The Importance of Local Content at a Time of Crisis – What Covid-19 will Teach the Industry
At a time when travel around the world is severely restricted and the oil price war brings even more uncertainty to the industry, oil & gas executives face another challenge as more and more countries close their borders to contain the spread of Covid-19. While a lot of people in Europe and beyond fear how this crisis might impact their job security, and while some projects are being put on hold, some companies are instead struggling to maintain activity levels due to a shortage of staff. LinkedIn posts have been multiplying requesting technical experts in particular locations as companies struggle to secure staff due to travel bans, repatriations and local restrictions on movement.
In the past, significant rounds of redundancies due to price crashes have resulted in a lag factor in Africa once the market rebounds as operators have struggled to hire capable expats quickly enough. This current crisis might be an opportune time for the industry to finally deliver on the considerable efforts that have gone into local content over the past decade. Principally, if the region is able to continue to invest in the education and training of local people it can prove a decisive moment for domestication of value adding activities in Africa by reshaping the local workforce.
Local content regulations and implementation are often discussed during industry gatherings, especially in regions like Africa, where capacity building has been front of mind for many hydrocarbon-rich nations. One such example is in Ghana which launched its Accelerated Oil and Gas Capacity (AOGC) programme as part of capacity-building efforts (https://info.oilandgascouncil.com/africa-presentation-petroleum-ghana). Most recently in January, when the coronavirus threat was only beginning to emerge, hundreds of industry experts gathered in Dakar during the MSGBC Basin Summit & Exhibition’s Local Content Forum to hear how this booming region is approaching the topic. A host of regional leaders from across the value chain outlined the concrete steps that have been taken in Senegal before and since the adoption of a new petroleum code and local content law in early 2019. These included
- Cross-industry workshops to set out a timeline and framework for implementation;
- The INPG’s (Senegal’s National Institute of Oil and Gas) first specialised Master Degree Program in Oil and Gas Engineering
- The promotion of non-technical roles such traders, lawyers & financiers;
- The development of a value chain including, amongst others, logistics and transportation;
- The progress of organisations like Invest in Africa who since 2018 have developed a digital platform through which 400 local companies have registered to access to tenders.
With Senegal targeting 50% local content for all oil & gas projects by 2030, the local workforce is probably not yet ready to singlehandedly respond to the current crisis. However, while the MSGBC’s oil & gas sector is still in its infancy, the first wave of INPG graduate is already set to enter the job market by April, and 50% of the tenders promoted on Invest in Africa’s platform have been won by local companies. This builds on other local content program success such as those at Takoradi Technical University in Ghana launched back in 2015.
Localisation efforts can be supplemented further through industry efforts. The Nigerian Content Development and Monitoring Board (NCDMB) $50 million intervention fund is one such scheme. Announced in March 2020, this looks to support local R&D and keep $5billion of O&G revenues in the country moving forwards
As the current situation unfolds, it will be interesting to follow how the industry adapts to a world where travel restrictions may become more of the norm and whether maximising local workforces might emerge as a practical solution. Similarly, as the oil price continues to lead to major uncertainties for IOCs, NOCs and independents alike, cost reduction efforts may follow a similar path and lead companies to explore more remote working and training solutions.
The Oil and Gas Council is keen to hear how your company is dealing with the current restrictions and challenges brought about by the oil price. If you have any insights, solutions or comments you would like to share, please contact Sam Scarpa at [email protected] – we would love to hear from you.
A quick toolkit to Ensuring Local Content Excellence in Africa in a low-price environment:
- Consider your recruitment strategy for the long-term – at a time like this it is possible to find some of the best local candidates that would have previously been snapped up by bigger IOCs. It is worth investing in strategies to ensure that any recruitment takes a longer-term view by considering training highly qualified but inexperienced candidates. This will potentially save on manpower, create a winning local content culture and these people are likely to excel and stay in the company for longer.
- Align with international investors – the World Bank-funded Kenya Petroleum Technical Assistance Project is one such example. Multilateral organisations have a direct mandate to supports governments’ development strategy in Africa, which means they are happy to invest in projects that see accelerated sustainable growth. There also are market makers who can connect to export credit agencies and offer both expertise and lines of credit to the O&G sector in Africa.
- Ensure industry collaboration – take AKER’s $4.5 million support of Ghana’s Accelerated Oil and Gas Capacity-Building (AOGC) programme. This collaboration looks to support the training of individuals in various vocational and technical areas, and to grow localisation efforts in Ghana. Such efforts ensure that there is significant involvement from the contractors who are investing in training and development of local people. This can be further supplemented with developing localised approaches, as we have seen with “In Kingdom Value” in Saudi Arabia or “In Country Value” in Oman.
- Ensure performance includes training others – in order to develop junior staff, it is recommended that the performance of many operational and non-operational expatriates have it within their job description and functions to work closely with the training of local junior staff in order to transfer knowledge. This will leave a lasting legacy when looking to domesticate the knowledge transfer of technology after a few years.
- Collaborate with tertiary institutions to better prepare the pipeline – this will optimize vocational learning and helps reduce cost of training on hire. Focus here can also be on preventive maintenance. The INPG’s specialised Masters program supported by the University of Calgary is one such example. Similar programs exist, such as ANEP in Mozambique, that have seen it partner with the Industrial and Commercial Institutes in both Matola and Nampul. If industry and learning institutions can collaborate on specific curricula to be covered, it will allow students in Africa to move into jobs with a much more focused background on the skills necessary for their actual jobs.