Local content in the oil and gas industry is usually a hot topic across the world, and especially here in Africa.
Exploration of oil and gas resources in various countries calls for a strategic approach towards local content.
Most countries have enacted laws to promote local participation. For example, Nigeria, Ghana and Uganda
What is local content?
It is important to understand this term if you are going to utilize this concept to grow your oil and gas business.
In simple terms, local content is the development of local capacity, skills, technology transfer and use of local suppliers in the oil and gas industry.
Every country where an oil and gas project is being undertaken will require it’s citizens to reap most benefits from the upstream activities.
You will achieve this through capacity building, SME development and utilization of local products or services.
Local content policies in oil and gas
Local content policies in the oil and gas industry aim to encourage local participation. It is helpful in developing domestic industries and manpower.
It is also aimed at promoting the transfer of technology and capital.
What is a LC policy?
An LC policy is a measure that a government puts in place to guide the implementation of the local content requirements.
These policies will require that you use domestic or local goods or services in order to operate in the country’s upstream oil and gas industry
You will be affected by the local content requirements or LCRs in whichever country you choose to invest in.
LC policy in Nigeria
A prime example of LC policy is the Nigerian Oil and Gas Industry Content Development Act. It was introduced in 2010.
This policy was created to help build the capacity of indigenous firms. This is to provide more opportunities for participation in oil and gas business.
Importance of Local Content
Local content is important in the development of the oil and gas value chain.
A country that gets the balance right, between attracting investments and promoting local participation achieves the most benefits from such programs;
- LC encourages local companies to maximum in-country value in providing of good and services.
- It promotes and encourages collaborations or partnerships between international investors and local businesses.
- Promotes exchange and transfer of technology as well as skills.
- Increased growth of local productive capacity.
- Creates jobs and income opportunities.
- Reduces the importation of materials, equipment and services
The importance of these policies, when well executed, can go a long way in improving the upstream oil and gas industry
In conclusion, E & P companies, as well as international oilfield services companies or contractors will need to find ways to work with local firms.
Collaboration with local companies provides a great opportunity to build sustainable business model that will guarantee success in Africa.
You should consider creating partnerships that will add value to the upstream oil and gas operations.