Local Content: Just How Much Is Too Much?

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As a prelude to Global Local Content Summit 2011, Oil and Gas iQ conducted a survey to canvass opinions on contemporary issues in the field. The following editorial is an analysis based on the survey's findings.

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.

Contributor:   Asdza Nadleehe

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Report Abuse   dl11 11/08/2011 5:10:49 PM EST Local content requirements represent an opportunity for new companies to enter the offshore oil & gas industry. It is technology-intensive ventures that really provide high value-added jobs to a country. Whether it is home-grown technology, collaborative R&D or strategic international partnerships, it is essential that all players recognize the importance of collaboration among the academic, business and government communities to achieve a significant ripple effect throughout a local economy. A long-term investment perspective by the financial community is necessary for new ventures to realize commercial success. In today's challenging economy, it is important to think "outside the box" when it comes to securing project funding. Replies (0) Post a reply Sign in or Sign up to post a comment

Report Abuse   LukeTreacy 06/10/2011 12:16:57 PM EDT Intriguing results, particularly the differences of opinion on local content requirement between the IOC’s and Government. Emmanuel Buah, Deputy Minister for Petroleum for Republic of Ghana has recently joined the panel of speakers at the Global Local Content Summit 2011. Will be interesting to hear his views on the matter when he's in London Replies (0) Post a reply Sign in or Sign up to post a comment