Africa Rising: African countries create new rules in the oil game

Citizens in countries throughout Africa have long been angered over the lack of benefits reaped from multinationals exploiting minerals from their seas and land. In recent years, African governments – authoritarian and democratic alike – have come under increasing pressure to develop policies to ensure the exploitation of oil and minerals provide long-term benefits to their citizens, through creating jobs and growth in industries.

At an oil conference in Accra, Ghana, held last week, African countries made it clear that oil industry players would be required to meet "local content laws," which includes hiring a certain percentage of workers locally, if they wanted to tap Africa’s oil reserves.

“Nigeria has a great future … and corporates who want to be part of that future will have to consider Nigerian local content because it’s not going to be game as usual from now on,” said General Manager of the Nigerian Content Development Board Wole Akinyosoye.

The term "local content" has become a catch word among key players in the oil and gas industry, and policies can mean anything from the inclusion of quotas for local employment from senior managerial staff to workers out on the oil rigs, percentages of local ownership and control of operations in oil fields, to contracts being awarded to local companies for the provision of equipment, goods, and services. Countries such as Brazil, Norway, Malaysia, and Trinidad and Tobago are all countries that have used local-content laws to create jobs and fuel domestic economic growth.

Buzz word to create jobs

But the concept has only become popular in Africa in recent years due to the new discoveries and the rising price of oil, according to Willie Olsen a senior adviser with INSTOK Norwegian Oil and Gas Partners.

“Local content in this part of the world is very politicized and there is a high degree of meeting expectations and the word local content has become a buzz word in recent years due to higher oil prices,” says Mr. Olsen.

“But at the same time it is clear that the aim is to create more jobs and develop the industrial base and you understand why this policy comes and you have to ask will the policies work?” he says.

Nigeria is the loudest and most controversial voice on local content and Africa’s biggest oil player, producing 2.3 million barrels of crude per day, according to the latest report of the International Energy Agency. Last year after the government passed the Nigerian Oil and Gas Industry Local Content Development Act, oil majors voiced their objections.

The local bill gives Nigerian independent operators first consideration in the awarding of oil blocks, oil field licenses, and it specifies that exclusive consideration should be given to Nigerian-owned service providers. The law also requires that oil companies and industry service providers be required to train Nigerians.

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