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Oil & Gas IQ: Local Content

Local Content: Just How Much Is Too Much?

Contributor: Tim Haïdar, EIC
Posted: 05/26/2011
Local Content: Just How Much Is Too Much?
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Surveys are all about reading trends and discrepancies, and in a poll canvassing the opinions of oil company and government officials from the four corners of the world, there is no surprise that opinion was divided.

The main sticking point for respondents was over the question of the percentage of oil and gas projects that should fall under aegis of the local content.

Respondents from IOCs overwhelmingly polled in favour of only allowing 20-40 per cent of a project to be applicable as local content, whereas their counterparts at NOCs and governmental agencies voted for 60-80 per cent local content in oil and gas projects. Some government officials even voted for 90 per cent.

Of course, such a rift in opinion perfectly defines the key conflict in the local content debate: the struggle between what is beneficial for operating companies, and what is beneficial for the national infrastructure and native populations where assets are located.

An adjunct to that same dialogue is exactly what is perceived as realistic and what is idealistic in the local content debate.

For example, could you realistically and locally produce specialised machine parts in countries with underdeveloped or poor capabilities for hi-tech manufacture?

We can see the NOC/IOC & government divide played out again in our questioning what areas of local content need to be improved in their native regions.

Just under a quarter of our respondents agreed that areas for improvement in local content were capacity building and investment into local economies and infrastructure.

Predictably, those who voted for improvement in capacity building were overwhelmingly working for NOCs. Those who advocated further investment in local economies were firmly in the IOC and government camp.

Despite the discrepancy in opinion over the right percentage for local content and the areas to concentrate funding on, both the NOC and IOC/government sides of the coin agreed that, in the main, the global oil and gas industry is currently meeting the local content requirement in their regions.

Tim Haidar
Contributor: Tim Haïdar, EIC