Local Content can be defined as the quantum of composite value; either added to or created in the local economy in order to deliberately utilize national material resources, human resources, and services in the development, exploration, exploitation, transportation and sales of local crude oil and gas resources.
A number of legislations have been introduced across various countries to ensure targets are being met within contract evaluation and award criteria. Preferences are normally given to bids that meet or exceed national content targets.
HOW DO WE MEASURE LOCAL CONTENT
Local Content is generally measured as a percentage of investment, working hours, the equipment manufactured or the number of job roles created by individual companies operating in the country.
WHY IS LOCAL CONTENT IMPORTANT
Most countries aim to achieve local content without compromising internationally accepted quality, HSE standards through training, recruitment and development of local employees. Local content legislations were introduced to develop the industrial infrastructure and skills of local workforce.
Effective Local Contents strategies require planning, management, resources and determination to obtain improvements—which are often realised as long term gains. Although there might be short-term costs in training and developing local suppliers, a reliable local supply chain with better overall value in the long term will be realised.
HOW TO ENSURE LOCAL CONTENT IS BEING FOLLOWED?
Companies should exploit various communication channels to drive local content initiatives, with stakeholder benefits always serving as the key
driver. Communications should incorporate a variety of different business functions including: procurement, public and government affairs and human resources departments.
It is important to be realistic when setting local content targets if long term benefits are to be achieved. Targets that exceed on going capacities of local workforces may create inefficiencies, higher costs, lower government revenues and less competition.
Defining what makes local content can be contentious although normally understood to mean national content. In some jurisdictions there are increasing focuses on the ‘local’ element to reflect state-level political and ethnic realities. Whilst international investment is integral to economic progression of almost all nations, the key message certainly from skills perspective is to “search for expertise locally before searching elsewhere.”
There is no “single approach” to local content development; likewise international business should not seek to consolidate and replicate regulations across multiple markets. At LCP we work with several clients who link their businesses more closely to the local environment. Through local equity ownership, local supply and local job creation, it is often the case that most companies will find it easier to monitor, mitigate and manage risk.
Companies that are ready to invest in local or national content will be able to secure industry-specific incentives and exemptions if they are prepared to be the first movers. Get in touch with LCP to find out how we can provide you with advice and expertise on implementing local content strategies that benefits your business.