A rational and egalitarian approach to our local content policy

Overview

With the fast approaching date for ‘first oil”, our local content policy, still to be announced, is urgently required. The sense of urgency arises not only because of the limited timeframe, but because of the national imperative of maximizing the contribution of the oil and gas (O&G) sector to our economy and the well-being of our country. How the nation spends its income from the sector is, of course, also of much importance, and that discussion, will be a continuing one for our people and Parliament in the years ahead. However, the immediate priority is putting in place a Local Content policy that seeks to garner the most from the sector.

To highlight the importance of our local content policy, we can look at the metric of the “national income” from the O&G sector. Many commentators, making assumptions on the future price of oil, have estimated the direct “government take” to be in the region of 10% of the gross revenue generated by the sector. The challenge faced by the country is therefore how to obtain a share of the remaining 90% , which is where local content policy is relevant. The “90%” will be going primarily to the main contractor (Exxon-Mobil and partners), the sub-contractors who will supply the major services to the contractor, and many minor sub-contractors providing necessary services such as housing, ground transportation, brokerage, food, etc. The Production Sharing Agreement with the main contractor having been signed, means that our local content policy will effectively determine the further benefits accruing to the nation…..

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