1

BUILDING LOCAL CONTENT CAPACITY IN AFRICA’S OIL & GAS EMERGING

ECONOMIES

Jessica Kyeyune

2

Africa’s Oil & Gas Industry is on the Spotlight51 of 54 on-going

or planned exploration operations

Home to 6 of the 10 fastest Growing world Economies

New Frontiers in Oil

& Gas

16 Oil Exporting Countries

17

3

Resource Rich Countries with Poor People

Resource rich countries around the world tend not to score well on Governance

Lack of clear and stable laws and regulations

Limited capacity and skills in government

Poor fiscal, monetary and budgetary discipline

These are basic errors to be avoided by EEs17

4

What is Capacity building?A process to develop & strengthen skills, instincts, abilities, processes and resources needed to survive and thrive (UNDP)

Includes:Human resource development & upgrading

Organizational Development

Institutional & legal framework Development

Building capacities to enable support to decision making

5

Emerging Economies are on the right track

Laws and policies that govern and maximise in-country benefits from the Oil & Gas sector

State Participation in Petroleum activities

Procure goods and services from local entrepreneurs, and technology transfer

Employment and training plans, capacity building and succession plans where there is no immediate local capacity

The question is: if the policies will be effectively achieved

6

Industry Challenges faced by EEs Skill-gap between local supply capacity and required

oil & gas standards

O&G industry is highly capital intensive with limited direct employment opportunities

Highly technological & specialized goods and services demanded by industry are typically supplied by competitive international markets

These challenges not readily understood by communities.

7

Universities and Technical

InstitutionsPetroleum Industry

E&P

Refining

Transportation

Distribution

Governmental Agencies

Supply Chain of Goods and Services

Financial Institutions

Environmental Protection

Health and safety assurance

Social and economic development

Technological innovation

Key objective: Promote Sustainable Development

Where is Capacity Building required?

Boarder Control, Passport Control, INTERPOL,

Security & Law enforcement

8

Sustainable Development is a State responsibility

EEs must have a strong incentive to:

Manage their country’s newfound oil wealth well

Eradicate mechanisms that allow oil wealth to be

siphon off

Desist from poor economic & resource management

Manage expectations from citizens and IOCs

Those factors work against capacity building success

.

9

Building domestic capacity is a critical step

Capacity to negotiate with oil companies

Capacity to manage the oil industry

Skills to support industries & non-oil economy

Technology transfer requires skilled workers to absorb it.

TT is a key component of developing local content.

10

CB is a precondition for local content success

Build a strong and attractive business environment with appropriate institutions and laws

Sufficient infrastructure to create thriving business environment.

Capacity to reduce the barriers to entry, improving local skills and developing local capabilities

Capacity to reduce transaction costs – including hurdles to enterprise development.

11

CB a Precondition for local content Success…..

Capacity to understand factors that matter for creating an industrial base (manufacturing, fabrication and services) is pertinent.

Any protection should be temporary and transparent.

Key obstacles to keep in mind include:

Limited experience of local entrepreneurs with goods and

services required in oil & gas sector

Limited size and access to local financing

Limited track record of local firm borrowing

12

Avenues to support capacity building

Technical assistance from development partners

Bi-lateral assistance from other countries with experience in the oil sector

From the oil companies themselves

Revenue from oil exports can be used to develop capacity

13

Way Forward

A well-defined, holistic and effective capacity building strategy can help maximize local content

Such strategies must respond to questions along two (2) fundamental dimensions:

○ Optimization of local content targets

○ Definition of local content strategic enablers

14

Optimization of local content targets Analyze the national capacity to supply the oil & gas

industry with skills and goods Identify the gaps and CB strategies to close the gaps

Prioritize CBs to produce measurable annual results

Analysis to take into account impact on:Overall costs/Project schedule

Investor profitability/Government revenues

Job creation & Impact on foreign direct investment

15

Local Content Strategic Enablers

Require effective capacity building strategies:1. Education and training: Skills to assume more

value-added roles.

2. Technology transfer: R&D centres to produce intellectual capital

3. Procurement process: Upgrade suppliers skills to meet the O&G standards

4. Infrastructure: Serviced parks for local industries to benefit from cluster infrastructure

16

Wrapping upEEs address gaps that impede local competitiveness

Place technology acquisition and technological capability on top of the Capacity building agenda

Develop the skills & personnel to manage the Sector……………………………………………………………… If Capacity building looks at building local capability

Local Content looks at maximizing local participation

Focused Capacity building Successful Local Content

17

Security and how Revenues are spent

Direct Effect

• Value of oil and gas production (IOCs & GoU)

Indirect Effect

• Purchase of materials, services and supplies locally Private Sector

Induced Effect

• Spending by employees of both oil Companies and

suppliers• Private Sector &

GoU

Oil and Gas Sector

Governmentgets revenue from oil and taxes from OilCompanies,SuppliersAndEmployees

And reinvests the proceeds to develop the Country’s Economy

Thank You