Local Content Development of Oil and Gas Projects
First, LC is gaining ground in developing nations to promote social and economic development while global trends in LC continue to flourish in MENA, Asia Pacific and Latin America. Indigenization, domestication and maximum utilization of the LC become a hot topic in nowadays oil and gas industry.
Secondly, Socio-economic impact of contemporary O&G prices and projects should be well analysed by National Oil Corporations (NOCs) as International Oil Corporations (IOCs) invest in their countries. There is a huge demand in higher LC in terms of engineering, procurement, construction, consultancies, technical support and services, and management. LC is not only seen as a concern to the host states but also to foreign investors and developing countries worldwide. The TEFCEL model aims to break down and analyse the LC issues from different angles and provide the wider oil and gas industry the opportunity to interact and express their viewpoints and learn from their fellow friends. TEFCEL Model is designed to deliver solutions to LC Development in respective countries and organisations.
Third, local content requirements aim to create jobs, promote enterprise development and accelerate the transfer of skills and technologies and it became a strategic issue for the oil and gas companies as local content policies affect both POCs and NOCs. The importance of the issue of local content, force many companies to looking at it as strategic issue that can have a direct impact on a range of core business functions, such as business development, procurement and operations.
Forth, local content is a complicated concept also; there is a gap in the definition of local content in the theory. Most countries define local content by their own words, even some countries use other terms and defines with their own purpose. The best mechanism is when discussing local content try not to use term at all and instead simply say what you mean.
Firth, there are some benefits regarding local content programs which are: Reductions in operational costs, expatriate staff to a minimum; smoother flowing supplies of goods and services. It is important to mention that these opportunities are for the companies like IOCs, not for the country and government, because the host government can gain other benefits from the local content programs.
Sixth, challenges that may occur during the local content development program are: lack of qualify labor, lack of basic infrastructure, low quality of educational systems, unavailability of finance and the condition of infrastructure
Seventh, local content is indeed a source of promotion for the enterprise development and expansion of the local market. However, there are further observations or concerns may be required to deal with the said issues of the local content in more ciritical approach based on the TEFCEL Model:
- one may fail to understand that whey there is a gap in the definition of local content in the theory. What would be the pros and cons of the concept and definition of local content that they may be varied in terms of each local market and domestic law.
- how could it be possible to envisage the local content program in the petroleum contract, but without elaborating and discussing the concept and terms of the local content.
- how local content program would reduce the operational costs, and how such program would also create smooth flowing supplies of goods and services, whereas IOCs always claim otherwise!
- there is often the case that local content program is the program proposed, promoted or encouraged by the Host Government (HG). On the contrary, such program could be a heavy duty and extra obligation to IOCs. So how such program could have counter-productive, thus, create opportunities for IOCs.
- certain challenges have been mentioned in enforcing local content such as low quality of educational systems, unavailability of finance and the condition of infrastructure. On the other hand, local development program or plan may create opportunities. Accordingly, it is highly required to elaborate furthermore on those challenges and opportunities that may be created by local content plan for both IOCs and HGs .