Thinking Locally

This article was published on Africa Oil & Power

Following the COVID-19-induced oil crisis and looming recession that faces most African oil producers, one question remains at the forefront of the frenzy: how can national companies spearhead the continued development not only of the oil and gas industry, but also of their own national economy?

In an effort to extend previous short-term financial gains to future, long-term economic development, African countries have adopted local content policies that promote domestic production linkages, job creation and the participation of small and medium enterprises (SMEs) in the energy supply value chain. Strategies for the sustainable development of the extractive sector that hinge on local content begin by establishing local content frameworks, comprised of policies, legislation and institutional bodies that manage and monitor the outcomes of capacity building policies.

In 2014, Equatorial Guinea enacted its National Content Regulation that expanded upon preceding local content legislation. In the years that have followed, the country has seen impressive economic growth and development led by national enterprises in the public and private sector. Elite Construcciones, a 100% Equatoguinean construction and engineering firm, has been commissioned for some of the most critical infrastructure projects in the country, including the construction of a liquified natural gas (LNG) storage and regasification station on the mainland that will enable the first results of a gas-to-power project as part of the LNG2Africa initiative in the final quarter of this year.

The National Association of Hydrocarbons Service Companies groups various companies and public bodies of Equatorial Guinea’s oil and gas sector to promote and attract companies from other countries to Equatorial Guinea to become local shareholders in national companies, and serves as a key organization for national service companies seeking to operate within the sector. The Association facilitates partnership among the government, industry and civil society members to allow SMEs to gain access to skill development, mentoring and business management support. Holding Equatorial Guinea is a public enterprise that develops joint ventures between the government and the private sector in non-oil industries to advance both local content priorities and the national diversification agenda.

By incentivizing local companies to form joint ventures with international firms, the company facilitates direct knowledge and technology transfer between the two parties. Beyond the oil and gas industry, sectors identified with the most potential for local content development include telecommunications, construction, agriculture, manufacturing, mining and auxiliary services, which also represent the sectors targeted for diversification in the National Development Plan: Horizon 2020.

Ministerial Order 1/2014

Following in the steps of countries such as Nigeria and Angola, the government of Equatorial Guinea enacted its National Content Regulation (Ministerial Order 1/2014) in an effort to implement stronger regulations protecting, developing and driving local industry. The 2014 legislation reinforces the national content regulation that was already in place yet remained underdeveloped through Equatorial Guinea’s 2006 Hydrocarbons Law. In addition, a National Directorate of Local Content was established for the implementation and monitoring of the outcomes of the policy framework.

The regulation stipulates that all contracts must include local content provisions and capacity building programs that span the energy and industry supply chain. Preference must be given to local companies in the award of service contracts. If a skillset is not available in the national labor pool, then the job is opened up to non-national applicants, with preference given to member countries of the Central African Economic and Monetary Community (CEMAC). If the skillset is not available in the CEMAC labor pool, then preference is given to applicants from other African countries. Notably, this stipulation distinguishes Equatorial Guinea’s local content policy from that of other policies in the region, which do not give preference to CEMAC member states.

Knowledge transfer and skill-building

In an effort to create a more qualified local workforce, the public and private sector have initiated a number of key developments. The Instituto Technologico Nacional de Hidrocarburos de Guinea Ecuatorial (ITNHGE) provides educational courses in petroleum and electrical engineering, mining engineering and mechanical engineering, and is open to applicants from CEMAC Member Countries. The ITNHGE supports local content initiatives through its training of indigenous personnel and equips them with the necessary skills to be able to perform highly skilled labor. Through the National Content Development Fund, the government has also created training and capacity building programs for nationals and provided scholarship funds and schemes for higher education studies abroad.

A key development from the private sector comes from iCubeFarm, an online job portal that connects job seekers with hiring companies in both Equatorial Guinea and the region. Through the portal, companies can post job openings for oil and non-oil industry positions, to which candidates can apply directly online. While most vocational training centers in the region focus activities on short-term capacity building to meet the immediate needs of the oil industry, Equatorial Guinea has fostered a more long-term outlook on skills development and the creation of employment opportunities both in and outside of the oil industry.

Efforts to reduce costs and create a qualified local talent pool have not been lost on international companies, either. The three wholly-owned subsidiaries of Marathon Oil – Marathon Equatorial Guinea Production Limited, EG LNG, and AMPCO – have created the Punta Europa National Content Committee to identify and employ potential local service and materials providers. Among its achievements are facilitating the setup process for new vendors, offering seminars to discuss commercial processes, and last year, standardizing the vendor disclosure questionnaire to simplify registration and augment opportunities for local companies to develop contracts on Punta Europa. In 2014, Marathon launched its commercial skills program, which provides training for mid to senior level nationals and expatriate employees from the public and private sectors. The program caters to in-country operations and addresses topics such as contract negotiations, contract law and other business skills.

Enforcing regulation

To ensure compliance with local content regulations, the Ministry of Mines and Hydrocarbons has conducted a compliance audit to assess efforts taken by operators, suppliers, contractors and sub-contractors toward domestic capacity building, and to ensure that they invest back into Equatoguinean communities by implementing corporate social responsibility plans and training programs for nationals. While the Ministry has sought to strengthen enforcement of compliance with regulations, a sophisticated legal, regulatory and institutional framework to support the policies is still needed, along with monitoring and evaluation mechanisms that have the authority and autonomy to implement the policies in place. The framework should also include quantifiable metrics to measure the performance of the international companies in executing knowledge and skills transfer.

As the government continues to develop its local workforce and the role of national companies in nation building, there remains tangible room for improvement. In addition to implementing more targeted monitoring and evaluation methods, the government will seek to strengthen regional cooperation among CEMAC member countries, further the establishment of enterprise development and vocational training centers, and exchange information and experiences with other African countries that have effectively implemented local content regulation, such as Angola and Nigeria.