 
BLAIR