Local Content Challenges in Upstream Overseas Projects
- Nikolay Seregin (JSC BASHNEFT)
- Document ID
- World Petroleum Congress
- 21st World Petroleum Congress, 15-19 June, Moscow, Russia
- Publication Date
- Document Type
- Conference Paper
- 2014. World Petroleum Council
- 0 in the last 30 days
- 106 since 2007
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In overseas E&P projects local content issues become essential quite often. While the company has available resources to finance a new project; it may be faced with local problems of different character slowing or hindering the project. Middle East; South Asia; Latin America and CIS countries have their own particular features and problems. The companies are obliged to use local services and local labor; while at the same time they need to ensure project feasibility and perform in compliance with the best world practices.
Fundamentals of Local Content
In the last 10 years the concept of Local content has been gaining more ground and attracting increasing attention in the oil and gas industry. What started off as a vague definition of a particular form of regional development is now finding its way into the legislation of a great number of countries. Governments of many resource-rich developing countries are increasingly adopting local content rules aimed at boosting local participation of domestic firms in every stage of resource development. Historically, International oil companies (IOCs) have sought to maximize their economic outcomes, which have included some local spending in areas such as health, education and the environment, but nowadays delivering local benefits in the communities where extractive industries operate is no longer voluntary, in an increasingly big number of cases it is mandated by law. IOCs must now move beyond a philanthropic model.
Due to the fact that this concept is not yet fully established there are different definitions of local content. We refer to Local Content as a set of actions aimed at maximizing national value creation along the petroleum value chain through workforce development, value-addition, and the transfer of technology and knowledge. Such actions are designed to develop the industrial infrastructure and skills of the people in countries that host oil and gas projects. The regulatory environment in such countries is being readjusted to increase economic derivatives from the energy sector.
In light of this, there have been some changes on the global energy scene. In particular the relations between major resource holders and international oil companies have been changing. Host nations are seeking to maximize the overall economic benefits for their citizens, to create social and commercial benefits that progress economic growth and contribute to sustainable development. Therefore, National oil companies (NOCs) are reevaluating and setting new objectives and partnership roles to define participation in joint ventures and productionsharing agreements in their countries, and in doing so are emerging as relatively new change agents on the global energy scene.
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