Regional Content as an Alternative to Local Content: Is it Feasible?

I posted a blog last week about the changing attitudes of the oil industry toward local content and how welcome that change is to those of us focused on local economic development and jobs creation in countries with hydrocarbon resources. Of course, the big question remains: how might operators and their contractors facilitate local content development?

The question has many answers, including some tried and true approaches, from the creation of enterprise development centers or other wide-scope capacity building programs (the multi-year industry-wide collaboration on CAE-Angola or BP’s long-time Enterprise Development Program in Azerbaijan) to more targeted efforts such as ExxonMobil’s support for locally manufactured steel pipe in Nigeria.

One other potential answer has been peeping up in discussions of late, including at the CWC Gulf of Guinea Oil & Gas (Malabo, June 2012), the IQPC Global Local Content events (London, September 2012) and the CWC East Africa Oil & Gas (London, October 2012); this is the concept of “regional content”— that local or national content may not really be the answer, and could be replaced with a strategic approach to the development of certain supplier sectors in neighboring oil producing companies. It is an overwhelming concept for sure, but think about how powerful this idea could be for a region like the Gulf of Guinea where you have the massive, decades-old oil economies of Nigeria and Angola, a brand new producer like Ghana, and countries like Liberia and Sierra Leone which look to become producers in the near term. You also have populations that range from 150M in Nigeria to 700K in Equatorial Guinea and widely varied levels of education and infrastructure among the countries, factors which significantly affect each nation’s capability to deliver local content. Or how about Southeast Asia, which ranges from a century-plus of production in Indonesia to a Cambodia that may see first oil in 2016? Or the countries of East Africa, long ignored by major producers but now courted by majors and independents for their gas reserves?

What if we were to strategically map the comparative advantages in each country to meet the extensive supply needs of the regional oil & gas industry? Certainly, some goods and services would ideally always come from within the producing country. But what if countries specialized in higher tech skill sectors and equipment manufacturing? What if a country were able to really concentrate on developing a handful of top quality, high value sectors serving not only the domestic O&G industry but also that of neighboring countries (not to mention other domestic and regional industries) rather than trying to do a little of everything?

Given how very difficult it is to get local content stakeholders to play in the same sandbox within any one country, I recognize that achieving the level of private and public sector collaboration required for such a regional effort may be a dream. However, some regional collaboration is inevitable—fabrication yards or refineries, for instance. Those types of (perhaps) forced collaborations lead me to believe that a handful of visionaries among the IOCs, NOCs, international suppliers, local suppliers and national governments could, in theory, change the economic landscape for an entire region. That would be an innovation worth considering.

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